MUMBAI: More than two decades after torrential rain and floods wrought havoc in Mumbai on July 26, 2005 (aka the “26/7” floods), the Bombay High Court dismissed an appeal filed by an insurance company that had turned down a claim raised by a housing society that suffered structural damage in the deluge.
The court upheld the findings of the National Consumer Disputes Redressal Commission (NCDRC), which directed New India Assurance Company to pay compensation amounting to ₹34.78 lakh to Gayatridham Cooperative Housing Society Phase II in Titwala. The court said the society had paid the insurance policy premium by cheque to buy the Standard Fire and Special Perils Policy and it was the insurer’s own operational deficiency that had delayed the cheque realisation.
Justice Somasekhar Sundaresan said the consequence of that “cannot be visited upon the innocent society which had, in fact, received the insurance policy and even made a claim, which claim was processed by New India…”
The housing society had renewed its insurance policy on July 17, 2005, a week before its expiry. It paid ₹18,910 by a cheque drawn on the Thane District Central Co-operative Bank. On July 22, a fresh annual policy was issued to the society that would kick in on July 25. The next day, torrential rains struck Mumbai and its suburbs, leading to severe damage to the structures in the housing society.
Although the cheque had been received on July 17, after which the policy was issued, the insurance company deposited the cheque on July 30. On August 4, it claimed to have written to the society stating that its cheque had been dishonoured, purportedly on account of insufficient funds, due to which the insurance policy issued to the society was being cancelled.
On August 7, the society filed a claim request with the insurer. “The Thane bank is on record confirming that the society had adequate and sufficient funds,” the court noted. The bank had also stated that the cheque was dishonoured owing to the breakdown of infrastructure due to the floods and not due to insufficiency of funds in the society’s account.
The insurer argued that since payment was not realised, there was a failure of underlying consideration for the insurance policy. The insurer can, hence, not be made to shoulder the financial burden imposed by the NCDRC.
The court said the insurer had a week to deposit the cheque and failed to do that. It asked the insurer to pay ₹25,000 to the society in addition to the compensation awarded by the NCDRC.
“It is inexplicable that a party that claims that insurance premium has to be received in advance of the insurance cover taking effect, would bank the cheque nearly a week after the insurance cover took effect,” the court observed.