Direct cause and direct proximate cause in Insurance Claim

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NCDRC allows claim of the Complainant for loss due to rainfall that was not specifically listed or covered under perils of insurance policy.

In the case of M/s. A R Trading Company v. Oriental Insurance Company Limited, the Complainant claimed damages to ‘tendu leaves’ due to the moisture caused by excessive rainfall in the region. The claim of the Complainant was repudiated by the insurance company on the ground that the same was not covered under the insurance contract and loss due to contamination was specifically excluded under the insurance. The policy specifically covered losses to the leaves caused on account of storm, cyclone, typhoon, tempest, hurricane, tornado, flood and inundation. However, the contract specifically excluded loss, destruction or damage caused to the insured property by pollution or contamination if loss to the insured property is due to natural rains or moisture, then it was not covered.

In the present case, the Commission invoked the principles of direct and direct proximate cause based on the previous decision of the Commission. The National Commission held “In the instant case, we find that this Commission had occasion to deal with a similar type of case in the case of “M/s. National Insurance Co. Ltd.  V. Marthi Crystal Salt Co. Ltd., 1986-2002 Consumer  6043 (NS)” and “United  India Insurance Co. Ltd. V. Dipendu Ghosh and Anr.”  II (2009) CPJ 311 (NC), wherein this Commission has interpreted the word ‘Direct Cause’ as appears in the terms of the Policy and had recorded as under:

Learned Counsel for the respondent brought on record the copy of ‘P. Ramanatha Aiyar’s The Law Lexicon, Law Dictionary’.  As per this dictionary, the word ‘direct cause’ as well as ‘Direct and proximate cause’ has been defined as under:

‘Direct Cause’ -that which sets in motion train of events which brings about result without intervention of any force operating or working actively from new and independent source’ or, one without which the injury would not have happened.  Norbech V. Mutual of Omaha Ins. Co., 3 Wash. App 582, 476 p 2d, 546, 547 (Black’s Law Dictionary)

  1. The direct and proximate cause in this case for the rotting of Tendu Leaves is the rainfall which had occurred during the same period. It is not disputed, as per facts brought on record by the Counsel for the petitioner, that there was rainfall in that area during that period and it is pleaded that on account of rain, the dried Tendu Leaves absorbed the moisture and got rotten.
  2. We are unable to accept the  interpretation/contention of the Surveyor/ Appellant – Insurance Company.  In a number of cases under almost identical circumstances where claims had been repudiated under the Fire and Special Perils Policy on the ground that the damage caused to the insured stocks/ premises had been caused because of seepage caused due to heavy rains and not due to inundation, floods etc., we had concluded that the claim was wrongly repudiated since flood/inundation also means outpouring of water.  On this analogy loss caused due to moisture content following heavy rains would be covered and the claim should in such circumstances be indemnified.  Some specific judgments wherein we had reached the above conclusions include Bajaj Allianz General Insurance Co. Ltd.  Vs. Gondamal Hardyal Mal (MANU/CF/0039/2009: IV (2009) CPJ 165 (NC); New India Assurance Co. Ltd.  Vs. Dani Mourdhwaj Cold Storage Pvt. Ltd. (RP No. 4113 decided on 10.02.2012); and Oriental Insurance Co. Ltd.  Vs. M/s. Sathyarayana Setty & Sons (RP No. 3454 of 2007 decided on 14th March, 2012).  In the instant case, since it is not in dispute that the damage was caused by moisture on account of rainfall, we are of the view that it would be logically covered under the policy even though  it may not per se have been listed as one the perils of the insurance policy.”

In the present case, the National Commission allowing the claim taking liberal view upheld an important doctrine of direct and direct proximate clause with regard to interpretation of Insurance Contract. While any specific condition is not covered under the insurance contract, however from the other covered conditions, logically it could be construed the same to have been covered, whereas there is no absolutely specific exclusion in this regard, the insurance company cannot repudiate the claim on the ground of technicality or claim to be not covered under the insurance contract.

Full Judgment -> M/s. A R Trading Company v. Oriental Insurance Company Ltd

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