JUSTICE V.K. JAIN, PRESIDING MEMBER (ORAL)

          The respondent / complainant company owned a car bearing registration No. DL 3 CBM – 5039 which it had purchased for its Managing Director Mr. Raj Gupta.  The said car was got insured with the appellant company for the period from 11.2.2011 to 10.2.2012.  On 9.9.2011, when Mr. Raj Gupta was driving the aforesaid car, its engine allegedly went off as a result of which the vehicle stopped in the middle of the road.  According to the complainant/respondent there was flood like situation at the time the vehicle stopped and therefore, the car had to be pushed to one side of the road from where it was towed to a car garage.  On intimation being given to the appellant, a surveyor was appointed to assess the damage.  The surveyor informed the complainant / respondent that since the engine of the car had got damaged due to hydrostatic lock caused by seepage of water, the damage was not covered under the policy.  Based upon the report of the surveyor, the claim lodged by the complainant / respondent company was repudiated by the appellant on the ground that the damage due to ingression of water was beyond the scope of the insurance policy.  The appellant took the stand that it was liable to reimburse only a sum of Rs.7,262/-, that being the cost of filter element and labour for interior dry-cleaning.  Being aggrieved, the complainant / respondent approached the concerned State Commission by way of a consumer complaint.

2.      The complaint was resisted by the appellant which took a preliminary object that the company had no insurable interest in the private vehicle of the Managing Director.  On merits, it was alleged that the car was started / cranked several times in flood water, as a result of which it had got damaged and no additional cover had been taken by the complainant for the aforesaid damage.

3.      The State Commission vide its order dated 07.10.2016 allowed the complaint and directed the appellant company to settle the claim by paying a sum of Rs.12,83,868/- to the complainant / respondent, along with interest on that amount @ 9% per annum from the date of filing of the complaint and the cost of litigation quantified at Rs.25,000/-.  Being aggrieved from the aforesaid order, the insurer is before this Commission by way of this appeal. 

4.      The first question which arises for consideration is as to whether the complainant / respondent company had an insurable interest in the vehicle insured with the appellant company.  It is an admitted position that the insurance policy in respect of the aforesaid vehicle was taken by none other than the respondent company.  It is also not in dispute that the aforesaid vehicle is registered in the name of the respondent / complainant.  There is no evidence or even allegation of the sale consideration for the purchase of the aforesaid vehicle having been paid by the Managing Director of the company and not by the company itself.  The learned counsel for the appellant has drawn my attention to para-1 of the complaint where it is alleged that the car was a private vehicle of the Managing Director of the complainant company. The aforesaid expression, as rightly clarified by the learned counsel for the complainant / respondent was intended to convey that the vehicle in question was meant for the private use of the Managing Director of the company.  The said expression cannot be construed to mean that the sale consideration for purchase of the vehicle was paid by the Managing Director of the company from his own funds.  Therefore, I find no merit in the preliminary objection.  Moreover, a perusal of the letter dated 01.3.2012, written by the appellant to the respondent company would show that the alleged lack of insurable interest in the complainant company was not the ground for repudiating the claim.  Therefore, the appellant cannot be allowed to deny the claim on the aforesaid ground. 

5.      A perusal of the insurance policy would show that the appellant had inter-alia insured the vehicle against loss or damage by flood, typhoon, hurricane, storm, tempest, inundation, cyclone and hailstorm. 

          The case of the complainant / respondent, as noted earlier, is that due to heavy rains there was flood like condition on the road when the engine of the car went off suddenly and had to be pushed to a side of the road.  The case of the appellant company is that had the driver of the vehicle not started / cranked it several times in flood water, the engine would not have got damaged.  There is no evidence of the driver having started / cranked the vehicle several times in flood water. The surveyor not being an automobile engineer, his report by itself is not sufficient to prove that the engine could not have got damaged without the vehicle having been started / cranked several times in flood water.  In any case, the issue involved in this appeal is no more res integra in view of the decision of this Commission dated 05.1.2015 in Bharti Axa General Insurance Company Limited Vs. Chandra Mohan Goyal Revision Petition No. 4504 of 2014.  The aforesaid judgement to the extent it is relevant reads as under:

          “7.       The learned counsel for the petitioner company has produced before us a literature which to the extent relied upon reads as under:

          “Symptoms and damage

If an engine hydrolocks while at speed, a mechanical failure is likely. Common damage modes include bent or broken connecting rods, a fractured head, a fractured block, crankcase damage, damaged bearings, or any combination of these. Forces absorbed by other interconnected components may cause additional damage. Physical damage to metal parts can manifest as a "crashing" or "screeching" sound and usually requires replacement of the engine or a substantial rebuild of its major components.

If an internal combustion engine hydrolocks while idling or under low power conditions, the engine may stop suddenly with no immediate damage. In this case the engine can often be purged by unscrewing the spark plugs or injectors and spinning the engine to expel the liquid from the combustion chambers and then restarted. Depending on how the liquid was introduced to the engine, it possibly can be restarted and dried out with normal combustion heat, or it may require more work, such as flushing out corrupted operating fluids and replacing damaged gaskets.

If a cylinder fills with liquid while the engine is turned off, the engine will refuse to turn when a starting cycle is attempted. Since the starter mechanism's torque is normally much lower than the engine's operating torque and momentum this will usually not damage the engine but may burn out the starter. The engine can be drained as above and restarted. If a corrosive substance such as water has been in the engine long enough to cause rusting, more extensive repairs will be required.

Amounts of water significant enough to cause hydrolock tend to upset the air/fuel mixture in gasoline engines. If water is introduced slowly enough, this effect can cut power and speed in an engine to a point that when hydrolock actually occurs it does not cause catastrophic engine damage.

Causes and special cases

Automotive

Hydrolock most commonly occurs in automobiles when driving through floods, either where the water is above the level of the air intake or the vehicle's speed is excessive, creating a tall bow wave. A vehicle fitted with a cold air intake mounted low on the vehicle will be especially vulnerable to hydrolocking when being driven through standing water or heavy precipitation. Engine coolant entering the cylinders through various means (such as a blown head gasket) is another common cause. Excessive fuel entering (flooding) one or more cylinders in liquid form due to abnormal operating conditions can also cause hydrolock.”

 8.       The learned counsel has also relied upon the reply dated 22-10-2013 sent by IRDA under RTI Act, stating therein that generally insurance companies charge extra premium to provide add on cover for hydro static loss in a motor vehicle policy.

9.       The contention of the learned counsel for the petitioner-company is that since the major damage to the vehicle occurred on account of hydro static loss and they had not charged extra premium in order to cover the said loss while issuing the policy to the insured, they are not liable to pay for the damage on account of hydro static loss to the vehicle.

10.     We have perused the insurance policy issued by the petitioner-company to the complainant. The said policy while covering damage due to flood, cyclone, hailstorm, etc., does not exclude the loss to the vehicle due to hydro static lock. In the absence of such an exclusion, the insurance company will have to reimburse cost of repair of the vehicle on account of damage by heavy rains and flooding irrespective of whether the said loss occurred due to hydro static lock or for some other reason. If despite IRDA permitting charging of an extra premium for reimbursement in respect of loss due to hydro static lock the petitioner-company did not charge such a premium, it is only itself to blame for such a situation because the policy issued by it while granting insurance against damage due to flooding, etc., did not exclude the loss/damage to the vehicle on account of the aforesaid reason. Therefore, in our opinion, in a damage of this nature, unless expressly excluded, in the insurance policy, damage to the vehicle on account of hydro static lock would also be covered for the purpose of reimbursement. For this reason alone the petitioner-company must necessarily fail”.

6.      In view of the above referred pronouncement of this Commission, the damage to the engine of the vehicle is covered by the insurance policy even without the respondent / complainant having taken an additional cover for damage due to hydrostatic lock.

7.      The learned counsel for the appellant has pointed out that as per the terms of the insurance policy; depreciation was to be deducted in case of the replacement of a part.  He submits that in this case, the depreciation was to be deducted @ 10% as the vehicle was more than one but not exceeding two years old.  A perusal of the repair estimate would show that the cost of the replaced part was Rs.10,54,846/-, inclusive of all taxes.  The appellant therefore is entitled to deduct a sum of Rs.1,05,484.60 on account of depreciation.

8.      It is also pointed out by the learned counsel for the appellant that the salvage of the replaced part would belong to the insurer.  There is merit in the contention.  If the salvage is still lying at the workshop and has not been taken by the complainant, the appellant company shall be entitled to obtain the same from the workshop.  If however, the salvage was taken by the complainant / respondent, the appellant company shall be entitled to recover such value of the salvage as may be assessed by the surveyor who was appointed to inspect the vehicle and assess the damage. 

9.      The learned counsel for the appellant also submits that as per the terms of the policy an amount of Rs.1,000/- was liable to be deducted from the claim.  The appellant company would be entitled to deduct the aforesaid amount.

10.    For the reasons stated hereinabove, the appeal is disposed of with the following directions:

(i)      The appellant shall pay the amount awarded by the State Commission to the complainant / respondent after deducting therefrom, a sum of Rs.1,05,484.60 towards depreciation and a sum of Rs.1,000/- as per the term of the policy;

(ii)      The appellant shall also be entitled to obtain the salvage of the replaced part from the workshop and in case, it is found that the salvage has been returned to the complainant / respondent, the appellant shall also be entitled to deduct such amount towards value of the salvage as may be assessed by the surveyor.

(iii)     The payment in terms of this order shall be made within two weeks from today.