House Damaged due to Water Leakage from Sewerage: SBI General Insurance and Bhawanigarh Municipal Council Asked To Pay Rs4.75 Lakh
Moneylife Digital Team 30 January 2024
Holding the Bhawanigarh municipal council deficient in not maintaining water pipes, the national consumer disputes redressal commission (NCDRC) directed the municipal council to pay Rs2.37 lakh to a house-owner. NCDRC also directed SBI General Insurance Company Ltd to indemnify the loss and pay a Rs2.37 lakh insurance claim.
In an order last week, the NCDRC bench of Subhash Chandra (presiding member) and Dr Sadhna Shanker (member) says, "From a perusal of clause 9 of the insurance policy, it is clear that the clause 9 does not mention anywhere that the clause is applicable only in the context of water tanks situated above the house on the terrace. Hence, the loss is covered under clause 9 of the policy, and the insurance company is liable to indemnify the loss."
"Considering the fact that the matter relates to the year 2015 and we are now in 2024, the cost of construction has been increased multiple times, and the damage was due to leakage of water from the water pipes, we are of the opinion that a compensation of equal amount of Rs2,37,650 on Bhawanigarh Municipal Council is just and appropriate," the bench says.
The case is related to the damage caused by water leakage from the pipes to the home owned by Bhawanigarh, Punjab-based Ram Chander. He bought an old house and deposited the fee for approval of the site plan for his house's construction with the Bhawanigarh municipal council. The site plan was approved on 2 February 2015. He deposited another fee for approval of the site plan of the first floor with the municipal council which was approved on 12 May 2017.  
Mr Chander obtained a Rs13 lakh home loan from the State Bank of India (SBI). SBI insured Mr Chander's house from SBI General Insurance for a sum insured of Rs24 lakh, covering all the risks of the house.
Mr Chander contended that he spent nearly Rs35 lakh on the construction of the house and shifted there after the completion of the building. He noticed some cracks in the walls and the ceiling of the house. During the first week of April 2017, the walls and one portion of the floor of his house suddenly started to subside swiftly, the whole building developed big cracks and all the doors became jammed. 
He immediately called the mason and also intimated the Bank regarding the loss to his house and the Bank further informed SBI General Insurance. The insurance company appointed a surveyor who visited the house and assessed the loss. SBI General Insurance informed Mr Chander that the loss was not covered under the policy issued to him.
Mr Chander again called the mason and the floor was excavated. It was found that there was a pool of water and then he informed the Bhawanigarh municipal council. On information, the officials of the municipal council excavated the common street. They found that the main water pipeline was damaged due to the bursting of pipes which caused the free flow of water. The water pipeline was damaged accidentally due to water overflowing in pipes or due to negligence of the municipal council officials. Mr Chander had written a letter to the municipal council and requested to pay the claim amount against loss.
Mr Chander again intimated to the insurance company the reason for the loss caused to his house. SBI General Insurance appointed a surveyor who visited Mr Chander's premises and again took photographs. Mr Chander got the tentative estimate for house repair from engineer Hanish Gupta, who prepared the estimate of Rs27.34 lakh for the reconstruction of the building by giving the opinion that the house was no longer safe for human habitation and should be reconstructed.
On 27 April 2017, Mr Chander submitted all the documents to the surveyor of SBI General Insurance. He also wrote letters to officials from the Bhawanigarh municipal council and the Sangrur district deputy commissioner to redress his grievances. 
SBI General Insurance repudiated his claim on 21 August 2017 on the grounds that the loss was not covered under the policy. Mr Chander immediately approached SBI and requested the settlement of his claim, but it refused to entertain his request. He further approached the municipal council, informing them that his claim had been repudiated by the insurance company and that they had refused to pay any claim amount. But he did not receive any response.
Being aggrieved, Mr Chander filed a complaint before the Punjab state consumer disputes redressal commission. 
SBI General Insurance resisted the complaint by filing a written statement. It stated that the loss had occurred due to seepage of water from a sewerage pipe, occurring over a period with none of the perils covered under 'long-term home policy/ fire policy' and the loss was not covered under the policy.
"Further, the cracks in the building are due to continuous seepage of the water from the leaked sewerage line into the foundation of the building and the same is not covered under the policy. The building was to be used for residential purposes, whereas the ground floor was occupied as a shop, hence, it was used for commercial purposes and hence Mr Chander is not a consumer. Hence, the insurance company does not have any liability to pay the compensation, and the liability is only of the municipal council as it is the custodian, manager and owner of the water as well as sewer lines," the counsel for SBI General Insurance contended.
The counsel for the Bhawanigarh municipal council stated that there was a minor leakage of water supply which was not to the extent that could have led to the alleged damage. "The minor leakage was at a distance of about 20 feet away from the house, which could by no means be the cause of damage and the damage is covered with the insurance policy."
SBI also raised preliminary objections that the complaint was not maintainable against it as it did not disclose any cause of action against it and it was only a facilitator for Mr Chander to assist him to get the insurance policy.
In an order on 1 October 2018, the state commission allowed the complaint against the municipal council and dismissed the complaint against the insurance company. It directed the Bhawanigarh municipal council to pay Mr Chander a compensation of Rs2,37,650 with interest at the rate of 6%pa (per annum) from the date of filing the complaint till actual payment, Rs30,000 as compensation and Rs15,000 as cost of litigation.
Not satisfied with the order of the state commission, Mr Chander filed an appeal before NCDRC.
The counsel for Mr Chander argued that the state commission had not considered the policy in toto and had considered only five clauses and failed to consider clause 9 which clearly covers the claim he raised. He stated that it was an admitted fact that there was a leakage of water from the pipes; therefore, the Bhawanigarh municipal council was liable to indemnify the loss. He further argued that no reasoning had been given to discard the report of the government-approved surveyor and to accept the loss assessed by the surveyor and the complainant.
The counsel for SBI General Insurance argued that the loss had occurred due to seepage of water from a sewerage pipe outside the house, which was not covered under clause 9 of the policy.
The counsel for the Bhawanigarh municipal council argued that Mr Chander had constructed the building in violation of the building bye-laws and totally changed the nature of the building from residential to commercial; therefore, he was not a consumer.
After perusing clause 9 of the insurance policy, NCDRC observed that clause 9 did not mention anywhere that the clause was applicable only in the context of water tanks situated above the house on the terrace. "Hence, the loss is covered under clause 9 of the policy, and the insurance company is liable to indemnify the loss. Hence, the repudiation made by the insurance company is unjustified, and the complainant is entitled for the compensation."
Referring to the Supreme Court's judgement in the Lilavati Kirtilal Mehta Medical Trust vs Unique Shanti Developers & Ors case, NCDRC opined Mr Chander got the site plan sanctioned for building his house by depositing the requisite fee with the Bhawanigarh municipal council and had been paying the water charges for consumption of water supply. "No evidence of profit-making activity has been brought on record from the alleged shop in the building. Therefore, Mr Chander is a 'consumer' within the definition under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986."
Considering the admitted fact that there was leakage in the water sewerage pipe, the bench says the damage to the house was due to water leakage from the water pipes laid by the municipal council. "The contention that the leakage of water pipe in the street was at a distance of 20 feet away has no substance because the municipal council has failed to prove that the leakage was insufficient to cause the damage. It is the prime duty of the municipal council to maintain the water pipes laid down in the streets by rectifying them and inspecting them from time to time. Had the pipes been checked or properly maintained, the building would not have been damaged, and the loss would not have occurred. Thus, there is a deficiency on the part of the municipal council in maintaining the water pipes."
While disposing the appeal and setting aside the order passed by the Punjab state commission, NCDRC directed SBI General Insurance to pay Rs2,37,650 along with interest at the rate of 6%pa from the date of repudiation till payment to Mr Chander. It also directed the Bhawanigarh municipal council to pay the equal amount of Rs2,37,650 to Mr Chander within four weeks from the date of pronouncement of its order failing which the amount will be paid with interest at the rate of 9% per annum. 
(First Appeal No115 of 2019  Date: 22 January 2024)
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