Insurers must explicitly disclose exclusion clauses; mere policy renewal does not confirm acceptance of exclusions by the insured.

JUDGMENT

Per Sanjay Parihar-J

1. This appeal challenges the order dated 11.10.2024 passed by the Jammu & Kashmir Consumer Redressal Commission, Srinagar (“the Commission”), whereby the complaint filed by the respondent was allowed and the appellants were directed to pay an amount of Rs. 4,76,347/- as compensation for the damage caused to the respondent’s residential house during the floods of September 2014.

2. The relevant facts are not in dispute. The respondents are the legal heirs of late Shad Mohd Bashir, who had insured his residential house situated at Sarai Payen, Amira Kadal, Srinagar, with the appellants since 2009. The policy was renewed annually, covering the risks enumerated therein. The last policy period was from 29.12.2013 to 28.12.2014. During this subsisting policy period, the insured house suffered substantial damage due to the September 2014 floods. The respondents, as legal heirs, sought indemnification of the loss. The appellants registered the claim and appointed a surveyor, M. Kumar Surveyors Pvt. Ltd., who assessed the loss at Rs. 6,08,462/-. The appellants, however, repudiated the claim on the ground that the policy was a Standard Fire Policy, which excluded STFI (Storm, Tempest, Flood and Inundation) perils.

3. While deciding the complaint, the Commission noted the appellants’ plea that the policy had been renewed uninterruptedly since inception, that STFI perils had been excluded in all earlier years, and that the insured was fully aware of this exclusion. On this basis, the appellants argued that the respondents could not plead ignorance regarding the exclusion. The Commission rejected this contention, holding that a lay consumer cannot reasonably be expected to:

(i) calculate premium variations arising from the inclusion or exclusion of specific risks;

(ii) discern whether any discount was granted for excluding a particular peril or whether an additional premium was charged for any add-on cover; or (iii) understand the technical expression “STFI” or its scope without explicit disclosure by the insurer.

4. Upon consideration of the survey report and the submissions of both parties, the Commission held that although the policy contained an endorsement excluding STFI perils, the respondents were not entirely free from negligence. Holding them contributorily negligent, the Commission reduced the assessed loss by 25%, and directed the appellants to pay Rs. 4,56,347/-, along with Rs. 20,000/- as litigation compensation (total Rs. 4,76,347/-), within 30 days; failing such payment, the amount was to carry interest @ 6% per annum.

5. The appellants have assailed the impugned order primarily on the ground that it is legally unsustainable. It is contended that since the policy was a renewal of the earlier policy, it amounted to a continuation and repetition of the original contract, thereby reviving all prior terms and conditions, including the exclusion of STFI perils. It is further submitted that the respondents never objected to such exclusion at any stage. According to the appellants, once the exclusion existed in successive policies, the Commission erred in presuming that the insured was granted any rebate by excluding STFI risks.

The appellants further argue that, in the absence of payment of the additional premium, as mandated under Section 64VB of the Insurance Act , the insurer never assumed the risk of indemnifying the STFI-related loss. During the proceedings, the respondents demanded production of the original proposal form; however, the appellants expressed their inability