A) ABSTRACT / HEADNOTE

The Supreme Court in Gopal Dikshit v. United India Insurance Company Ltd. (Civil Appeal No. 6623 of 2025, decided on 19 May 2025) addressed the repudiation of an insurance claim under a House Holder Insurance Policy on grounds of alleged continuous seepage. The appellant’s premises in New Delhi, insured for ₹1.50 crores, suffered extensive basement damage after heavy rainfall between 25 August and 31 August 2016. The first surveyor’s report attributed the damage to heavy rains and subsequent flooding. However, the insurer, dissatisfied with this report, commissioned a second survey which concluded the loss resulted from seepage—an exclusion under the policy. Based on this, the insurer repudiated the claim, and the National Consumer Disputes Redressal Commission (NCDRC) dismissed the appellant’s complaint.

The Supreme Court held that the first survey, conducted immediately, comprehensively attributed the loss to rainfall-induced flooding. Certificates from consulting engineers supported this finding. The belated second survey, deviating without cogent justification, was found arbitrary and unreliable. The Court set aside the NCDRC order and directed reconsideration for determination of compensation payable to the insured. The ruling reinforces judicial scrutiny on insurer’s reassessment tactics and the sanctity of contemporaneous survey findings.

Keywords: Rejection of insurance claim; Flood and inundation; Seepage; Survey reports; Consumer Protection Act, 1986; National Consumer Disputes Redressal Commission; Arbitrary reassessment; Indemnity under policy; Compensation.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The dispute in this case arises under the Consumer Protection Act, 1986 which empowers insured persons to seek redressal against wrongful repudiation of insurance claims. The appellant, Gopal Dikshit, owned premises at Ishwar Nagar, New Delhi, insured under a House Holder Insurance Policy with the respondent-insurer, United India Insurance Company Ltd., for a sum insured of ₹1.50 crores. During August 2016, heavy rains in Delhi led to severe flooding, inundating the basement of the premises. The appellant discovered upon return from travel that the basement had accumulated over three feet of water, damaging furniture, documents, and fittings. A surveyor promptly appointed by the insurer recorded that the cause of damage was flooding from rainfall.

However, dissatisfaction expressed by the insurer led to the commissioning of a second survey that contradicted the first. It attributed the cause to seepage, which was outside the policy coverage. Relying on the latter, the insurer repudiated the claim. When challenged before NCDRC, the Commission sided with the insurer, reasoning that meteorological reports did not conclusively prove heavy rainfall on the claimed dates and that expert certificates indicated continuous ingress of water through seepage into the structure. The NCDRC dismissed the complaint.

Aggrieved, the insured appealed to the Supreme Court under Section 23 of the Act. The central issue was whether the damage was proximately caused by insured peril—flood due to heavy rains—or by seepage, an excluded cause. The matter thus tested judicial oversight of insurers’ reliance on selective survey reports and the evidentiary weight accorded to initial contemporaneous surveys.

D) FACTS OF THE CASE

The appellant’s premises comprised multiple floors including a basement used for storage. On his return on 29 August 2016, after a short absence, he found the basement inundated with over three feet of water due to torrential rains in Delhi from 25–31 August 2016. Immediate remedial steps including installation of a booster pump failed to drain all water. The insurer’s first appointed surveyor inspected the premises on 3 September 2016 and in his report of 6 September 2016 attributed the loss to heavy rainfall, specifically noting water ingress through the flooring.

Despite this, the insurer withheld the preliminary report and engaged a second surveyor who inspected on 9 September 2016. Meanwhile, the appellant also obtained structural engineering certificates, some highlighting that the building had become unsafe, though not attributing causation to seepage in the basement. Subsequently, the insurer communicated that the damage fell outside policy coverage since seepage was not an insured peril. The final repudiation letter dated 23 November 2016 rested on continuous seepage being the cause of damage.

The NCDRC, in dismissing the complaint, emphasized meteorological data that did not expressly record heavy rainfall on 25 August 2016, and relied on structural engineers’ observations of seepage. It found merit in the insurer’s stance that seepage, not flood, was the proximate cause.

Before the Supreme Court, the appellant argued that the flooding was sudden, inconsistent with seepage, and contemporaneous survey and certificates corroborated his claim. He stressed that seepage is gradual, unlike the sudden inundation observed. The insurer reiterated reliance on expert reports attributing corrosion and damage to long-standing seepage, and on policy exclusions.

E) LEGAL ISSUES RAISED

i. Whether the loss sustained in the appellant’s premises was caused by flooding due to heavy rainfall, an insured peril, or by seepage, an excluded cause?
ii. Whether the insurer’s reliance on a second survey report, deviating from the first without cogent justification, was arbitrary and contrary to principles of fair claim settlement?
iii. Whether the NCDRC erred in dismissing the appellant’s complaint by placing undue reliance on selective expert certificates while disregarding contemporaneous survey findings?
iv. Whether repudiation of the insurance claim amounted to deficiency of service under the Consumer Protection Act, 1986?

F) PETITIONER/ APPELLANT’S ARGUMENTS

The counsels for the appellant submitted that the first survey report clearly attributed the cause of damage to heavy rainfall and flooding. The repudiation based on seepage was untenable because seepage denotes gradual ingress, whereas the basement had been suddenly inundated with over three feet of water in just three days—consistent with flood, not seepage. Reliance was placed on United India Insurance Co. Ltd. v. Dipendu Ghosh & Anr., II (2009) CPJ 311 (NC), wherein the NCDRC held that “flood” encompasses outpouring of water and includes inundation.

They argued that the meteorological data indicated heavy rainfall across different localities, and Ishwar Nagar indeed received significant precipitation during the relevant period. Further, the first surveyor’s inspection was timely, while the second was delayed and suspect, with the final report curiously filed over a month later. This, they contended, smacked of mala fide.

The structural engineers’ certificates, they urged, merely opined on the safety of the structure and did not attribute flooding to seepage in the basement. The insurer, while repudiating, failed to establish the actual source of water ingress. The NCDRC’s reliance on the structural engineer’s note on general seepage in structural elements was misplaced since it did not concern basement flooding.

Thus, the appellant contended that the insurer was guilty of arbitrary repudiation of a valid claim, amounting to deficiency in service under the Act, warranting setting aside of the NCDRC order.

G) RESPONDENT’S ARGUMENTS

The counsel for the respondent maintained that seepage was excluded under the policy and expert certificates confirmed continuous ingress of water into the foundation and basement, corroding reinforcement and weakening the structure. They argued that the meteorological report did not corroborate extraordinary rainfall on 25 August 2016, undermining the appellant’s version. The claim period of 25–31 August 2016, they alleged, was an afterthought.

They contended that seepage is not confined to minor leaks but encompasses gradual infiltration leading to accumulation, which could explain the flooding. The NCDRC, after appreciating expert evidence, rightly concluded that seepage was the proximate cause. They distinguished precedents cited by the appellant, asserting that interpretation of perils depends on policy wording. Reliance was also placed on the absence of newspaper reports of rainfall-related damage during the relevant period, corroborating their stance that the flooding was not due to rains.

Thus, the respondent defended the repudiation as consistent with contract terms, denying deficiency in service.

H) RELATED LEGAL PROVISIONS

i. Consumer Protection Act, 1986, Section 23 – Right of appeal to the Supreme Court against orders of NCDRC.
ii. Principles of Insurance Law – Doctrine of proximate cause; indemnity; exclusion clauses.
iii. Judicial precedents: United India Insurance Co. Ltd. v. Dipendu Ghosh & Anr., II (2009) CPJ 311 (NC); Mahavir Road and Infrastructure Pvt. Ltd. v. Iffco Tokio General Insurance Co. Ltd., (2019) 5 SCC 677.

I) JUDGMENT 

The Supreme Court analyzed the evidentiary record, including the first and second survey reports and expert certificates. It emphasized that the first survey conducted promptly attributed the loss to heavy rainfall. Certificates from M/s International Consultants & Technocrats Pvt. Ltd. and M/s Chordia Engineering Consultancy Services corroborated flooding as the cause. The certificate of Unique Consulting Engineers, however, only spoke of seepage in structural elements, unrelated to the basement flooding.

The Court noted that the second survey was delayed, offered no new evidence, and abruptly departed from the first without reason, raising doubts about its reliability. It held that such reassessment was arbitrary and devoid of valid grounds. Accordingly, the Court set aside the second survey report and the NCDRC order, remanding the matter to NCDRC to determine quantum of compensation.

a) RATIO DECIDENDI

The proximate cause of the damage to the appellant’s premises was flooding due to heavy rainfall, an insured peril under the policy, not seepage. The insurer’s reliance on a belated second survey that contradicted the contemporaneous first survey without cogent justification was arbitrary. Consumer forums must assess claims based on contemporaneous and credible evidence, not speculative or belated reports. An insurer cannot deny liability by commissioning successive surveys until a favorable report emerges.

b) OBITER DICTA

The Court observed that expert certificates assessing structural safety must not be misapplied to determine causation of loss when they do not directly address the disputed peril. It also noted that the absence of newspaper reports of rain damage cannot outweigh contemporaneous surveys and technical certificates. Further, the Court cautioned insurers against practices undermining good faith in claim settlement, reiterating that insurance contracts demand fair treatment of consumers.

c) GUIDELINES

The Court laid down that:
i. First surveys conducted promptly after an incident carry higher evidentiary weight unless cogent reasons justify reassessment.
ii. Insurers must disclose survey reports to insured parties and cannot withhold preliminary reports.
iii. Second surveys must be based on necessity, new evidence, or identified deficiencies in the first; otherwise, they lack credibility.
iv. Structural engineers’ certificates must be considered in proper context, distinguishing between causation and condition of the structure.
v. Repudiation of claims must align with policy terms but also conform to fairness and transparency, failing which it may amount to deficiency of service.

J) CONCLUSION & COMMENTS

The judgment underscores judicial vigilance against arbitrary insurer conduct. The Court prioritized proximate cause determination grounded in contemporaneous surveys over belated contradictory reports. This approach strengthens consumer rights under the Consumer Protection Act, 1986 and enforces accountability in insurance claim processing. By emphasizing fairness, transparency, and good faith, the decision harmonizes principles of contract law with consumer protection objectives.

Importantly, the Court highlighted that seepage, as a gradual phenomenon, cannot be conflated with sudden flooding from heavy rains. This demarcation ensures insurers cannot exploit ambiguities to evade liability. The ruling affirms that insurers must respect initial surveys unless compelling evidence dictates otherwise.

This decision aligns with global standards of insurance jurisprudence emphasizing proximate cause and fair settlement, and resonates with precedents like Dipendu Ghosh where inundation was recognized within the scope of flood. By distinguishing Mahavir Road, the Court reinforced contextual application of precedents.

The remand for quantum assessment ensures that compensation will be determined consistent with the policy, thereby balancing contractual obligations with consumer justice. This case sets a crucial precedent for similar disputes involving insurer repudiations on tenuous grounds.

K) REFERENCES

a. Important Cases Referred
i. United India Insurance Co. Ltd. v. Dipendu Ghosh & Anr., II (2009) CPJ 311 (NC).
ii. Mahavir Road and Infrastructure Pvt. Ltd. v. Iffco Tokio General Insurance Co. Ltd., (2019) 5 SCC 677.

b. Important Statutes Referred
i. Consumer Protection Act, 1986, Section 23.
ii. Indian Contract Act, 1872 (principles of proximate cause and indemnity – implied).
iii. National Building Code of India, 2009 (referenced in structural engineer reports).