Context becomes very important when decoding a word used in a policy. In other words, the meaning of a word depends always on its context. When the meaning of the word used in a policy is uncertain or nebulous, the court first considers the immediate context of a word. It considers the broader context of the paragraph, section, or policy as a whole if needed. Noscitu, a sociis, interprets a word in the light of other words. Simply put, the rule’ Noscitur a sociis’ maintains that a word is explained by the company it keeps. The Latin words “Noscitur” means “is known” and “Sociis” means “by its associates,” Noscitur a Sociis is a principle that explains that a particular word or phrase in a statute is based on its context and association with other words or phrases in the same provision or statute.
Interpretation of perils- Flood, inundation, storm, tempest in the light of the above observation
In Young v. Sun Alliance & London Insurance (1977)- The plaintiff’s house ( Montague Young) was built on a meadow land. The plaintiff insured it with the defendant’s insurance company (Sun Alliance & London Insurance) under a household policy seeking protection against damage or destruction from storm, tempest or flood and escape of water from or frost damage to any water, drainage or heating installation. In 1973, water entered the downstairs lavatory and rose to a depth of 3 inches. Young preferred a claim from his insurers for a loss of pound 468 for the cost of work and pound 294 for the cost of redecoration caused to his house no-1 Grange Road, Elstree Herts by Flood – a peril covered in the policy. The court rejected the claim, holding that the policy intended to cover three types of natural phenomena, which were related not only by the fact they were natural but also by unusual manifestations of those phenomena in that they were accompanied by violence. Mere seepage of water from a natural source cannot be considered a flood. It has to be an abnormal occurrence, such as a significant irruption of water. The three natural phenomena are related as they are natural but also connote unusual manifestations. Storm means rain accompanied by a strong wind; tempest signifies a violent storm; flood is overflowing or irruption of a great body of water and not merely a seepage, trickling or dripping from some natural source. All these three perils have some element of violence, suddenness or largeness about them. Flood, here, has been defined in the context of other words with similar connotations.
In another case involving Oriental Insurance Company Limited versus M/s. J.K. Cement Works (2020) – the Respondent, J.K. Cement Works, purchased a Standard Fire and Special Perils insurance policy from the Appellant( The Oriental Insurance Co Ltd) for the coal stock between 20.11.2002 and 19.11.2003. The policy covered damage caused by “Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation”.
As a result of torrential rains on 29.08.2003 and 30.08.2003, a certain amount of coal was washed off, and the stock of coal suffered damage. On 01.09.2003, the insured informed the insurer of the damage. The appointed surveyor submitted its report on 29.03.2004, assessing the loss caused to the insured (Respondent) at Rs.58,89,400/ and maintained that the liability was admissible as the loss was caused by flood as per the policy issued. The insurance company, on 14.12.2004, repudiated the claim on the score that the loss caused to it did not fall within the scope of the policy, as the loss occurred due to heavy and extraordinary rain and not ‘flood’ or ‘inundation’. The insured filed a consumer complaint before the NCDRC seeking compensation of Rs.1.32 crores. Vide the impugned order dated 18.11.2008, the NCDRC allowed the insured Rs.59,89,400/ (based on the survey report ) and directed the insurer to pay the said amount along with 9% interest. The insurance company contested the above judgment and appealed to the highest court. The learned counsel appearing for the insurance company contended that the terms ‘flood’ and ‘inundation’ refer to two significantly different phenomena that cannot be equated with each other and argued that the term’ flood’ refers to overflowing of water bodies such as rivers, ponds, lakes etc. In the absence of a water body near the factory that had overflown into the coal yard, the loss cannot be said to have been caused by a ‘flood’. As per the term ‘inundation’, the learned counsel of the insurance company argued that the same refers to ‘accumulation of water’ and could thus not be applied to the instant case as the coal had merely been washed off due to heavy rains. The argument was that the rainfall was the cause of the loss and not the flood, as there was no water body near the insured’s stock. The insured’s counsel argued that the surveyor had relied on the rainfall data of Nimbahera (the place of occurrence of the loss) for 29.08.2003 and 30.08.2003 from the Meteorological Department of the Government of India to conclude that there were adequate rains in the area to cause floods/inundation.
The Hon’ble court delved deep into the definition of flood and devised the observation mentioned below.
In an ordinary context, floods may be described as an overflow of water over land. There are three categories of floods: coastal floods, fluvial floods (river floods), and pluvial floods (surface floods).
1. Coastal floods take place when sea or ocean water flows into nearby areas. High tides or storm surges cause them, such as strong winds from a hurricane or other storms forcing the water onshore.
2 Fluvial or river flood occurs when the water level exceeds the holding capacity of a river, stream, or lake. The resulting overflow of the leftover water submerges the nearby banks and neighbouring land. Excessive rainfall or unusually high melting of snow causes this flood
3. Pluvial or surface floods are caused by excessive rainfall, so water accumulates in an area. Overflowing water bodies have no bearing on this type of flood. Pluvial floods include flash floods due to intense but brief torrential rain spells. A pluvial flood is widespread in hilly regions – as the runoff water from hilly regions flows and accumulates in the low-lying area. Because of concrete streets and thick construction, rainwater cannot seep into the ground in dense urban localities. Steady rainfall over a few days or torrential rains for a short period may clog the drainage system’s capacity, splashing water on the streets and nearby structures and resulting in immense economic damage.
So far as the term ‘inundation’ is concerned, it can be used to refer to the act of overflowing water over normally dry land and to the state of being inundated. Inundation can also be intentional for agricultural and rivermanagement purposes. Inundation refers to the accumulation of water in which objects or land may be submerged. In simpler terms, inundation refers to the act of overflow of water and the result of such overflow.
The court maintained, ‘Similarly, given our prior discussion on pluvial floods, which occur independently of a water body, it is clear that floods are not restricted to overflow of water bodies’. The argument put forward by the insurance company that the terms ‘flood’ and ‘inundation’ cannot be equated, and, secondly, that ‘flood’ needs to be understood in a narrow sense to refer only to the overflowing of a water body, and to exclude instances where overflowing of water occurs due to excessive rainfall was found untenable by the court. It was established that the terms ‘flood’ and ‘inundation’ are often used synonymously to refer to the act of overflowing of water over land that is generally dry. It was established that floods are not restricted to overflowing water bodies as pluvial floods occur independently of a water body. From the above judgements, one can easily understand the importance of context. Insurance companies often miss this point and frequently make a mistake, much to the chagrin of the customers.
-Prof. Abhijit K.Chattoraj, Chartered Insurer
