Whether Hydrostatic Lock loss is covered or excluded under Motor Insurance Policy?
Generally the hydrostatic lock loss is not paid by the insurers on the plea that the water ingress is a consequential loss which is exclusion in the policy. As a result, some of the Insurers have covered such loss “Hydrostatic Lock” as “Add on Cover”, which is duly approved by IRDA. In this regard, the decisions of Ombudsman/ State Commission have been announced for and against such losses. There is only one decision of the ombudsman wherein the repudiation was upheld.
If we examine the repudiation letter, issued by the Insurer, which states that water ingress is a consequential loss and the same is an exclusion clause under the Policy. In my opinion the decision of the Insurer is untenable/unjustifiable because it is not a “Consequential Loss” rather a direct loss as per the meaning of “Consequential Loss” under various English Dictionaries which states that any loss after the property is damaged is a consequential loss. Hence, water ingress is damaging the engine and the same cannot be termed as consequential loss.
According to Surveyors, it is not a consequential loss rather exaggerated loss because water has already entered into the engine and have already damaged the first piston and connecting and further crank of engine will damage the other pistons also and the same are not payable as it is negligence on the part of the insured. The negligence is neither exclusion nor peril mentioned in the policy. Rather as per condition no. 4 of the policy states that “ in the event of any accident or breakdown the vehicle shall not left unattended without proper precautions being taken to prevent further damage or loss and if the vehicle be driven before the necessary repairs are effected any extension of the damage or any further damage to the vehicle shall be entirely at the insured’s own risk. “
This condition cannot be exclusion and it is to be examined under which circumstances the Insured’s have acted. At the time of logging every vehicle driver is very much concern for the safety of vehicle as well as for him and other occupants. Moreover the “Dos and Do not’s” of any vehicle manufacturers (except M/s TATA Motors) , do not specify that in water logging, the engine should not be cranked otherwise water ingress will take place. Therefore, this condition does not amount to repudiation of the claim.
During the floods in Mumbai in 2005, the loss of hydrostatic lock was paid by all the Insurers. Initially the Private Insurers were reluctant but after the PSU settlement of such claims, they also settled these claims. It is a matter of concern, why such claims are not payable when the claims were settled in Mumbai floods.
IRDA should not have permitted to the private insurers to cover such risk as “ Add on Cover” when it is not an exclusion.
It is suggested that in case any Insurer repudiates the Hydrostatic Loss, Insured should take legal course of action, to get relief.
In various legal decisions pronounced, Ombudsman /District /State Consumers Commission allowed such claims after considering it as direct loss not consequential loss.
Judgements:
- Hyderabad Ombudsman 5/1/2007 (Against Insured) , 2. Bhopal Ombudsman 19/1/2007 (Against Insurer) , 3. Manjit Singh Khaira, Vs HDFC ERGO Chandigarh (Against Insurer) , 4. G. Sridhar Goud Vs. Future General India Insurance Co. Ltd., Hyderabad (Against Insurer) , 5. Mr. Anand Sai B Vs. M/s. ICICI Lombard General Ins. Co.td. Hyderabad (Against Insurer)