Dr. Inder Jit Singh, Presiding Member

1. This Second Appeal(SA) has been filed by the Petitioner against Respondent(s) as detailed above, under section 51(2) of Consumer Protection Act 2019, against the order dated 26.05.2025 of the State Consumer Disputes Redressal Commission, Uttarakhand (hereinafter referred to as the 'State Commission'), in First Appeal (FA) No. SC/5/A/205/2022 in which order dated 29.08.2022 of District Consumer Disputes Redressal Commission, Haridwar (hereinafter referred to as District Commission) in Consumer Complaint (CC) No. 349/2021 was challenged, inter alia praying to set aside the order passed by the State Commission.

2. While the Appellant(s) were Respondent(s) before the State Commission and Opposite Party before the District Commission and the Respondent were Appellant before the State Commission and Complainant before the District Commission. Notice was issued to the Respondent on 28.08.2025. Parties filed their Written Arguments/ Synopsis on 01.12.2025 (Appellant) and 17.10.2025 (Respondent).

3. Brief facts of the case, as presented by the Complainant and as emerged from the Second Appeal, Order of the State Commission, Order of the District Commission and other case records are that:-

                          3.1 The Complainant purchased a Mercedes-Benz vehicle for Rs.65,00,000/-, financing Rs.31,00,000/- through a loan from Axis Bank and contributing Rs.34,00,000/- from her own funds. The vehicle was purchased from respondent no.2 herein (OP-3 before the district commission) registered with the A.R.T.O., Haridwar on 11.11.2011 (Registration No. UK-08-V-0700), and used by the complainant.

                          3.2 The complainant obtained a comprehensive insurance policy (Policy No. 2311200415793200000) from the Appellant insurance company for the period 23.01.2013 to 22.01.2014. The policy included a "Zero Depreciation" (Zero Dep) add-on. Complainant alleges that at the time of sale, representatives of the insurer (opposite party nos. 1 & 2) verbally represented that damage due to "drowning in water" would be fully covered.

                          3.3 On 15.06.2013, during heavy rain, the vehicle became immobilized and suffered water ingress at Bhagat Singh Chowk, Haridwar. The complainant notified the insurer, which deputed a surveyor. Relying on the surveyor's advice and assurance that repair costs would be borne by the insurer, the vehicle was towed to the authorised workshop, T & T Motors Limited, New Delhi.

                          3.4 The workshop provided a repair estimate of Rs. 74,45,257/-.It is alleged that the insurer refused to pay this amount. Subsequently, via a letter dated 07.10.2013, the insurer repudiated the claim in substance, stating its liability was restricted only to "cleaning, opening & refitting of parts" and "flushing" of the engine.

                          3.5 Following this repudiation, the complainant alleged that he made several unsuccessful requests for settlement of the claim. The claim has been repudiated by the Insurance Co. vide its letter dated 09.10.2023 Prior to this, two letters dated 15.07.2013 and 19.07.2013 were issued. Alleging deficiency in service and unfair trade practice, the complainant filed a consumer complaint bearing no.CC/2021/349 before the District Commission seeking appropriate relief.

4. The District Commission vide Order dated 29.08.2022, in the CC no. 349/2021, while dismissing the complaint passed the following order:

                          21. On the basis of aforesaid comments we are of the opinion that the complaint is time barred and the damage caused to the vehicle is due to the driving of the vehicle in deep water by the complainant or her driver for which the opposite party cannot be held responsible. In these circumstances the complaint is Hable to be dismissed.

5. Aggrieved by the Order dated 29.08.2022 of District Commission, Complainant/Respondent herein appealed before the State Commission and the State Commission vide order dated 26.05.2025 in SC/5/A/205/2022 Allowed the appeal and passed the following order:

                          "11 we are of the considered view that there was ciear-cut deficiency in service on the part of the insurance company in repudiating the genuine and bonafide claim of the complainant. The law laid down above is applicable to the case in hand.

                          12. So far as the quantum is concerned, the vehicle was insured at an IDV of Rs.45,00,000/-. The respondent No; 3 has issued an estimate of repairs to the tune of Rs. 74,45,257/-, i.e., more than the IDV of the vehicle. Thus, the present case falls under the category of total loss and the claim is to be settled on total loss basis. The occurrence took place on 15.06.2013, i.e. about 12 years ago, thus, it would be just and proper to deduct certain amount towards salvage of the vehicle and the complainant should not be directed to hand over the salvage of the vehicle to the insurer or to transfer the vehicle in favour of the insurer. In our considered opinion, there should be deduction of 20% from the IDV of the vehicle towards the salvage value with R.C. and after deducting 20% amount, the complainant is entitled to get sum of Rs.36,00,000/- (Rs.45,00,000/- minus Rs. 9,00,000/-, i.e., 20% of Rs.45,00,000/-Since the insurance company has wrongly repudiated the claim of the complainant, hence the complainant is entitled to interest @6% P.a. on the aforesaid amount of Rs. 36,00,000/- from the: date of filing of the consumer complaint, i.e., 17.04.2021 till payment and Rs. 25, OOO/- towards costs. Thus, the appeal is fit to be allowed and the impugned judgment and order passed by the District; Commission is liable to be set aside.

                          13. Appeal is allowed. Impugned judgment and order dated 29.08.2022 passed by the District Commission is set aside. Consumer; complaint No. 349 of 2021 is partly allowed and respondent Nos. 1&2 (insurance company) are directed to pay an amount of Rs. 36,00,000/- to the appellant towards claim along with interest @6% p.a. on the aforesaid amount of Rs. 36,00,000/- from the date of filing of the consumer complaint, i.e., 17.04.2021 till payment and Rs. 25,000/- towards costs.

                          xxxx"

6. Appellant herein has challenged the said Order dated 26.05.2022 of the State Commission mainly on following grounds:

                          (i) The State Commission erred in failing to recognize that the respondent remained dormant for a period approximating eight years and filed a Consumer Complaint on 24.12.2021, which was barred by limitation. Consequently, the District Commission committed no legal infirmity in dismissing the complaint on the ground of limitation.

                          (ii) The State Commission erred in holding that there existed a deficiency in service on the part of the Appellant insurance company in repudiating the genuine and bonafide claim of the complainant. The State Commission is alleged to have erred by failing to appreciating that the claim was not repudiated, but was instead closed due to inaction concerning authorized repairs and the non-submission of requisite documents by Respondent no.l.

                          (iii) The State Commission erred in failing to appreciate the factual and contractual position that loss arising from hydrostatic lock or flooding is not covered peril under the policy unless specific coverage for the same has been expressly obtained.

                          (iv) The State Commission erred in not appreciating that the liability of the Appellant insurance company was contractually restricted to the flushing of engine and cleaning of the vehicle. The surveyor, in accordance with the policy terms and conditions, had granted approval limited to this scope.

                          (v) The State Commission erred in not appreciating the technical principle that the engine of a motor vehicle cannot sustain damages merely from contact with water. Damage ensues only under circumstance where an attempt is made to operate the engine while it is still in contact with water.

                          (vi) The State Commission committed an error in not appreciating that the respondent no.l was negligent in starting the vehicle after the vehicle was left inside water which resulted in aggravation of loss which amounts to loss consequent to the negligent act and thus is violation of condition no.4 of the policy which mandated that the insured shall take all reasonable steps to safeguard his vehicle which reads as under:

                          'the insured shall take all reasonable steps to safeguard the vehicle from loss or damage and to maintain it in efficient condition and the company shall have at all times free and full access to examine the vehicle or any part thereof or any driver or employee of the insured'

                          (vii) The State Commission committed an error in relying upon the judgment of Hon'ble Supreme Court in the case titled "Galada Power and Telecommunication Ltd. Vs. United India Insurance Co. Ltd. and another, etc (2016) 14 SCC 161" as the same is not applicable to the facts of the present case.

7. Heard learned counsels for the parties. Contentions/pleas of the parties, on various issues raised in the Appeal, Written Arguments, and Oral Arguments advanced during the hearing, are summed up below:

8. Contentions/argumerits of the Respondent (Complainant):

                          8.1 The Complainant/respondent herein has in his submission contended that the appeal is not maintainable as the appellant has failed to make out any grounds challenging the order/judgment dated 26.05.2025 and also has re-agitated all the facts and grounds in the present appeal which has already been dealt by the State commission.

                          8.2 The Complainant submitted that in the claim repudiation letter dated 09.10.2013; nothing has been mentioned that due to the negligence / carelessness / fault of the complainant or driver, the water has entered into the engine of the vehicle, thereby causing loss to the vehicle. The claim was repudiated for non-submission of requisite documents by the complainant and also in view of the fact that the claim was pending for more than 108 days Learned counsel for the appellant has stated that the repair estimate of Rs.74, 45,257/- was duly submitted by the complainant to the insurer, but the insurance company refused to bear the repair cost of the vehicle, The terms and conditions of the insurance policy, wherein nothing is mentioned that in case the due to excessive rain, water is entered into the engine of the insured vehicle, the insurance company shall not be liable to indemnify the loss. Here, the condition of the insurance policy was mentioned in the claim repudiation letter. Paper No. 82 available on record shows as to what are the major exclusions in the policy. In the said exclusions, it is nowhere mentioned that if rain water enters into the engine of the vehicle, the insurance company shall not be liable.

                          8.3 It is submitted that as per order dated 28.08.25 by this Hon'ble Commission, learned Counsel for the Appellant Insurance Company submitted that they were not pressing the issue of Complaint being time barred but wish to pursue their Second Appeal remedy only on merits.

                          Therefore this ground becomes irrelevant.

                          8.4 It is further submitted that the Appellant insurance company wrote letters dated 15.07.2013 and 19.07.2013 to the respondent no.l stating the details of damages sustained by insured vehicle and the scope of insurance coverage under the subject policy and observed that the claims are excluded under policy and hence not payable. But the Appellant insurance company wrote another letter dated 09.10.2013 to the respondent no.l requesting to submit documents for claim processing as per policy terms and conditions as the claim was pending for more than 108 days. Since the respondent no.l did not reply to the letters sent by the Appellant insurance company, her claim was closed.

                          8.5 It is submitted that respondent is relying upon judgment reported as Bharti Axa General Insurance Company Limited vs. Chandra Mohan 2015 SCC Online NCDRC 1678, wherein it has been held that "The said policy while covering damage due to flood, cyclone, hailstorm, etc., does not exclude the loss to the vehicle due to hydro static lock. In the absence of such exclusion, the insurance company will have to reimburse cost of repair of the vehicle on account of damage by heavy rains and flooding irrespective of whether the said loss occurred due to hydro static lock or for some other reason.

9. Contentions/arguments of Appellant Insurance Company:-

                          9.1 The Appellant contends that they appointed surveyor 'Atul Tyagi & Associates' for inspection. The surveyor found no external impact damage but confirmed water ingress. A subsequent engine teardown revealed a broken engine block and connecting rod, identifying the cause of damage as "hydrostatic lock."

                          9.2 The Appellant contends that damage caused by hydrostatic lock (resulting from repeated attempts to restart the engine in water) constitutes a consequential loss. Such losses are specifically excluded from the standard policy coverage and are therefore not payable.

                          9.3 The Appellant argues that the State Commission failed to recognize that hydrostatic lock is not a standard peril. Such damage is only covered if the insured has opted for a specific Engine Protector Add-on, which was not present in this policy.

                          9.4 The Appellant submits that engine damage does not occur from mere water contact, but from the driver's attempt to crank the engine while submerged. By attempting to start the vehicle, the Insured was negligent, directly causing the loss.

                          9.5 The State Commission overlooked that the Insured violated Condition No. 4 of the policy, which mandates that the Insured must take "all reasonable steps to safeguard the vehicle from loss or damage.

10. The matter was heard on 28.08.2025 and 24.11.2025, when the arguments were concluded and the judgment was reserved. On 28.08.2025.

Counsel for the Appellant Insurance Company submitted that they are not pressing on the issue of Complaint being time barred but wish to pursue their Second Appeal remedy only on merits. The extract of the relevant para of the order dated 28.08.2025 is reproduced below:

                          "3. In this regard, the State Commission observed as follows in its order:

                          8. Learned District Commission has dismissed the consumer complaint on the ground that the same is barred by limitation.

                          We have perused the certified copy of order-sheet of the consumer complaint (Paper Nos. 49 to 52). The order-sheet of the consumer complaint has revealed that while submitting the consumer complaint before the District Commission, the complainant has moved an application under Section 5 of the Limitation Act, 1963, seeking condonation of delay in filing the consumer complaint. The District Commission vide order dated 12.11.2021 has allowed the said application, thereby condoning the delay in filing the consumer complaint and the consumer complaint was registered and notice was directed to be issued to the opposite parties for filing the written statement. There is nothing on record to show that the order dated 12.11.2021 passed by the District Commission, was challenged by the insurance company before this Commission. Thus, the aforesaid order had attained finality. This being the position, there was no justification on the part of the District Commission to hold that the consumer complaint was barred by limitation. Therefore, we do not find ourselves in agreement with the said finding recorded by the District Commission and the same is not in the eyes of law.

                          4. During the hearing, learned Counsel for the Appellant Insurance Company submitted that they are not pressing the issue of Complaint being time barred but wish to pursue their Second Appeal remedy only on merits."

11. Delay in filing the SA was condoned vide order dated 24.11.2025. The claim has been repudiated by the Insurance Company vide its letter dated 09.10.2013. Prior to this letter, two letters dated 15.07.2013 and 19.07.2013 were issued. Although the final letter dated 09.10.2013 states that on account of the insured not submitting the requisite documents, the claim has been closed by the Insurance Company, in the earlier letters dated 15.07.2013 and 19.07.2013, relying on the report of the Surveyor, they have stated certain reasons for not considering the claim. Extract of these three letters is reproduced below:

                          July 15, 2013 'Sub: Insurance Claim for Own Damage of car Bearing Registration No. UK-08 V 0700, Date of loss 16/06/2013, reported to us on 22/06/2013, Clam No. C230013030187.

                          Dear Sir/Madam, We refer to your above own damage claim registered under the "Insurance" Policy No 2311200415793200000 valid for the period 23/01/2013 to 22/01/2014.

                          Kindly note that in respect of your above mentioned own damage claim had been conducted by independent Surveyor Mr. ATUL TYAGI & ASSOCIATES (an independent surveyor appointed by IRDA) Mobile No- 9810140525.

                          On perusal of the report submitted by the surveyor, and the documents submitted by your good self, following has been observed:

                          1. There is no external Impact either to the vehicle or to the engine from outside

                          2. Engine can not be impacted merely coming in to contact with water and damage if any, can be attributed to either mechanical failure or trying to run the engine when it is still in contact with the water.

                          3. When vehicle stops on the water logged road, efforts to start the vehicle is the well known source to cause damages to engine.

                          4. The obvious course is known to be not to try to start the engine, without total cleaning the water from inside engine and inspection by an expert technician, thus your extension of damages to the engine if any cannot be considered as per condition no 4 ofpolicy contract.

                          5. Please note the liability of the insurer is restricted up to. flushing of engine and the cleaning of vehicle. Accordingly the surveyor has advised the workshop for the same.

                          As per the policy terms, conditions & exceptions under our Standard Motor Package policy the damages directly attributed due to water are covered to the extent of cleaning, opening & refitting of parts and if water has entered the engine then flushing of the same.

                          AH other losses to the interna! parts of engine or block which might have been damaged in the said claim are exclusions under the policy and hence not payable.

                          As the losses to the Engine are of consequential and has been attributed due to mechanical breakdown and as per the policy terms and conditions under s ' "SECTION I-

                          The Company shall not be liable to make any payment in respect of Consequential losses, depreciation, wear and tear, mechanical or electrical breakdown, failures or breakages"

                          Since engine damage is an exclusion under the Standard Motor Package policy to get the additional coverage of engine cover or hydrostatic lock, there are riders or add on covers which may be added on standard Motor package policy with payment of an additional premium and these add on products have been approved by IRDA for certain insurance companies."

                          Julv 19, 2013 "Sub: Insurance Claim for Own Damage of car Bearing Registration No. UK-08-V 0700, Date of loss 16/06/2013, reported to us on 22/06/2013, Claim No. C230013030187.

                          Dear Sir/Madam, INe refer to your above own damage claim registered under the "Insurance" Policy No. 2311200415793200000 valid for the period 23/01/2013 to 22/01/2014.

                          Kindly note the in respect of your above mentioned own damage claim had been conducted by independent Surveyor Mr. ATUL TYAGI & ASSOCIATES (an independent surveyor appointed by IRDA) Mobile No- 9810140525. The surveyor reached the workshop and inspected the vehicle and observed that there were no external damages to the said vehicle and engine.

                          The surveyor had requested for your permission to get the vehicle engine opened to verify the interna! damages, and after your permission the workshop dismantled the engine and the surveyor verified the following facts:

                          1. The engine block as well as connecting rod was found broken.

                          On perusal of the engine damages it has been concluded that these damages are due to hydrostatic lock.

                          In automotive terminology, a hydrolock is the Immobilization of an engine's pistons by a Hiquid (usually water, hence the prefix "hydro-"), Hydrolocking occurs when liquid fills a cylinder on the intake stroke and, due to the incompressibility of a liquid, makes the compression strake impossible. This, in turn, prevents the entire engine from turning, and can cause significant engine damage if one attempts to forcibly turn over or start the engine. It may result into severe damages to connecting rods which may bend or even break and may further damage the entire engine, making the engine beyond economical repairs.

                          Only when the repeated attempts are made to forcibly turnover or start the engine, the air vents get opened which makes the entry of water or external liquid possible in the combustion chamber(s) which in turn damages the connecting rod or any other interna! engine parts, sometimes resulting of damages to engine block also, due to non- compressible nature of liquids.

                          The same has been observed in your vehicle's engine after dismantling it, which in fact had good quantity of water in combustion chamber(s). It may be further noted that as per manufacturer's design whenever the air intake is filled with water or any external liquid, the engine shall immediately stall due to starvation of air, hence, entry of water into engine is not possible whilst the vehicle is running condition.

                          As per the policy terms, conditions & exceptions under our Motor Car Comprehensive policy the damages directly attributed due to water are covered to the extent of cleaning, opening & refitting of parts and if water has entered the engine then flushing of the same.

                          AH other consequential tosses to the engine block damaged due to repeated attempts and reeving the engine as in the said claim are an exclusion under the policy and hence not payable.

                          To get this additional coverage there are riders or add on covers added under the Motor Car Comprehensive policy which has been approved by IRDA for certain insurance companies.

                          Thus, on perusal of the report submitted by the surveyor, and the documents submitted by your good self, following has been observed:

                          1. there is no external impact either to the vehicle or to the engine from outside

                          2. Engine cannot be impacted merely coming in to contact with water and damage if any, can be attributed to either mechanical failure or trying to run the engine when it is still in contact with the water.

                          3. When vehicle stops on the water logged road, efforts to start the vehicle is the well known source to cause damages to engine.

                          4. The obvious course is known to be not to try to start the engine, without total cleaning the water from inside engine and inspection by an expert technician, thus your extension of damages to the engine if any cannot be considered as per condition no. 4 ofpolicy contract.

                          5. Please note the liability of the insurer is restricted up to cleaning, opening & refitting of parts and if water has entered the engine then flushing of the same. Accordingly the surveyor has advised the workshop for the same."

                          October 9, 2013 Sub : Insurance Claim for Own Damage of car Bearing Registration No. UK- 08- V 0700, Date of loss 16/06/2013, reported to us on 22/06/2013, Claim No. C230013030187.

                          Ref Dated 15/07/2013,19/07/2013 Dear Sir/Madam, We refer to your above own damage claim registered under the "Insurance" Policy No. 2311200415793200000 valid for the period 23/01/2013 to 22/01/2014.

                          Kindly note the in respect of your above mentioned own damage claim had been conducted by independent Surveyor Mr. ATUL TYAGI & ASSOCIATES (an independent surveyor appointed by IRDA) Mobile No- 9810140525.

                          Kindly note that inspite of our best efforts, the following documents required for claim processing has not been submitted by you:

                          1. Repairer Bill.

                          2. Arrange the vehicle for re- Inspection

                          3. KYC documents (ID proof (latest paid bill), Pan card (Signature proof), Cancelled cheque.

                          You will appreciate that the above mentioned document are necessary for further processing ofyour claim.

                          Kindly find reference of our earlier communication in this regard whereby you have been requested to supply the mentioned above documents of your vehicle. Please note that till today we have neither received the documents nor any reply from your end.

                          Please also note that the claim is pending for more than 108 days. In absence of the requisite documents and in view of no reply from your end, it is understood that you are no more interested in pursuing your claim hence we are constrained to treat your claim as "dosed"."

12. During the hearing, Counsel for the Appellant drew our attention to the exclusion clause which states that the Insurance Company shall not be liable to make any payment in respect of consequential loss, depreciation, wear and tear, mechanical or electrical breakdown, failures or breakages.

13. On the other hand, it is the case of the Respondent/Complainant that the vehicle was being driven on the road and suddenly due to heavy rain, it got struck on the road and suffered consequential damage. They have drawn our attention to the coverage clause under the policy and relying on sub-para (c) of this coverage clause, which includes all act of God perils like earthquake, flood, cyclone etc., contending that the claim is admissible under the policy. As the present incident is covered under the Act of God, and damages consequential loss due to heavy rain hence is covered under the policy. The State Commission considering the facts of the case and the evidence before it, allowed the Appeal filed by the Respondent/ Complainant and came to the finding that the claim is admissible. We have also carefully considered the orders of the State Commission, other relevant records and rival contentions of the parties in the light of the coverage clause as well as the exclusion clause in the policy and are of the considered view that the claim is covered under the policy in accordance with clause (c) "all act of God perils like earthquake, flood, cyclone etc." hence, the insured is entitled to the claim.

14. Coming to the quantum of the compensation, the State Commission as per its order have allowed the compensation of Rs.36,00,000/- after deducting the salvage value @20% from the IDV of Rs.45,00,000/- and allowed a claim of Rs.36,00,000/-. It is to be noted that the vehicle in question was an old vehicle at the time of its insurance. The Complainant has stated that he purchased the said vehicle for Rs.65,00,000/-, the IDV at the time of its insurance was Rs.45,00,000/- and the period of insurance was 23.01.2013 to 22.01.2014. The incident took place on 15.06.2013. Although, the workshop provided a repair estimate of Rs.74,55,257/-, as it exceeded the IDV, it was treated as total loss by the State Commission. Since 2013 the status of the vehicle, whether it was actually repaired by the insured, if yes, at which cost, whether the vehicle is still being used by the insured etc., is not known. There are no bills evidencing the cost of repair etc. As the vehicle is with the insured since 2013 i.e. for the last about 12 years (at the time of State Commission's order) possibly, the vehicle might have been under use by the insured after repairs but the exact status of the vehicle is not known. Even IMT prescribed rates of depreciation under which if the age of vehicle exceeds 4 years but not 5 years, the rate of depreciation for fixing IDV is 50%. IDV of vehicles beyond 5 years of age is to be determined on the basis of understanding between the insurer and insured. No doubt, these depreciation rates are for the purpose of determining value at the time of fixing IDV, we are of the view that State Commission has liberally granted the compensation by deducting only 20% as a salvage value. In the given facts and circumstances of the case, we are of the considered view that as the status of the use of vehicle since the date of incident is not known, the maximum Complainant should be entitled to get is 50% of the IDV of the vehicle; i.e. 50% of Rs.45.0 lakhs i.e. Rs.22.50 lakhs instead of Rs.36.0 lakhs awarded by the State Commission. Hence, subject to the above modification, rest of the order of the State Commission is maintained.

15. The Second Appeal No. 553 of 2025 is disposed off in terms of above said order. All pending lA's, if any, stand disposed of by this order.