Monsoon car insurance blues: Angel is in policy

Images of cars submerged like submarines or smashed under fallen trees have been a common spectacle in monsoon ravaged Tamil Nadu. I’ve seen propaganda by insurance companies urging vehicle owners to buy add-on cover such as an ‘engine protector’ for their policies. The most common damage is the engine getting stalled while driving through an inundated stretch. In automobile parlance, this is a ‘hydrostatic lock’ and can occur when you try to start the car submerged in water. Repeated cranking may result in water entering the engine or getting mixed with the oil and fuel. Many do not opt for this add on ‘engine protector’ cover in their insurance policies as it’s about 0.5 to 2 % of the Insured Declared Value (IDV) of the car or anything between Rs 3000 to

Rs 12,000 for an IDV of Rs 6 lakh. The upper limit of this add-on could be almost the entire premium for a comprehensive policy!

I’m concerned about the legality of insurance companies rejecting claims by labelling hydrostatic lock as ‘consequential damage’. When a car stops on a flooded road, it’s a natural instinct to try to start it. Let’s assume the owners follow the insurance commandment of not turning on the engine and immediately have it towed to an authorised service centre. A few questions arise. Is it mechanically possible to determine whether the water entered the engine when the car was in motion, causing its breakdown or whether it stopped because of or post an attempt to crank it? When water levels are not static but rise and recede, can it be ascertained whether a policyholder deliberately drove the car in water-logged areas? How can a driver, that too with poor visibility, gauge how much further he can go? If he stops, what if the car is pushed ahead by the swirling waters? Or if water gushes into the car caused by another passing vehicle? These scenarios are fraught with subjective interpretation. Or what insurance companies will call a claim assessment, which is their own surveyor’s report. It may be crucial but can be contested in court.

Which brings me to a fundamental point. How ‘comprehensive’ is a comprehensive policy? Aside of the mere third party insurance, a standard policy will, among other circumstances, cover damage “by flood, typhoon, hurricane, storm, tempest inundation, cyclone, hailstorm, frost.” A bare reading of this clause will reveal that when a car that breaks down due to nature’s fury, it ought to be covered by a regular insurance policy. In Manjit Singh Khaira Vs HDFC Ergo General Insurance & others, the ‘hydrostatic lock and consequential damage’ argument did not cut ice with the Chandigarh state commission. It ordered the insurance company to pay the complainant, whose car broke down and was damaged due to flooding on the road, the entire cost of repairs, running into '19 lakh, as contained in the surveyor’s report. In a similar case, the Andhra Pradesh state commission in G. Sridhar Goud Vs Future Generali India Insurance, relying on a slew of other decisions, held that “damage caused is not consequential” but “directly attributable to the inundation”. Consumer courts have also held that a break down of vehicles during floods can fall under the clause “accident by external means” which is covered by most standard insurance policies.

Fallen trees are another cause of damage. This may happen while driving which is an Act of God, or when the vehicle is parked. Inundation also hits parked cars. A common ruse to reject such claims is ‘negligence’. Unless the tree was slanting and on the verge of falling, is it practically possible for owners to play horticulturists or arborists to gauge if it will fall? The strongest trees can come down if wind speeds are high, which even meterologists cannot always forecast. So does an owner sue the Met department? Speaking of which, what about suing the municipal authorities? Interestingly, the National Commission in Consumers Unity & Trust Society Vs State of Rajasthan, held that a citizen is not a consumer under the Act as payment of taxes is not ‘consideration’ for service rendered by the government.