State Consumer Commission Directs Liberty General Insurance To Pay ₹3.86 Lakh For Wrongful Repudiation Of Home Insurance Claim
The State Consumer Disputes Redressal Commission, Chandigarh, presided over by Justice Raj Shekhar Attri (President) and Mr. Preetinder Singh (Member), has held Liberty General Insurance liable for deficiency in service for wrongfully repudiating a home insurance claim arising from internal leakage damage. The Commission observed that internal leakage causing sudden and extensive damage is covered under the policy and cannot be excluded by misinterpreting exclusion clauses.
Facts of the Case
The complainant, Dheeraj Khanna, had obtained a home loan of ₹29 lakh from Aditya Birla Housing Finance Limited in June 2020. The housing finance company, acting as an agent of Liberty General Insurance, offered a House Protection Insurance policy, which the complainant purchased by paying a premium of ₹14,010 for coverage from August 7, 2020, to July 7, 2025.
Shortly after taking possession of the insured flat, the complainant noticed significant damage, including subsidence of flooring, damage to POP and paint, and sinking tiles in bathrooms and washing areas. Despite spending Rs. 6,18,000 of his own funds on repairs, the insurance company repudiated his claims, leading him to file a consumer complaint alleging deficiency in service.
Separately, the complainant also alleged that a theft occurred at the flat in July 2021, which was reported to the police. However, this claim was also rejected by the insurer.
Aggrieved by the repudiation of claims, the complainant filed a consumer complaint before the District Commission, which dismissed the complaint. This led to the present appeal before the State Commission.
Arguments by the Opposite Parties
O.P.1 & 2 ( Aditya Birla Capital Ltd. and Aditya Birla Housing Finance Ltd.) argued that they were not parties to the insurance contract and had no role in processing or settling the insurance claim. They denied any agency relationship with the insurer and sought dismissal of the complaint.
The Liberty General Insurance (OP3 & 4) contended that:
• The complainant did not have insurable interest since the property was registered in the names of his parents.
• The damage was caused due to internal leakage, which was not covered under the policy's exclusion clauses.
• The theft claim was invalid as the complainant failed to lodge a proper FIR promptly and only submitted a delayed complaint.
• The repudiation of the claim was justified based on the surveyor's assessment and policy conditions.
Observations & Decision
The Commission found that the District Commission had wrongly relied on the exclusion clause. It observed that internal leakage causing sudden and extensive damage cannot automatically be equated with seepage falling under exclusion. The burden to prove applicability of exclusion lies on the insurer, and in the present case, the insurer failed to discharge that burden.
The Commission further noted that Clause 9 of the insurance policy explicitly provided coverage for damage caused due to bursting or overflow of water pipes and related apparatus. Once internal leakage was established, the insurer could not deny liability by adopting a narrow interpretation that defeats the purpose of the policy.
The Commission also examined the surveyor's report and found arbitrary deductions, particularly a 30% deduction without adequate justification. It held that only reasonable deductions towards depreciation and salvage could be permitted.
However, with respect to the theft claim, the Commission upheld the repudiation, noting that the complainant failed to place cogent evidence showing timely reporting of the alleged theft, and the delayed complaint deprived authorities of the opportunity to properly investigate.
The Commission partly allowed the appeal and held the insurer liable for deficiency in service. It directed Liberty General Insurance to:
• Pay ₹3,86,259 to the complainant towards loss suffered, after permissible deductions;
• Pay interest at 9% per annum from May 31, 2022, till realization;
• Pay ₹20,000 as compensation for mental agony and harassment;
• Pay ₹15,000 towards litigation costs;
• Comply with the order within 30 days, failing which the amount would carry interest at 12% per annum.
The complaint against the remaining opposite parties was dismissed.
Case Name: Dheeraj Khanna v. Aditya Birla Capital Ltd. & Ors.
Case No.: Appeal No. 106 of 2025
Advocates Appeared:
Abhishek Malhotra, Advocate for the Appellant
Karan Sirohi, Sh. Nakul Sharma, Advocates for Respondents No. 1 and 2
Sachin Ohri, Advocate for Respondents No. 3 and 4