The Jammu & Kashmir and Ladakh High Court has directed an insurance company to satisfy an award in favour of the legal heirs of a man whose insured house was damaged during the September 2014 floods, holding that any clause allowing an insurer to escape liability after accepting premium is unfair and void.

The court was hearing an appeal against an order of the J&K Consumer Redressal Commission, Srinagar, which had allowed the complaint of the respondents and directed the insurer to pay ₹4,76,347 as compensation for flood damage to a residential house.
A Division Bench of Justice Sanjeev Kumar and Justice Sanjay Parihar observed that insurance contracts are standard-form agreements drafted unilaterally by insurers, leaving consumers with no real bargaining power. The Bench held that if a clause defeats the very purpose of the contract and allows the insurer to avoid liability despite collecting premium, such a clause must be struck down as unfair.
The respondents are legal heirs of late Shad Mohd Bashir, who had insured his residential house with the appellant insurance company since 2009, with the policy renewed annually. During the subsistence of the policy, the house suffered substantial damage in the 2014 floods. Though the insurer’s surveyor assessed the loss at ₹6,08,462, the claim was repudiated on the ground that the Standard Fire Policy excluded STFI (Storm, Tempest, Flood and Inundation) perils.
While deciding the complaint, the Consumer Commission noted that although the policy contained an endorsement excluding STFI risks, the insurer failed to prove that the exclusion was clearly disclosed or explained to the insured. Holding the insured partly negligent, the Commission reduced the assessed loss by 25 percent and directed payment of ₹4,56,347 along with ₹20,000 as litigation costs.
Upholding the Commission’s order, the High Court reiterated that insurers have a statutory duty under IRDA regulations to clearly explain exclusions to policyholders. The court noted that the policy described itself as a “Standard Fire and Special Perils Policy” and even the acronym STFI was not spelled out, making it unreasonable to presume that the insured understood the exclusion.
Finding no infirmity in the Commission’s reasoning, the Bench dismissed the appeal and directed the insurance company to satisfy the award, ordering the statutory deposit to be released to the respondents.