January 30, 2026 : The State Consumer Disputes Redressal Commission, U.T., Chandigarh has partly allowed an appeal filed by Dheeraj Khanna, holding Liberty General Insurance Limited guilty of deficiency in service for wrongfully repudiating a home insurance claim arising out of internal leakage damage.
The Bench comprising Justice Raj Shekhar Attri (President) and Preetinder Singh (Member) delivered the judgment in Appeal No. 106 of 2025, titled Dheeraj Khanna v. Aditya Birla Capital Ltd. & Ors., on January 29, 2026.
According to the order, the appellant had obtained a home loan of ₹29 lakh from Aditya Birla Housing Finance Limited in June 2020 for purchase of a residential flat, which was registered in the names of his parents. At the time of sanction of the loan, the housing finance company facilitated a House Protection Insurance Policy issued by Liberty General Insurance Limited for the period August 7, 2020 to July 7, 2025, upon payment of a premium of ₹14,010.
Soon after taking possession, the complainant noticed subsidence of flooring, damage to POP and paint on the roof, and sinking of tiles in the bathrooms and washing area. The matter was reported to the insurer, but the claim was eventually repudiated. The complainant undertook repairs at his own expense and claimed to have spent ₹6,18,000. He also alleged that a theft occurred in the flat on July 5, 2021, but that claim too was rejected. The District Consumer Commission-I, Chandigarh dismissed the complaint, leading to the present appeal.
While examining the internal leakage claim, the State Commission found that the District Commission had incorrectly relied on Exclusion Clause 4 of the policy by treating the damage as seepage and therefore outside the scope of coverage. The Bench observed that there was no material on record to establish that the damage was caused by seepage in the strict sense contemplated under the exclusion clause. On the contrary, it was the admitted case that the damage occurred due to internal leakage within the insured premises. The Commission clarified that internal leakage resulting in sudden and extensive damage to flooring, POP and tiles cannot be equated with seepage. It reiterated that exclusion clauses must be strictly construed and that the burden lies on the insurer to prove that a particular loss falls within an exclusion.
The Commission also examined Clause 9 of Section I (Home Protection) of the policy, which specifically covers loss caused by bursting or overflow of water tanks, apparatus and pipes. It held that once internal leakage was established, the insurer could not deny liability by adopting a narrow interpretation that defeated the very object and purpose of the policy. The approach of the District Commission was described as hyper-technical and contrary to settled principles governing interpretation of insurance contracts.
With respect to quantum, the Commission scrutinised the Final Survey Report dated May 31, 2022, which assessed the gross loss at ₹4,15,332. It noted that the surveyor had deducted 30 percent on account of “variation” without assigning convincing reasons, in addition to deductions of 2 percent towards depreciation and 5 percent towards salvage. The Bench held that such substantial deductions without supporting material were arbitrary and unsustainable in law. It concluded that only 2 percent towards depreciation and 5 percent towards salvage, aggregating to 7 percent, could be reasonably deducted. After applying these deductions, the complainant was held entitled to ₹3,86,259, and the repudiation of the claim was declared to amount to deficiency in service.
However, in relation to the burglary and theft claim, the Commission found no infirmity in the insurer’s decision. It observed that the complainant failed to place on record cogent evidence to show that the PCR was called on the date of the alleged incident, July 5, 2021. Instead, a simple letter was addressed to the SHO on May 8, 2022 after considerable delay. The Commission held that such unexplained delay deprived both the police authorities and the insurer of a fair opportunity to investigate the matter, and therefore the repudiation of the theft claim was justified .
Accordingly, the appeal was partly allowed. The Commission set aside the District Commission’s order to the extent of the internal leakage claim and directed Liberty General Insurance Limited to pay ₹3,86,259 to the complainant with interest at 9 percent per annum from May 31, 2022 until realization. The insurer was also directed to pay ₹20,000 as compensation for mental agony and physical harassment, along with ₹15,000 towards litigation costs. The amount is to be paid within 30 days, failing which it will carry interest at 12 percent per annum from the date of default. The complaint against the remaining opposite parties stands dismissed.
Case Title: Dheeraj Khanna v. Aditya Birla Capital Ltd. & Ors.
Case No.: Appeal No. 106 of 2025
Coram: Justice Raj Shekhar Attri (President) and Preetinder Singh (Member)
