The court delves into the legal intricacies of interpreting a transit insurance policy in a case involving damage to a helicopter during transportation. The focus is on whether storing, unpacking, and assembling the helicopter in New Delhi falls within the ordinary course of transit, ultimately impacting the insurer’s liability. The NCDRC and SCDRC orders have been overturned, highlighting the significance of understanding policy terms and their implications in commercial contracts.
Facts
- The respondent filed a consumer complaint before the SCDRC on 18 August 2006 seeking compensation for wrongful repudiation of the claim and towards the loss sustained.
- The appellant repudiated the claim of the respondent on 11 July 2006, stating that the loss occurred after the duration of the policy had ended as per Clause 5 of the Institute Cargo Clauses (Air Cargo).
- The appellant’s argument was that the losses claimed, including damage to the tail boom and window of the crew door of the helicopter, were inadmissible as they were noticed after the policy duration had ended.
- The respondent’s position was that the damage occurred within the transit period as defined by the policy, extending up to Bhopal, and hence, should be covered.
- The NCDRC upheld the finding of the SCDRC that there was a deficiency of service on behalf of the appellant in repudiating the claim.
- The SCDRC found that the halt at New Delhi was only a transit halt and the assembly of the helicopter did not change the nature of the cargo.
- Both the appellant and the respondent preferred separate appeals before the NCDRC against the SCDRC’s decision.
- In addition to compensation granted by SCDRC, NCDRC awarded ‘interest compensation by way of damages’ at the rate of six percent per annum from the date of repudiation till realization.
- The appellant filed a Special Leave Petition before the Court under Article 136 of the Constitution assailing the decision of the NCDRC.
- The operation of the judgment of the NCDRC was stayed by an order of the Court dated 15 February 2019.
- The SCDRC held the appellant to be deficient in service and directed it to pay compensation of ₹64,89,205 towards the cost of repair of a helicopter to the respondent.
- The NCDRC dismissed the appellant’s appeal and partly allowed the respondent’s appeal for enhancement of compensation, also awarding interest at the rate of six percent per annum.
- The respondent purchased a ‘Transit Marine Insurance Policy’ from the appellant to cover the transportation of a Bell – 430 Helicopter from Langley, Canada to Bhopal, India.
- The transit route for the helicopter transportation was set out by the appellant in an acceptance letter and later altered in a letter dated 10 July 2005.
- The policy schedule indicated that the policy was issued from 22 July 2005 for transportation of the helicopter with standard packaging from Langley to Bhopal for a total sum insured of ₹20,00,00,000.
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Issue
- The issue before the Court is whether storage, unpacking, and assembly of the helicopter in New Delhi would be considered outside the scope of the ‘ordinary course of transit’.
- This determination is crucial in deciding whether coverage under the policy is terminated.
- The focus is on whether these activities are considered part of the normal transit process.
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Arguments
- (i) The respondent stored the helicopter in its hangar in New Delhi for convenience, not for onward carriage to Bhopal, taking the cargo beyond the ordinary course of transit and terminating coverage under the policy.
- (ii) By taking custody of the cargo and assembling the helicopter in New Delhi, the respondent ended the link with the carrier, affecting risk cover and deviating from the requirements of Clause 6 and 15 of the ICC.
- (iii) The policy covered risks for transportation of the disassembled helicopter as cargo through a carrier, not for assembly at a different location, creating new risks not agreed upon in the policy.
- (iv) Operational risks associated with the flight of a helicopter are covered under a separate Aviation Hull All Risk Insurance Policy, distinct from risks covered by the transit marine insurance policy.
- (v) The interpretation of the policy by the NCDRC contradicted the intended meaning of the parties, essentially rewriting the policy.
- The tenure and duration of the policy were contingent upon an event triggering Clause 5 of the ICC.
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Analysis
- The court cannot substitute the terms of a contract of insurance.
- Insurance policies should be construed according to general principles applicable to commercial contracts.
- Liability of the insurer is limited to what is covered by the insurance policy.
- The damage to the helicopter during transit cannot be conclusively proven.
- The assembling and flying of the helicopter altered the nature of the consignment, exposing the insurer to additional risks.
- The respondent failed to prove that the damage occurred during transit.
- Storing the helicopter in New Delhi for assembly was not considered part of the ordinary course of transit.
- The policy terminated upon alterations to the subject matter of the insurance.
- The respondent voluntarily decided to store the helicopter for commercial convenience, ending the transit insurance.
- The insurer was not liable for damages not covered by the transit policy due to alterations in the transit process.
- The destination of the wood pulp, as specified in the policy of marine insurance, was the plaintiff’s place of business at Bomaderry in New South Wales.
- The container was not unloaded completely by the end of the day and when the workers arrived the next morning, the goods were found to be stolen.
- The plaintiff shipped a quantity of wood pulp from Sweden to Port Kembla.
- The court held that the wood pulp was still in transit at the time of the theft, making it covered under the policy of insurance.
- About thirty-eight days after the wood pulp had been unloaded, the wood pulp in one of the stores was destroyed by fire.
- After the wood pulp was unloaded at the port, the plaintiff stored the consignment in three other stores due to insufficient storage space at Bomaderry.
- The interpretation adopted by the NCDRC was fundamentally at odds with the purpose of the policy and sound commercial principles.
- The interpretation placed on the terms of the insurance policy was deemed manifestly incorrect.
- The orders of the NCDRC and SCDRC were found to be unsustainable.
- The character of the risk insured was altered beyond the scope of the agreed policy terms.
Decision
- The appeals have been allowed.
- The impugned judgments and orders of the NCDRC and the SCDRC have been set aside.
- No costs have been awarded.
- The consumer complaint has been dismissed.
- Any pending application(s) have been disposed of.
Case Title: BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD. Vs. THE STATE OF MADHYA PRADESH (2020 INSC 358)
Case Number: C.A. No.-002366-002367 / 2020
