Consumer Protection Act, 1986: Deficiency in service – Insurance policy – Respondent purchased a “Transit Marine Insurance Policy” from the appellant-insurer on 21 July 2005, to cover the transportation of Helicopter from Langley, Canada to Bhopal, India – As per the acceptance letter, the transit route for the transportation of the helicopter was ‘Langley to Bhopal (by road/by air)” – On 5 October 2005, the helicopter was transported in a knocked down condition by air to New Delhi – On 13 October 2005, the helicopter was cleared by the customs and was shifted to a hangar at New Delhi – On inspection, the window of crew door was reported to be damaged – By letter dated 22 October 2005, the respondent informed insurer of the damage and stated that the helicopter was “being assembled at the Hangar located at Delhi so that the Helicopter can fly from Delhi to Bhopal” – On 23 November 2005, the respondent informed insurer that upon inspection, the tail boom of the helicopter was found damaged – A surveyor was appointed by the appellant to assess the alleged damage – In the report, surveyor concluded that the damage to the tail boom had occurred at Hangar Delhi after substantial assembly but prior to test flight and not during transit and hence would not fall under the purview of marine insurance policy as issued to the insured – Whether storage, unpacking and assembly of the helicopter at New Delhi would fall outside the scope of the expression “ordinary course of transit”, terminating coverage under the policy – Held: The insurance cover in the instant case is expressed in terms of the voyage itself – It provided that policy commenced from the time the insured cargo left the warehouse, premises or place of storage at the place named in the policy and continued during the “ordinary course of transit” – The specific act of unpacking the cargo at New Delhi for assembling it for the flight to Bhopal indicated that the transportation of the cargo in a knocked down state had come to an end – Once the respondent decided to leave the goods in the hangar at New Delhi for its commercial convenience not associated with or in furtherance of the requirements of their carriage to Bhopal, the transit insurance ended – The act of assembling the helicopter with a view to having it flown under its own power, instead of transporting the packaged knocked down helicopter further to Bhopal by road, would not constitute as storage in the ordinary course of transit – The policy covered only those risks that were associated with the transportation of the helicopter and did not cover the risks associated with the flight or operation of the helicopter – Change in the character of the helicopter from a knocked down state to a ready to fly state exposed insurer to risks not contemplated by the parties under the policy – Nature of the subject-matter having been altered, the cargo could not be said to be in transit and insurer was absolved from any liability arising out of any subsequent damage to the consignment.
Insurance Policy – Expression “in the ordinary course of transit”, meaning of – Held: Expression “in the ordinary course of transit” depends on the context, object and the wording of the particular policy – In context of the policy, the words “in transit” do not require transportation of the consignment in a single trip from the commencement to the final destination but includes those interruptions in motion that are incidental to or in furtherance of the conveyance or transportation of the consignment – The question of what does and does not constitute a deviation in furtherance of the conveyance of the goods is a question of fact that must be determined by both the intent of the policy and the actions of the parties.
Insurance Policy – Burden of proof – For the respondent to prove its case, a mere assertion that the loss incurred during the course of transit is not sufficient – Burden of proof lies on the respondent to show that the loss incurred was covered within the terms of the policy and that on a balance of probabilities there existed a proximate cause between the loss incurred and the consignment being in transit.
Insurance Policy – Construction of – Held: Insurance policies should be construed according to the principles of construction generally applicable to commercial and consumer contracts – The court must interpret the words in which the contract is expressed by the parties and not embark upon making a new contract for the parties – Interpretation of statutes.
Insurance Policy – Marine transit insurance policy – The purpose of the marine transit insurance policy is to cover the consignment from risks associated with transportation of the consignment from one place to another – It is fundamental for those responsible for carrying the cargo to ensure that all stages of the transportation are effected with reasonable promptness – “In transit”, however, does not necessarily mean that the consignment needs to be in continuous motion at all times – A mere brief suspension must however be in furtherance of the ordinary course of transit – During the ordinary course of transit, the consignment might frequently come to rest or be temporarily stored in the dock awaiting loading or customs clearance – However, unduly protracted steps in the cargo’s transportation are not within, and may terminate, the “ordinary course of transit.”.
Allowing the appeals, the Court
HELD: 1. Insurance policies should be construed according to the principles of construction generally applicable to commercial and consumer contracts. The court must interpret the words in which the contract is expressed by the parties and not embark upon making a new contract for the parties. A reasonable construction must therefore be given to each clause in order to give effect to the plain and obvious intention of the parties as ascertainable from the whole instrument. The liability of the insurer cannot extend to more than what is covered by the insurance policy. In order to determine whether the claim falls within the limits specified by the policy, it is necessary to define exactly what the policy covered and to identify the occurrence of a stated event or the accident prior to the expiry of the policy. [Para 16][213-F-H; 214-A]
2. The insurance cover in the present case is expressed in terms of the voyage itself. It provided that the duration of the policy attached and commenced from the time the insured cargo left the warehouse, premises or place of storage at the place named in the policy and continued during the “ordinary course of transit”. The expression “in the ordinary course of transit” cannot be divorced from the context and must be read along with the other conditions which appeared in the policy document. The meaning of the expression “in the ordinary course of transit” depends on the context, object and the wording of the particular policy. [Para 17, 18][214-F; 215-E]
3. In context of the policy, the words “in transit” do not require transportation of the consignment in a single trip from the commencement to the final destination but includes those interruptions in motion that are incidental to or in furtherance of the conveyance or transportation of the consignment. The question of what does and does not constitute a deviation in furtherance of the conveyance of the goods is a question of fact that must be determined by both the intent of the policy and the actions of the parties. An action that is wholly unrelated to the usual or ordinary method of pursuing the transportation of goods would prevent the goods from being covered under the definition of the expression “in transit” under the policy. [Para 25] [221-F-H]
4. It is undisputed that at the time of customs clearance, no damage was reported. It was when the helicopter was inspected by the representative of the manufacturer during a routine inspection on 21 October 2005 that damage was reported to the window of the crew door of the helicopter. The helicopter was transported from Langley in a “knocked down state”. The specific act of unpacking the cargo at New Delhi in furtherance of the purpose of assembling it for the flight to Bhopal indicated that the transportation of the cargo in a knocked down state had come to an end. The act of unpacking the helicopter for the purpose of assembling it for undertaking the flight to Bhopal was unrelated to the usual or ordinary method of pursuing the transportation of the cargo insured. The policy covered only those risks that were associated with the transportation of the helicopter and did not cover the risks associated with the flight or operation of the helicopter. [Paras 26, 27][222-B-C, F-H]
5. Change in the character of the helicopter from a knocked down state to a ready to fly state exposed the appellant to risks not contemplated by the parties under the policy. The effect of the alteration of the subject-matter insured is outside the scope of the agreed cover and brings an end to the policy. Once the nature of the subject-matter was altered, the cargo cannot be said to be in transit and the appellant is absolved from any liability arising out of any subsequent damage to the consignment. Exposure to risks associated with the flight substantially and unnecessarily added to the risks of the journey that were not covered by the policy. Accordingly, the submission that the cover against risks would be provided till the time the helicopter was not delivered at the final destination of Bhopal is unsustainable. [Para 29][223-E-H]
6. Clause 5.1.2 of the ICC provided that the policy may terminate upon the assured choosing to use an alternate place of delivery, prior to the destination named therein for one of two purposes, either for storage other than in the ordinary course of transit or for allocation or distribution of the cargo. The purpose of a transit policy is to cover the carriage of goods to the final destination. In the present case, storage of the helicopter in the hangar at New Delhi awaiting replacement of the spare window cannot be said to be incidental or in furtherance of the carriage of the goods to the ultimate destination. It would be unreasonable to suggest that the transit policy intended to cover indefinite storage of the helicopter at the hangar in New Delhi not brought about by the requirements of transport but determined by commercial convenience of the respondent. Once the respondent decided to leave the goods in the hangar at New Delhi for its commercial convenience not associated with or in furtherance of the requirements of their carriage to Bhopal, the transit insurance ended. [Para 30][224-B-F]
7. Clause 15 of the ICC provided that during the period of the transit policy, the insured shall act with reasonable dispatch. The purpose of the marine transit insurance policy is to cover the consignment from risks associated with transportation of the consignment from one place to another. It is fundamental for those responsible for carrying the cargo to ensure that all stages of the transportation are effected with reasonable promptness. “In transit”, however, does not necessarily mean that the consignment needs to be in continuous motion at all times. In the instant case, the insured voluntarily decided to store the helicopter in the hangar at New Delhi out of commercial convenience and not in furtherance of the transit. In addition, the insured by assembling the knocked down helicopter for the purposes of flying it to Bhopal changed the nature of the consignment and exposed the appellant to operational risks beyond the scope of the policy. [Para 31][224-G; 225-A-D]
8. Clause 6 of the ICC provided for continuation of insurance cover after termination in circumstances beyond the control of the insured. Clause 6 stated that the insured can issue prompt notice to the underwriters to continue the cover upon payment of an additional premium, if owing to circumstances beyond its control either the contract of carriage is terminated at a place other than the destination named therein or the transit is otherwise terminated before the delivery of the subject matter insured as provided for in Clause 5. In the present case, if the respondent decided to retain the helicopter in New Delhi awaiting the arrival of the replacement window from USA, it could have issued a notice to the underwriters to continue the cover of carriage till the time the repairs were carried out. However, the respondent did not issue any notice seeking extension of the insurance cover under Clause 6. [Para 32][225-D; 226-A-B]
9. Clause 8 of the ICC provided for claims under the insurance policy. In terms of Clause 8, for the respondent to prove its case, the basic and fundamental fact which needs to be proved is that: (i) the respondent must have an insurable interest in the subject matter insured at the time of loss; and (ii) the loss insured against occurred during the period covered by the policy. [Para 34, 35][226-F, G-H; 227-A]
10. For the respondent to prove its case, a mere assertion that the loss incurred during the course of transit is not sufficient. The burden of proof lies on the respondent to show that the loss incurred was covered within the terms of the policy and that on a balance of probabilities there existed a proximate cause between the loss incurred and the helicopter being in transit. The respondent has adduced no evidence to supports its case. [Para 36][228-C-D]
11. According to the NCDRC, the expiry of thirty days after completion of discharge at the final port of discharge should be essentially interpreted as thirty days after reaching Bhopal and not thirty days during the course of transit which included the halt at New Delhi. The line of approach adopted by the NCDRC is evidently incorrect. While construing a contract of insurance, it is not permissible for a court to substitute the terms of the contract. The court should always interpret the words used in a contract in a manner that will best express the intention of the parties. The NCDRC has incorrectly proceeded on the path that the ordinary course of transit would include assembling of the helicopter at New Delhi and the policy covered all risks till the time the helicopter did not reach Bhopal. The risks associated with the assembled helicopter were not covered within the purview of the policy, as the subject-matter which had been insured was a helicopter being transported in a packaged knocked down condition. The act of assembling the helicopter with a view to having it flown under its own power, instead of transporting the packaged knocked down helicopter further to Bhopal by road, would not constitute as storage in the ordinary course of transit. The interpretation adopted by the NCDRC strikes fundamentally at the purpose of the policy and is not in accordance with sound commercial principles. The interpretation altered the character of the risk insured beyond the scope of the policy as agreed between the parties. [Para 39][230-A-E]
Export Credit Guarantee Corporation of India Ltd v. Garg Sons International (2014) 1 SCC 686 : [2013] 1 SCR 336 – referred to.
Verna Trading Pty Ltd v. New India Assurance Co Ltd. (1991) 1 VR 129; QBE Insurance Limited v. Patterson Fine Jewellery Pty Ltd. 2004 VSC 31; Bethell v. Clark (1888) 20 QBD 615; SCA (Freight) Ltd v. Gibson [1974]
2 Lloyd’s Rep 533; Wiggins Teape Australia Pty Ltd v. Baltica Insurance Co Ltd [1970] 2 NSWR 77; First American Artificial Flowers, Inc v AFIA Worldwide Ins 1977 AMC 376 (N Y Sup Ct 1976); Lumber & Wood
Products, Inc v. New Etc 807 F 2d 1987, 1987 AMC 1244; Verna Trading Pty Ltd v. New India Assurance Co Ltd [1991] 1 VR 129; NEC Australia Pty Ltd v. Gamif Pty Limited [1993] FCA 252; Rhesa Shipping Co S A v. Edmunds [1985] 2 All ER 712 – referred to.
Mac Gillivray on Insurance Law Twelfth Edition, Sweet and Maxwell (2012); P Ramanatha Aiyar’s Law Lexicon 3rd Edition, 2012 Black Law’s Dictionary 10th Edition, Colinvaux’s Law of Insurance 10th Edition by Robert Merkin – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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