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Bajaj Allianz General Insurance Co. Ltd. and Ors. v. The State Of Madhya Pradesh

Bajaj Allianz General Insurance Co. Ltd. and Ors. v. The State Of Madhya Pradesh

FACTS-

  • Respondent purchased a "Transit Marine Insurance Policy" from the appellant on 21 July 2005 to cover the transportation of a Bell – 430 Helicopter from Langley, Canada to Bhopal, India.
  • Policy indicated transportation from Langley to Bhopal with standard packaging for a sum insured of ₹ 20,00,00,000.
  • Helicopter transported in a knocked down state by air to New Delhi on 5 October 2005.
  • Damage to helicopter noticed at New Delhi on 21 October 2005, including damage to the window of the crew door and tail boom.
  • Surveyor appointed to assess the damages. The surveyor concluded that the damage occurred at the hangar in Delhi after substantial assembly but before the test flight. Importantly, the surveyor's report stated that the damage did not occur during transit, thus indicating that it was not covered by the insurance policy.
  • Appellant repudiated the claim citing reasons such as the damage was not detected during transit or customs clearance.
  • Respondent filed a complaint seeking compensation for wrongful repudiation of the claim.
  • SCDRC found appellant deficient in service and directed payment of compensation to the respondent.
  • NCDRC upheld SCDRC's finding of deficiency of service and awarded additional interest compensation by way of damages.
  • Stay granted on the operation of NCDRC's judgment by an order of the Supreme Court dated 15 February 2019.
  • The present appeal is against the NCDRC Judgment.

ISSUE-

  • Whether storage, unpacking, and assembly of the helicopter at New Delhi fall outside the scope of the expression "ordinary course of transit," terminating coverage under the policy.

RULE-

 

  • The policy covered risks associated with transportation in an ordinary course, it doesn’t include the risk that are out of scope of policy i.e., unpacking and assembling of helicopter to make it ready to fly.

 

HELD-

  • SCA (Freight) Ltd v Gibson [1974] 2 Lloyd's Rep 533 ("Gibson"): The court held that goods cease to be "in transit" when they are on a journey not in furtherance of their carriage to the ultimate destination.
  • First American Artificial Flowers, Inc v AFIA Worldwide Ins [1977 AMC 376 (N Y Sup Ct 1976)] ("First American Artificial Flowers"): The court held that once the insured accepted delivery outside of the warehouse, coverage terminated. While the insured was free to commence unloading and continue until the job was completed, any delay beyond what was necessary for unloading was at the insured's risk. Therefore, the insurance coverage did not extend indefinitely after the goods were at the destination
  • Above precedents establish that goods are considered "in transit" when in the possession of the carrier, with certain deviations allowed but within the ordinary pursuit of transportation.
  • 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.
  • 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. 
  • 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.
  • The insurance cover would have continued if the insured had issued a notice to extend the cover.
  • Court decided that the ordinary course of transit ended in Delhi. Further, from the surveyors report it was concluded that the damage to the tail boom is caused at hangar and Delhi, not during the ordinary course of transit.
  • The burden of proof was on the insured to show that the damage occurred during the course of transit, which they failed to do.
  • The NCDRC's interpretation, considering assembly in New Delhi as part of the ordinary course of transit, was incorrect and altered the nature of the risk covered.
  • The appeals were allowed, and the consumer complaint was dismissed. There was no order as to costs