Misconceptions and various interpretations regarding the duration clause are not new in marine insurance. Although the coverage provided by Institute Cargo Clauses (ICC) incepts from the origin warehouse and terminates in accordance with the duration clause (Clause 5), little thought is given to various termination provisions of the duration clause. Many construe it as a “warehouse to warehouse cover” irrespective of contract/inco terms and storages/situations which do not fall within the purview of the ordinary course of transit.

The Indian Supreme Court, in its judgement in the Civil Appeal No. 2366-67 of 2020, relying on the 1888 decision of the Queen’s Bench Division in ‘Bethell v Clark12’, clarified the ordinary meaning of ’transit’ and referred to 19 Precedents across various jurisdictions which have dealt with the meaning of the expression ’in transit’ and ’in the ordinary course of transit’.

The court dealt with a matter in which the insured had purchased a ‘transit’ marine insurance policy from an Indian insurer in July 2005 to cover the transportation of a Bell-430 Helicopter from Langley, Canada, to Bhopal. The helicopter was transported in a knocked-down state when it reached New Delhi. Although customs cleared the machine before it was shifted to a hangar, it was identified that the window of the crew door was broken and had been assembled in order so it could fly from Delhi to Bhopal. Later, the insured informed the insurer that the helicopter’s tail boom was damaged. The court observed that the insured intended to assemble the helicopter in New Delhi and then fly it to Bhopal.

According to the court, “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”, and the “change in the character of the helicopter ... from a knocked-down state to a ready to fly state” exposed the insurance firm to risks not contemplated by the parties under the policy. Once the nature of the subject matter was altered, the cargo cannot be said to be in transit and the insurance firm is absolved from any liability arising out of any subsequent damage to the consignment.

The detailed judgement can be accessed here.