Warranties in Marine Insurance

In one line

A warranty in marine insurance is a promise that must be exactly kept, whether or not it matters, and breaking it discharges the insurer from the moment of the breach.

In the wording a student can write in an exam: by section 35 of the Marine Insurance Act, 1963 a warranty means a promissory warranty, by which the assured undertakes that some particular thing shall or shall not be done, or that some condition shall be fulfilled, or affirms or negatives the existence of a particular state of facts; it must be exactly complied with whether material to the risk or not; and on breach the insurer is discharged from liability as from the date of the breach, without prejudice to any liability incurred before it.

Why a warranty is so severe

Because the underwriter cannot inspect the risk. He is asked to insure a ship he has never seen on a voyage he cannot supervise. The only way he can control what he has priced is to make the assured promise it, and to make the promise absolute.

And because the promise is the price. A warranty that the vessel will carry no deck cargo, or will not sail after a stated date, or will be laid up in a named port during the monsoon, is what the rate was calculated on. If the promise is only as good as its materiality in the particular loss, the underwriter has priced something he did not sell.

The severity is therefore deliberate, and section 35(3) states it without apology.

The definition and the consequence: section 35

Section 35(1) provides that a warranty, in the sections relating to warranties, means a promissory warranty, that is to say a warranty by which the assured undertakes that some particular thing shall or shall not be done, or that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts.

Section 35(2) provides that a warranty may be express or implied.

Section 35(3) is the operative rule. A warranty is a condition which must be exactly complied with, whether it be material to the risk or not. If it be not so complied with, then, subject to any express provision in the policy, the insurer is discharged from liability as from the date of the breach of warranty, but without prejudice to any liability incurred by him before that date.

Four consequences follow and each is examinable.

Exact compliance. Substantial compliance is not compliance. A warranty that a watchman will be on board every night is broken by one night's absence.

Materiality is irrelevant. The parties have agreed that this matters, and the court will not reopen it. That is the chief difference from the duty of disclosure under section 20, where materiality is the whole question.