LLM Group 2 Business Law Law of Insurance 2025-26 Question Paper with Solutions

For full marks, cover: this is a bare Act question and it must be answered on the sections, not from a textbook summary; define the voyage policy from section 27 and distinguish it from the time policy, giving the consequences of the distinction, which is what makes the first part worth marks; then the statutory scheme of "the voyage" in sections 44 to 51, taken in order, because deviation is only one of five ways in which a voyage can go wrong and the examiner wants the whole scheme; then deviation itself under section 48, when it occurs and what it does; then all seven excuses in section 51(1) with the duty to resume under section 51(2); and then, expressly, the circumstances in which deviation is not excused, which is the half of the question most answers omit.

First, the implied warranty of seaworthiness applies only to a voyage policy. Section 41(1) implies a warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured; section 41(3) revives it at the commencement of each stage of a staged voyage; and section 42(2) adds, in a voyage policy on goods, a warranty of cargoworthiness, that the ship is not only seaworthy as a ship but reasonably fit to carry those goods to the destination. Section 41(5) provides that in a time policy there is no implied warranty of seaworthiness at any stage, but that where with the privity of the assured the ship is sent to sea unseaworthy the insurer is not liable for loss attributable to that state.

Second, the rules about the conduct of the adventure in sections 44 to 51 apply only to a voyage policy, because only a voyage policy has a voyage to conduct. A ship on a time policy may go where she pleases within any trading limits the policy names.

Third, the "at and from" form differs from the "from" form. Under an "at and from" policy the risk attaches while the vessel is in the port of departure as well as during the voyage, and section 41(2) then implies a warranty that she is reasonably fit to encounter the ordinary perils of the port at the commencement of the risk. Under a "from" policy the risk attaches only on sailing.

Section 46, sailing for a different destination. Where the destination is specified in the policy and the ship, instead of sailing for that destination, sails for any other destination, the risk does not attach. Again, no cover begins.

Section 47, change of voyage. Sub section (1): where, after the commencement of the risk, the destination of the ship is voluntarily changed from the destination contemplated by the policy, there is said to be a change of voyage. Sub section (2): unless the policy otherwise provides, where there is a change of voyage the insurer is discharged from liability as from the time of change, that is to say, as from the time when the determination to change it is manifested; and it is immaterial that the ship may not in fact have left the course of voyage contemplated by the policy when the loss occurs. The insurer is therefore off risk from the moment the intention is manifested, before any physical departure.

Section 50, delay in the voyage. In the case of a voyage policy, the adventure insured must be prosecuted throughout its course with reasonable despatch, and if without lawful excuse it is not so prosecuted, the insurer is discharged from liability as from the time when the delay became unreasonable.

Section 48(3) makes a point that is regularly got wrong: the intention to deviate is immaterial; there must be a deviation in fact to discharge the insurer. A master who forms the intention to depart from the route, and is prevented from doing so, has not deviated. This is the exact opposite of the rule for a change of voyage under section 47(2), where the insurer is discharged from the moment the determination is manifested, whether or not the ship has left the course. The distinction is the sharpest point in the topic and should be stated expressly: a change of voyage is about the destination and bites on intention; a deviation is about the route and bites on conduct.

Section 49 supplies a special rule for several ports of discharge. Sub section (1): where several ports of discharge are specified by the policy, the ship may proceed to all or any of them, but, in the absence of any usage or sufficient cause to the contrary, she must proceed to them, or such of them as she goes to, in the order designated by the policy; if she does not, there is a deviation. Sub section (2): where the policy is to "ports of discharge" within a given area which are not named, the ship must, in the absence of usage or sufficient cause, proceed to them in their geographical order; if she does not, there is a deviation.

(b) Where caused by circumstances beyond the control of the master and his employer. This covers the vessel driven off course by storm, ice or current, or diverted by an order of a public authority or a blockade. The test is one of control, and it is the master and his employer whose control is in question, so a deviation ordered by a charterer for commercial reasons is not within it.

(c) Where reasonably necessary in order to comply with an express or implied warranty. A vessel that must put into a port to be made seaworthy, so as to comply with the warranty in section 41 at the commencement of a further stage under section 41(3), is excused; the law does not require the assured to choose between two breaches.

(d) Where reasonably necessary for the safety of the ship or subject matter insured. This is the commonest excuse in practice: putting into a port of refuge for repairs after damage, avoiding a hurricane, or seeking shelter from ice. It must be reasonably necessary, so a diversion for convenience or for the master's preference is not enough.

Section 51(2) attaches a duty to every excuse and it must not be omitted: when the cause excusing the deviation or delay ceases to operate, the ship must resume her course, and prosecute her voyage, with reasonable despatch. An excused deviation therefore protects the assured only so long as the excusing cause lasts. A vessel that puts into a port of refuge for repairs and then lingers for commercial reasons is in breach from the moment the repairs are complete.

The circumstances in which deviation is not excused

This half of the question is answered by naming what falls outside the seven heads, and four categories cover the field.

First, deviation for the convenience or commercial advantage of the assured is never excused. Calling at an additional port to load or discharge extra cargo, taking a longer but cheaper bunkering route, or diverting to a market where prices are better, are all outside section 51(1), however sensible commercially.

Second, deviation to save property alone is not excused. As shown above, clause (e) protects only the saving of human life or aid to a ship in distress where human life may be in danger. A pure salvage venture requires a liberty clause under clause (a).

A deviation is not the same as a change of voyage, and the consequences differ. Under section 47 the insurer is discharged from the moment the determination to change the destination is manifested, before any physical departure. Under section 48 the insurer is discharged from the moment of an actual departure from the route, intention alone being immaterial. And under sections 45 and 46 the risk never attaches at all, so the premium is returnable, whereas a deviation or a change of voyage discharges a contract that has already attached, so the premium is earned and the insurer remains liable for a loss occurring before the deviation.

On the meaning of the adventure insured, Wilson, Sons & Co. v. Owners of Cargo per the Xantho, (1887) 12 App Cas 503, supplies the frame. A vessel sank after a collision in fog, and the House of Lords held a collision to be a peril of the sea, Lord Herschell explaining that the expression covers damage of a marine character caused by the violent action of the elements, as distinguished from the natural and inevitable action of wind and wave, and adding that the same words are read more widely in a bill of lading than in a policy. The significance for a voyage policy is that the insurer has priced the perils of a particular sea route, and a deviation substitutes a set of perils he never assessed.

On the reasonableness of a departure taken for safety, Canada Rice Mills Ltd. v. Union Marine and General Insurance Co. Ltd., [1941] AC 55, states the principle that runs through section 51(1)(d). Rice was damaged by heating after the ventilators were closed to keep out heavy seas in a storm. The Privy Council held that a reasonable precaution rendered necessary by perils of the sea does not break the chain of causation, and the loss was covered. The same idea animates the excuse for a deviation reasonably necessary for the safety of the ship or the subject matter: the law does not require a master to persist on his course into danger in order to preserve the cover.

Deviation under section 48 occurs where the ship departs, without lawful excuse, from the course designated by the policy or, if none is designated, from the usual and customary course; the insurer is then discharged from the time of deviation, it is immaterial that she regained her route before any loss, and by section 48(3) the intention to deviate is immaterial because there must be a deviation in fact. Section 49 adds that visiting several ports of discharge out of the designated or geographical order is itself a deviation.

The excuses are the seven in section 51(1): a special term in the policy; circumstances beyond the control of the master and his employer; reasonable necessity to comply with a warranty; reasonable necessity for the safety of the ship or subject matter; the saving of human life or aid to a ship in distress where life may be in danger; obtaining medical or surgical aid for a person on board; and barratry of the master or crew where barratry is insured. Section 51(2) requires the ship to resume her course with reasonable despatch once the excusing cause ceases.