Misrepresentation, Non-Disclosure and Breach ... - Law Commission

(1) The insurer may use warranties of past or present facts to add to the
remedies the law already provides for misrepresentation. Where a
statement is made into a warranty in the contract, and the fact stated is
not true, the insurer may treat the policy as discharged. This applies even
if the statement was not relevant to the risk; the insurer did not rely on it;
and it had no connection to any claim that has arisen.
De Hahn v Hartley 9
In June 1779 a policy of insurance was taken out on a ship which was sailing
from Liverpool to the British West Indies. This was a dangerous business and
the policy of insurance described the vessel as having “sailed from Liverpool
with 14 six-pounders, swivels, small arms and 50 hands or upwards”.
However, the ship had set off from Liverpool with only 46 hands. It docked at
Anglesey six hours later where it picked up a further six men. The ship then
sailed to Africa with 52 hands. Off the coast of Africa the ship (still with 52
hands) was captured and lost.
The underwriter refused to pay for the loss and the Court agreed. The Court
held that the warranty was not strictly true. It was irrelevant that it had been
remedied only six hours later whilst the ship was still in the relatively safe
waters around Britain.
(2) A statement on the proposal form may be converted into a warranty
using obscure words that most insureds will not understand. If a
prospective policyholder signs a statement on a proposal form stating
that the answers given form the “basis of the contract”, this has the effect
of converting all the answers into warranties. The insurer may avoid the
contract for any inaccuracy, even one that did not increase the risk.
9 (1786) 1 TR 343. See also Yorkshire Insurance Co v Campbell [1917] AC 218.
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