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

Civil law jurisdictions
7.61 The notion of a warranty that has the effect prescribed by the 1906 Act is unique
to the common law. Many civil lawyers express astonishment at the idea that
insurers can avoid liability for trivial breaches of obligations even if the breach
has been remedied or is unconnected with the loss. Most other European States
require that a breach be causally connected to the loss in some way before it can
absolve the insurer from payment.
7.62 Baris Soyer provides a detailed analysis of the English, German and Norwegian
approach to breach of warranty in marine insurance. 39 He shows that in both
Germany and Norway, provisions exist to exempt the insurer from liability if the
nature of the risk changes during the life of the policy. However, unlike the
English law, these require some degree of culpability and causation.
7.63 An example will illustrate the main differences. Under German law, the insurer is
not normally liable if the insured put a vessel to sea in an unseaworthy condition.
But this is subject to two important limitations. First, the exemption only applies to
loss caused by the conduct. If, for example, the loss was unrelated to the
unseaworthiness, the insurance policy continues. Secondly, it is open to the
insured to show that they were not “responsible” for the unseaworthiness - ie that
it was not a deliberate or negligent act. 40 Norwegian law is similar. 41 By contrast,
under the 1906 Act, voyage polices contain an implied warranty “that at the
commencement of the voyage the ship shall be seaworthy for the purposes of the
particular adventure insured”. 42 This means that if the ship is not seaworthy at the
beginning of the voyage, all liability is avoided even if the insured is not at fault; or
the defect is remedied; or the loss is totally unconnected with the defect.
7.64 Trine-Lise Wilhelmsen, a Professor at the Scandinavian Institute of Maritime Law,
comments that for most people in the Civil Law world, the UK concept of a
warranty is “hard to understand and even harder to explain”. Although the words
may seem “deceptively simple”, the consequences lack “logical reason” and
cannot be explained in terms of either legal fairness or economic efficiency. 43
39 B Soyer, Warranties in Marine Insurance (2 nd ed 2006).
40 B Soyer, Warranties in Marine Insurance (2 nd ed 2006) pp 186-187. See also Comite
Europeen des Assurances, Insurance Contract Law in Europe (2004). This explains that
German law requires an insured to notify details of an increased risk, but if they fail to do
so, the insurer “may only refuse to pay compensation if there is a causal link between the
occurrence of the risk insured against and the failure to notify details or the increased risk”
(p 81): see article 23 and following of the "Versicherungsvertragsgesetz" or Insurance
Contract Law of 30 May 1908, as amended 26 November 2001.
41 Under section 3-33 of the Norwegian Marine Insurance Plans 1996, the insurer is not liable
for “loss that is a consequence of the ship not being in a seaworthy condition, provided that
the assured knew or ought to have known of the ship’s defects at such a time as it would
have been impossible for him to intervene”.
42 Marine Insurance Act 1906, s 39(1).
43 “Duty of Disclosure, Duty of Good Faith, Alternation of Risk and Warranties: An Analysis of
the Replies to the CMI Questionnaire”, CMI Yearbook 2000 pp 392 and 409.
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