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

THE IMPLICATIONS FOR MARINE INSURANCE
8.111 In Part 5 we argued against making a distinction between Marine, Aviation and
Transport insurance (MAT) and other forms of insurance as far as non-disclosure
and breach of warranty are concerned. We were not convinced that MAT was a
separate and distinct market. 56 We thought it would be overly complex to apply
one law to (for example) major constructions, and quite a different law to ships.
We think the same applies here.
8.112 It might be argued that marine insurance should be treated differently because
the law has traditionally taken a stricter approach to marine warranties. Below we
reject this argument. We also consider the implications of our reform for the
implied marine warranties and voyage conditions contained in sections 39 to 46
of the 1906 Act.
Express warranties
8.113 The courts have tended to construe warranties more strictly in marine cases than
in other forms of insurance. It is said that in marine policies there is a
presumption that any statement of fact written into the policy and bearing on the
risk is to be construed as a warranty. 57
8.114 However, we have been told that express warranties are now very rare in marine
policies. There does not appear to be any great demand for them from the
market. We do not think that the present rules on warranties meet the needs and
expectations of an international market. We have not found any commentators
outside the common law sphere who consider it fair for an insurer to fail to pay a
claim for a breach which is not connected to the loss. Several criticise the rule in
scathing terms. 58 Even within jurisdictions that share the legacy of the 1906 Act, it
is rare for a court to accept insurers’ arguments that a claim unrelated to a breach
should not be paid. It was rejected by the US Supreme Court in Wilburn Boat,
and by the Supreme Court of Canada in Bamcell II. 59 The Australia Law Reform
Commission reviewed marine insurance law in 2001, following complaints from
the fishing industry, and recommended that a breach of warranty should only
justify avoiding a claim if it proximately caused the loss.
8.115 We provisionally propose that the causal connection test outlined above
should also apply to express warranties in marine insurance. They should
also apply in aviation and transport insurance.
56
In 1980, the Law Commission accepted that the line between MAT and other insurance
was not a clear one, and that some individuals with pleasure craft did need additional
protection. It expressed unease with the definitions of MAT used in previous regulations,
and suggested some omissions. It also proposed that the Secretary of State should be
empowered to vary the definition by regulation. (Insurance Law, Non-Disclosure and
Breach of Warranty (1980) Law Com No 104).
57 J Birds and N Legh-Jones, MacGillivray on Insurance Law (10 th ed 2003), para 10-30,
referring to Thomson v Weems (1884) 9 App. Cas. 671, 684; Yorkshire Insurance Co, v
Campbell [1917] AC 218, 224.
58 See, for example, Professor Trine-Lise Wilhelmsen Duty of Disclosure, Duty of Good Faith,
Alternation of Risk and Warranties: An Analysis of the Replies to the CMI Questionnaire,
CMI Yearbook 2000 p 392. and Professor Hare The Omnipotent Warranty: England v The
World, paper to the International Marine Insurance Conference, November 1999.
59 See paras 6.51 and 6.52 above.
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