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

The implied marine warranties
8.116 The 1906 Act implies four warranties into marine insurance contracts:
seaworthiness, portworthiness, cargoworthiness and legality. 60 In Issues Paper 2
we described these implied warranties 61 and suggested that the causal
connection test should also apply to them. We think this is right, for the reasons
given below.
8.117 Some respondents urged us to consider a more radical solution: that the implied
warranties should be abolished and the parties should agree expressly to any
warranties they wish to include. Below we ask for views on this.
Seaworthiness
8.118 The main effect of a causal connection test would be upon the warranty of
seaworthiness in voyage policies. It would effectively reverse the ruling in De
Hahn v Hartley, 62 by permitting warranties to be remedied. If, for example, a ship
leaves port with insufficient crew, and later takes more crew on board, the insurer
would be liable for subsequent losses. It would also mean that a technical breach
(such as not carrying the required medicines or not having the correct certificates
on board) would not discharge the insurer from liability for an unconnected loss.
8.119 Our proposals are mild: in a voyage policy, the insured would only be paid if it
could show, on the balance of probabilities that the breach did not contribute to
the loss. This goes nowhere near as far as the requirement in time policies,
where the insurer has to prove that the breach was a real or dominant cause of
the loss. It does, however, go some way to lessening the difference between
voyage and time policies. Given that the industry has lived with the time policy
rule for over 100 years, we do not think that this lesser rule in voyage policies
should cause undue difficulties.
Portworthiness and cargoworthiness
8.120 These warranties are less likely to be a major cause of dispute, and we do not
think that the proposed reform would have any great effect on the market.
8.121 At present, it may be possible for an insurer to argue that, if a problem in port is
remedied before the ship is put to sea, the insurer is discharged from liability for
an unconnected loss at sea. We do not think this result would be fair. Again, we
believe that the insured should be able to put forward a defence that the breach
did not contribute to the loss.
60 See Marine Insurance Act 1906, ss 39, 40 and 41.
61 See Issues Paper 2, Appendix A.
62
(1786) 1 TR 343.
211