Insurance Contracts CP - Law Reform Commission

(2) Warranties – Matters of substance not form
5.07 In HIH Casualty and General Insurance Ltd v New Hampshire Insurance Co 14 Rix LJ said that
whether a warranty exists or not:
―it is a question of construction and the presence or absence of the word ―warranty‖ or
―warranted‖ is not conclusive. One test is whether it is a term which goes to the root of the
transaction; the second, whether it is descriptive of or bears materially on the risk of loss; a
third whether damages would be an unsatisfactory or inadequate remedy.‖ 15
5.08 MacGillivray summarises the essential characteristics of a warranty in the following terms:
―(i) it must be a term of the contract;
(ii) the matter warranted need not be material to the risk;
(iii) it must be exactly complied with; and
(iv) a breach discharges the insurer from liability on the contract notwithstanding that the loss
has no connection with the breach or that the breach has been remedied before the time of the
loss.‖ 16
MacGillivray‘s four qualifying factors will be examined in turn.
(3) The warranty must be a term of contract.
5.09 While no specific form of words are necessary for a stipulation to be held to be a warranty, the
current practice is to expressly provide that certain stipulations are to be conditions precedent to the
insurers‘ obligation to pay out on the policy. The Supreme Court, in Re Application of Butler 17 held that a
covenant in a policy of motor insurance that required the insured to give notice of any accident ―as soon
as practicable‖ was a condition precedent, not least because the policy itself expressly so provided.
There is no obligation in such instances to show that non compliance has been prejudicial. 18 Should the
policy not expressly stipulate that the provision or requirement is a condition precedent to a valid claim, a
court will have to consider whether a condition precedent was intended. If insufficiently clear language is
used then a warranty or a condition precedent may not be inferred. On matters of this kind differences of
judicial perspective are legion, and the cases are incapable of being reconciled.
(4) The matter warranted need not be material to the risk
5.10 Even if the matter warranted is material to the risk, basis of contract clauses have been
criticised as being disproportionate in terms of their application and capable of producing considerable
hardship for the proposer. The most infamous Irish case in this respect illustrates this point perfectly. In
Keenan v Shield Insurance Co 19 a house and contents policy was negotiated, the proposal form seeking
details of any previous claims. The proposer answered the question in the negative whereas he had
made a claim for fire damage to a pump the previous year, the claim being for £53. The declaration
recorded that ―the particulars and answers are true and complete in every respect‖. The insurers refused
to meet a subsequent claim for fire damage to the property and Blayney J held they were entitled to do
so, applying Pawson v Watson. 20 Blayney J observed that even if the inaccurate reply to the question
―was trivial, that would be no obstacle to the defendant repudiating the policy in view of the accuracy of
the answers in the proposal form having been warranted by the plaintiff‖. Blayney J reached this
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[2001] EWCA (Civ) 735.
Ibid, para 101, followed in GE Reinsurance Corp v New Hampshire Insurance Co [2003] EWHC 302 (Comm).
Paragraph 10-003.
[1970] IR 45; Patton v Employers Liability (1887) 20 LR(Ir) 93. Contrast Weir v Northern Counties of England
Insurance Co (1879) 4 LR (Ir)216 where no express warranty terminology was used in the proposal form.
Gaelcrann Teoranta v Payne [1985] ILRM 109.
[1987] IR 113.
(1788) 2 Cowp 785.
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