Insurance Contract Law Issues Paper 2 Warranties - Law Commission

Held covered in case of any breach of warranty as to cargo, trade,
locality, towage, salvage services or date of sailing provided notice be
given to the Underwriters immediately after receipt of advices and any
amended term of cover and any additional premium required by them
be agreed. 8
2.9 In other words, once the insured gives prompt notice of the breach, the insurer is
obliged to provide additional cover, if necessary on amended terms and for an
additional premium. Where the parties cannot agree on the terms or premium,
the matter may be referred to a court or arbitration.
Creating a warranty
2.10 Most warranties are created expressly by the parties. There is no single form of
words that confers warranty status on a term. The use of the word “warranty” has
been said to be indicative but by no means decisive. 9 As Lord Justice Rix put it in
HIH Casualty and General Insurance Ltd v New Hampshire Insurance Co,
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; a second,
whether it is descriptive or bears materially on the risk of loss; a third,
whether damages would be an unsatisfactory or inadequate
remedy. 10
The case concerned film finance insurance, in which the original insured had
undertaken to make six films. This was held to be a warranty, even though the
word warranty was not used, because it was a fundamental term with a direct
bearing on the risk. 11
2.11 In marine insurance, the law will also imply certain warranties into the contract
(which are set out in Appendix A).
8
ITCH 1995, cl 3.
9 Barnard v Faber [1893] 1 QB 340.
10 HIH Casualty and General Insurance Ltd v New Hampshire Insurance Co [2001] 2 Lloyd’s
Rep 161 at para 101; [2001] EWCA Civ 735.
11 By contrast, courts have sometimes been prepared to hold that a clause described as a
warranty is not a warranty. In Roberts v Anglo-Saxon Insurance Ltd (1927) 27 LI L Rep
313, Bankes LJ argued that the phrase “warranted: used only for commercial travelling” did
not create a true warranty:
When persons insert clauses, whether described as warranties or whether
described as part of the description of the vehicle, indicating that the vehicle is to
be used in some restricted way, my opinion… would be that the parties had used
that language as words descriptive of the risk, and that, as a result, when the
vehicle is not being used in accordance with the description it is not covered; but
it does not follow at all that because it is used on some one occasion, or on more
than one occasion, for other than the described use, the policy is avoided. It
does not follow at all. (at p 314).
This was approved by Lord Buckmaster in Provincial Insurance v Morgan [1933] AC 240 at
p 247.
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