Insurance Contract Law Issues Paper 2 Warranties - Law Commission

3.21 A more recent example is Seddon v Binions. 15 Here a father was insured to drive
for “social domestic and pleasure purposes”. He occasionally helped his son out
with the son’s carpet laying business, although he did not get paid for it. One
Sunday, the father, son and the son’s employee were laying a carpet, when the
son’s employee suffered a toothache. The father drove the employee to the
dentist in his son’s car and suffered a serious accident. The Court of Appeal held
that the essential character of that journey was that the father was using the
son's car for a business purpose. The father’s insurance did not apply to the
journey that had taken place, and the insurers were not liable to meet the claim.
3.22 In Seddon, the dispute was between two insurers. The son’s car was insured with
a different company, who met the cost of the accident. If the policyholder had
stood to suffer a large loss, the Court might have interpreted the facts in a more
sympathetic light. However, the essential problem remains. Even a very minor
and technical breach may take a loss outside the description of the risk. It cannot
be right to apply one set of protections to warranties and a lesser set to
exceptions.
3.23 The issue is not simply confined to use clauses. There are many other examples.
It is common for motor insurance policies to state that a vehicle should not be
driven in an unroadworthy condition. This may be written as descriptive of the
risk, to say the insurer is not liable while the vehicle is being driven in an
unroadworthy condition. Alternatively, it may be written as a warranty, that “the
insured shall take all reasonable steps to maintain the vehicle in a roadworthy
condition”. 16 There are cases where a car is in an unroadworthy condition, but the
defect does not cause an accident. In Conn v Westminster Motor Insurance, 17 for
example, a taxi was driven with worn tyres, but Lord Justice Salmon commented,
If one thing is plain in this case it is that whatever did cause this
accident, it had nothing to do with the dangerous and inefficient
condition of the tyres. 18
3.24 However, the insurer still escaped liability. In Conn it did not matter if the term
was a warranty or an exception. As the defect was current at the time of the
accident, the insurer was not liable. It would not make any sense to permit an
insured to argue lack of causal connection in the case of warranties, but not in
the case of exceptions.
15
[1978] 1 Lloyd’s Rep 381.
16 th
See the discussion in M. Clarke, The Law of Insurance Contracts (4 ed 2002), para 19.2D
pp 594-6.
17
[1966] 1 Lloyd’s Rep 407.
18 as above, at p 414.
15