Insurance Contract Law Issues Paper 2 Warranties - Law Commission

It is a striking feature of this branch of the law that other legal systems
are increasingly discarding the more extreme features of English law
which allow an insurer to avoid liability on grounds which do not relate
to the occurrence of the loss. 24
6.50 In Canada, the Marine Insurance Act 1993 is based on the UK Marine Insurance
Act 1906. However courts have limited it “to situations where the warranty is
material to the risk and the breach has a bearing on the loss.” 25 Where cases do
not meet this criterion, the courts tend to find that the clause is not a true
warranty at all.
The Bamcell II
6.51 The leading case is the Supreme Court decision in Century Insurance Company
of Canada v Case Existological Laboratories Ltd. (“The Bamcell II”). 26 The
Bamcell II was a converted barge used for oceanographic experiments. The
owners had negotiated a policy, which included the following term
Warranted that a watchman is stationed on board the BAMCELL II
each night from 2200 hours to 0600 hours with instructions for
shutting down all equipment in an emergency.
6.52 In fact, the owners never placed a watchman on board. However, there were no
problems at night. The loss occurred mid afternoon, and therefore the breach had
“absolutely no bearing whatever on the loss” 27 . As a result, Ritchie J held:
The clause would only have been effective if the loss had occurred
between 2200 hours and 0600 hours, and it was proved that there
was no watchman stationed aboard during those hours. To this extent
the condition contained in the clause constituted a limitation of the
risk insured against but it was not a warranty. 28
24 Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd and others (The Star Sea) [2001]1
All ER 743, at para 79. Lord Hobhouse specifically mentions “the most outspoken criticism
of the English law of non-disclosure” found in the South African case of the Mutual and
Federal Insurance [1995] (I) SA 419.
25 Christopher Giaschi. “Warranties in Marine Insurance” Paper, Association of Marine
Underwriters of British Columbia, Vancouver, 10 April 1997.
http://www.admiraltylaw.com/papers/warranties.htm (24 May 2006)
26
[1984] 1 WWR 97.
27 Century Insurance Company of Canada v Case Existological Laboratories Ltd. (The
“BAMCELL II”) [1984] 1 WWR 97, 104, per Ritchie J.
28 Century Insurance Company of Canada v Case Existological Laboratories Ltd. (The
“BAMCELL II”) [1984] 1 WWR 97, 104, per Ritchie J.
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