Insurance Contract Law Issues Paper 2 Warranties - Law Commission

6.53 Soyer argues that on the facts there was a clear intention that the term should be
a warranty. He thinks the English courts would have regarded it as an express
warranty. 29 This is an open question. Some cases suggest that the English courts
may take an approach which is similar to the Canadian one. For example, in Kler
Knitwear v Lombard, Mr Justice Morland cited Bamcell II and used it to justify
overriding the clear words of the policy. However, this decision is only at first
instance and it has been subjected to academic criticism. 30 The English courts
also tend to construe marine insurance contracts more strictly.
6.54 The reasoning in Bamcell II and Kler Knitwear is predicated on the existence of
some ambiguity in the term, which is construed against the insurer. It is difficult to
know how far the Canadian court will go in overriding unambiguous words simply
to achieve fair outcomes. Soyer quotes the British Columbia Builders’ Risk
Clauses as an example of insurers’ attempts to prevent the courts from applying
Bamcell II to reinterpret warranties as descriptions of risk. Clause 1 is as
unambiguous as possible:
This policy contains warranties and general conditions none of which
are to be interpreted as suspensive conditions. The Underwriters
have agreed to accept the risk of insuring the Vessel on the condition
precedent that the Assured will comply strictly and literally with these
warranties and conditions. If the Assured breaches any of these
warranties or conditions, the Underwriters at their option will not pay
any claims arising thereafter, regardless of whether or not breach is
causative or in any way connected to such claim.
6.55 It is not clear how the courts would deal with a Bamcell II type case in the light of
such clear, definite and unambiguous wording.
Conclusion
6.56 As we have seen, the English courts have gone some way to temper the
unfairness associated with the strict application of warranties, and these
developments have been taken further by the Canadian Supreme Court.
Although these developments prevent unjust decisions, they also introduce some
uncertainty and incoherence into the law. The danger is of repeated litigation, as
insurers respond to court decisions by rewriting their contracts in even less
ambiguous terms.
THE USA
6.57 Traditionally, US marine insurance law followed the British approach and was
considered to be a federal matter. This, however, changed in 1955 following the
Supreme Court decision in the Wilburn Boat case. 31
29 Baris Soyer, Warranties in Marine Insurance (2 nd ed, 2006), p 45.
30 See Part 4.
31
[1955] AMC 467,
57