Insurance Contract Law Issues Paper 2 Warranties - Law Commission

The implied marine warranties
7.109 The Marine Insurance Act 1906 implies four warranties into marine insurance
contracts: seaworthiness, portworthiness, cargoworthiness and legality. These
are described briefly in Appendix A. The warranty of seaworthiness is by far the
most important, thought it operates differently in voyage and time policies.
7.110 A full review of the implied warranties is outside the scope of our project. In 1980
we commented that the rules were long-established and well-known, and that the
professionals in the market could reasonably be expected to be aware of their
niceties. 32 The rules are certainly well-established. How far they are well-known is
difficult to say; even the short description in Appendix A reveals some
complexities and uncertainties surrounding them. However, we have not received
demands for their reform, and a full-scale review would take more resources than
we have available.
7.111 Here we are concerned with only one limited question, which is whether the
requirement for a causal connection set out above should also apply to the
implied marine warranties. Our view is that it should. Below we consider the four
warranties, to see if they raise any special issues.
Seaworthiness
7.112 The main effect would be upon the warranty of seaworthiness in voyage policies.
It would effectively reverse the ruling in De Hahn v Hartley, 33 by permitting
warranties to be remedied. If, for example, a ship leaves port with insufficient
crew, and later takes more crew on board, the insurer would be liable for
subsequent losses. It would also mean that a technical breach (such as not
carrying the required medicines, or not having the correct certificates on board)
would not discharge the insurer from liability for an unconnected loss.
7.113 Our proposals are mild: in a voyage policy, the insured would only be paid if it
could show, on the balance of probabilities that the breach did not contribute to
the loss. This goes nowhere near as far as the requirement in time policies,
where the insurer has to prove that the breach was a real or dominant cause of
the loss. It does, however, go some way to lessening the difference between
voyage and time policies. Given that the industry has lived with the time policy
rule for over 100 years, we do not think that this lesser rule in voyage policies
should cause undue difficulties.
Portworthiness and cargoworthiness
7.114 These warranties are less likely to be a major cause of dispute, and we do not
think that the proposed reform would have any great effect on the market.
7.115 At present, it may be possible for an insurer to argue that, if a problem in port is
remedied before the ship is put to sea, the insurer is discharged from liability for
an unconnected loss at sea. We do not think this result would be fair. Again, we
believe that the insured should be able to put forward a defence that the breach
did not contribute to the loss.
32 para 2.8.
33
(1786) 1 TR 343.
84