Report No. 21
General.-This deals with the topic of warranties.
Nature of warranty in marine insurance.-In marine insurance, it has been said, the so-called warranties correspond to "conditions" in the Sale of Goods Act. In the Sale of Goods Act, breach of a warranty may give rise to damages and breach of a condition may give rise to a right to avoid the contract. In marine insurance, the breach of warranties discharges the insurer from liability, as provided by section 33(3) of the English Act, from the date of the breach. To that extent, it is more akin to a condition.
Representation when amounts to warranty.-A representation as to fact may or may not be embodied as a warranty. If it is not embodied, the insurer can avoid the policy only if the misrepresentation is material. But if it is so embodied, and turns out to be false, then whether or not the fact is material to the risk, the insurer is discharged, as section 33(3), first sentence, last 9 words, make it clear.
Words used to indicate warranty.-No particular form of words is necessary. The word "warranty" is not necessary, and a policy expressed to be on the "American Ship Mount Vernon" was held to embody a warranty as to nationality of a vessel.1
Held covered.-It is usual to have a clause to the effect that in case of a breach of warranty, the assured shall be held covered (in spite of the breach) at a premium, to be arranged.2
Time of discharge.-Where the assured fails to comply with the warranty, the insurer is discharged only from the date of the breach, if the warranty is as to a future event. If, however, the warranty is as to the existence of a particular state of fact, for instance, where the special equipment of ship is warranted and the facts differ from the warranty, then the policy never attaches.3
Intention to break not sufficient-difference between voyage and time policy.-Mere intention to break the warranty is not sufficient, because intention is revocable. This principle leads to different results when applied to a voyage policy and when applied to a time policy. In the case of a time policy, the mere intention to proceed to a port in violation of a warranty on the subject does not amount to a breach so long as the ship has not proceeded to that port. In the case of a voyage policy, however, if from the very beginning the voyage is different from the voyage insured, the policy never attaches and no liability arises. This is so even if the goods are lost at a place which would, at all events, have been travelled through even on the authorised voyage.
"Warranted".-It must be noted, however, that the mere use of the expression "warranted" does not give rise to a warranty. Sometimes these words are used merely to exclude a particular period or a particular place from the operation of the policy. For example, the use of the word "warranted not in the Bay of St. Lawrence during the month of April" merely means that the ship is not insured while it is in the prohibited area during April.4
1. Baring v. Claggett, (1802), cited in Dover, p. 348.
2. As to premium "to be arranged", see section 31 of the English Act-clause 28 and notes thereto.
3. See Lord Chorley Shipping Law, 3rd Edn., p. 309.
4. See Lord Chorley Shipping Law, 3rd Edn., p. 314.