A warranty in Marine Insurance is an agreement between the insurance company and the insured. It implies an assurance by the insured party that the statements or facts that he presents as warranties are true. The policyholder affirms or negates the existence of particular facts.
Warranties are like statements according to which insured promises to do or not to do some particular things. Remember, it is a statement of fact and not merely a condition. Moreover, warranties strongly insist upon statements and facts that should hold true throughout the tenure of the policy. Therefore, the contract becomes null and void at the time of breaking the warranties. It no longer stands valid regardless of whether the warranty was important or not.
Division of marine insurance warranties
Warranties are divided into two parts in marine insurance.
- Express Warranties – These form a part of the policy document.
- Implied Warranties – The policy document does not explicitly mention these warranties. However, the insurance parties fully understand the implied warranties, and therefore, they become as binding as express warranties.
Read More: What is not covered Under Marine Insurance?
Way warranty works in marine insurance
Now, let’s understand how the warranty works in marine insurance.
In the case of marine insurance, implied warranties are more crucial. It includes seaworthiness.
- Seaworthiness of ships- The ships used for transportation should be suitably constructed and equipped. They should be capable of withstanding ordinary stress on the voyage. The following points help us understand it better.
To decide whether the ship is seaworthy or not is subjective and may vary with any particular vessel at different periods of time and destination, as a ship may be seaworthy for summer but may not be apt for winter.
Apart from the physical condition of the ship, seaworthiness also includes adequacy of equipment, the expertise of crew members, and the condition of the consignment
The ship must be cargo-worthiness and reasonably fit to carry the insured cargo. Note, the warranty of seaworthiness doesn’t apply to the cargo. There is no warranty that the cargo should be seaworthy. The cargo owner may not be well acquainted with the shipping business.
A ship should be seaworthy at the port of commencement of the voyage and at different stages if the voyage is to be completed in different stages.
No change in the destination of the voyage
If the destination of the voyage is changed intentionally after the inception of the risk, there occurs a change in the voyage. If this happens, the marine insurance company is no more responsible for covering the new voyage.
No delay in the voyage
There should be no delay in starting the voyage without a valid reason. It is important to dispatch the insured venture within a reasonable time duration. In case there is a delay, the insurer has all rights to refuse to give the coverage in the absence of any legal reason.
The liability of the marine insurer ends if there is a deviation in the journey i.e., deviation from the common route. In case a ship deviates from its fixed passage, the insurer’s liability ends. This will be immaterial if the ship returns to its original path before the loss. However, the insurer can quit responsibility only if there is an actual deviation and not mere the intention to the deviation.
Read More: How to file a claim under Marine Insurance?
Exceptions of warranties
- When delay or deviation is due to a particular warranty of the insurance policy
- Delay or deviation for the safety of the ship or human lives is an exception
- When delay or deviation was beyond the control of the crew
Established in 2010, J/S Shipping Co. is a leading logistics company. As it exports to different parts of the world, the company has also bought a marine insurance policy to cover in-transit risks for its fleet. Last month, the company was ready to export one of its consignments to Sri Lanka. The port operation manager saw certain packages of the consignment not packed properly. However, the port operation manager did not stop the cargo.
When it reached the destination, the buyer found that out some damages to certain packages and refused to accept the consignment. In this case, even though J/S Shipping Co. had a marine insurance policy, the insurer did not cover the damages. Since J/S Shipping was aware of the damaged packaging, it continued with the consignment and thereby breaching the warranty. Due to the infringement of the warranty, J/S Shipping Co. had to suffer the entire loss to own even if the company had a marine insurance policy.