A warranty is something by which the policyholder undertakes that some things shall or shall not be done during the tenure of the policy. It means, he affirms or negates the existence of particular facts.
Warranties are like statements according to which an 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 and, therefore, the contract becomes null and void in case warranties are broken, irrespective of the fact that the warranty was important or not.
In marine insurance, warranties can be divided into two parts=
- Express Warranties= These are expressly included in the policy document.
- Implied Warranties= Though, these are not stated in the policy document, they are fully understood by the insurance parties and therefore, they are as binding as express warranties.
Read More: What is not covered Under Marine Insurance?
Now, let’s understand how the warranty works in marine insurance.
In case of marine insurance, implied warranties are more crucial and it includes=
- Seaworthiness of ship– It says, that ships which will be used for transportation should be suitably constructed and equipped and capable of withstanding ordinary stress at the voyage. It can be further understood with the help of the following points=
- 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, like, 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 equipments, expertise of crew members and the condition of the consignment
- It says that the ship must be cargo-worthiness i.e., must be reasonably fit to carry the insured cargo. Note, warranty of seaworthiness doesn’t apply to cargo. It means, there is no warranty that the cargo should be seaworthy and we can’t expect from the cargo owner to be well acquainted with the shipping business.
- A ship should be seaworthy at the port of commencement of the voyage and 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, it is known as the 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– It says that there should be no delay in starting the voyage without a valid reason. It is necessary that the insured venture must be dispatched within the 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.
- No deviation-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
- When delay or deviation is required for the safety of ship or human lives
- 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 when the port operation manager found that certain packages of the consignment were 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 by own even if the company had a marine insurance policy.
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