Marine insurance is a form of insurance that has been in existence since the ancient times of trade. The marine insurance policy provides coverage against various named and unnamed perils that cause loss or damage to the cargo, ship, or vessel during the transport of the property insured. Warranty is one of the important features of any marine insurance contract as it defines the scope of the insurance company’s liability. It decides whether the insured can get compensation in a particular situation for the loss or damage caused to the matter insured. Warranties in marine insurance ensure there are no disputes and ensure adherence to the promise. For better buying decision if is crucial to understand what are the 3 types of implied warranties in marine insurance.
Key Takeaways
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The “Silent” Contract: Implied warranties are unique because they don’t need to be mentioned in your policy document. By signing a marine insurance contract, you are legally deemed to have promised that your ship is seaworthy and the trip is legal.
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Strict Compliance: In marine law, “substantial compliance” is not enough. Even if a minor breach (like a 50-mile deviation) has nothing to do with a fire that later destroys the ship, the insurer can still deny the claim because the contract was “voided” at the moment of deviation.
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Seaworthiness is Subjective: A ship fit for a calm summer voyage in the Arabian Sea may be considered “unseaworthy” for a winter crossing of the North Atlantic. It depends on the time, place, and nature of the cargo.
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Legal Deviation: Not all deviations are breaches. Deviations to save a human life, avoid a storm, or due to a medical emergency on board are generally “excused” and do not void the insurance.
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The Legality Trap: Even if you didn’t know the cargo was illegal (e.g., restricted chemicals), the Legality of Voyage warranty is absolute. If the voyage is unlawful, the insurance is void from the start.
Marine insurance contract comes with two main types of warranties- express warranties and implied warranties. Express warranties are the clearly stated warranties in the marine insurance contract. On the other hand, implied warranties are the warranties in the marine insurance contract that are not stated in the policy but are assumed to be incorporated in the marine insurance policy by custom, law, or general agreement. Warranties in marine insurance are crucial, and even a minor breach of these warranties can turn the marine insurance contract null and void. The insured needs to be cautious as the claim can be totally denied if there is any breach of warranty. Let us learn more about implied warranties and the types of implied warranties in marine insurance.
Types of implied warranties in marine insurance:
Implied warranties are promises that are not explicitly (in an oral agreement or in the written form) stated in the marine insurance policy. However, implied warranties are mutually understood by both the parties (insurer and the insured) to the marine insurance contract as they are incorporated by the law. There are three types of implied warranties in marine insurance that play a crucial role. Let’s take a look at these implied warranties in marine insurance.
Three types of implied warranties in marine insurance:
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Seaworthiness of ship:
This means the ship used for the transportation of the insured cargo must be seaworthy. A ship is considered seaworthy when it is well-equipped, well-constructed, and capable of withstanding the perils of the sea. The ship must also be capable of transporting the insured property. The Seaworthiness of a ship is not just about the physical fitness of the ship; it also includes the expertise of crew members, equipment adequacy in the ship, and its ability to carry the insured cargo.
However, it is important to know that deciding the seaworthiness of a ship is a subjective matter. Hence, it may differ for each vessel at different places and times. For example, a ship that is seaworthy in the summer season may not be seaworthy in the rainy or winter season. Only until the time of the sailing of the ship is the implied warranty applied.
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No deviation:
In a marine insurance policy, the insurance company is liable to pay for the insured journey and a specified or prescribed route. In this case, a prescribed or regular route is an implied warranty in marine insurance. If there is any deviation from the specified route, the insurance company’s liability ends there. If the deviation is intentional, the marine insurance company is not responsible for covering the changed route.
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The legality of the voyage:
A marine insurance policy implies that the insured voyage must be lawful and carried out legally.
To sum up, it is important for the Insured to know what are the 3 types of implied warranties in marine insurance to ensure there is no breach of warranty. In case of any non-adherence to the warranties, it can make the marine insurance contract null and void. Hence, be aware of all the important features of a marine insurance contract before you avail of the coverage.
Summary: Implied Warranties in Marine Insurance
Frequently Asked Questions (FAQs)
Q1: If the ship becomes unseaworthy during the voyage (e.g., an engine failure), is the warranty breached?
A) Generally, the warranty of seaworthiness only applies at the commencement of the voyage. If the ship was fit when it left the port but suffered a breakdown later due to a peril of the sea, the warranty is not breached, and the claim is typically covered.
Q2: What is the difference between an “Express Warranty” and an “Implied Warranty”?
A) An Express Warranty is explicitly written in the policy (e.g., “The ship shall sail with a convoy”). An Implied Warranty is not written but is automatically read into the contract by the Marine Insurance Act (e.g., “The ship must be seaworthy”). Both are equally binding.
Q3: Can an insurer waive an implied warranty?
A) Yes. In many modern cargo policies, insurers include a clause saying “Seaworthiness of the vessel is admitted as between the Insured and the Insurer.” This means the insurer agrees not to use unseaworthiness as a defense against a cargo owner who has no control over the ship’s condition.
Q4: If a captain deviates from the route to save a drowning sailor from another ship, is the insurance voided?
A) No. Deviations for the purpose of saving human life or aiding a vessel in distress where human life may be in danger are legally excused. However, deviating just to save a “vessel” (property) without a threat to life is usually a breach.
Q5: What happens to my premium if I breach a warranty?
A) If a warranty is breached, the insurer is discharged from liability, but they generally keep the premium. Since the risk “attached” when the voyage began, the premium is considered earned by the insurer up to the point of the breach.
About The Author
Simran
MBA Insurance and Risk
With extensive experience in the insurance industry, Simran is a seasoned writer specializing in articles on marine insurance for SecureNow. Drawing from 5 years of expertise in the field, she possesses a comprehensive understanding of the complexities and nuances of marine insurance policies. Her articles offer valuable insights into various aspects of marine insurance, including cargo protection, hull insurance, and liability coverage for marine-related risks. Renowned for their insightful analysis and informative content, Simran is committed to providing readers with actionable information that helps them navigate the intricacies of marine insurance with confidence.
