Search
 

Beware of the Warranties in Marine Insurance

Insurers have the right to limit their risk by placing warranties in their policies that state if the warranty is breached the policy is void as of the breach. They are rarely used.

By Barry Zalma, Esq., CFE | Updated on September 01, 2015

Insurers have the right, seldom exercised, to limit their risk by placing warranties in their policies that state if the warranty is breached the policy is void as of the breach. They are not used, it appears, because modern insurers do not understand the effect of warranties or the ability of a warranty to protect the insurer from risks it is not willing to take. It is defined by the California Insurance Code as: “A statement in a policy of a matter relating to the person or thing insured, or to the risk, as a fact, is an express warranty thereof.” [California Insurance Code § 441]

For example, when a policyholder made a warranty that he would not take an insured vessel outside specifically described waters he argued that breach of the cruising warranty was immaterial because the actual loss occurred while the vessel was in appropriate waters. This argument failed as a matter of law because California Insurance Code § 448, which allows voidance of even an immaterial warranty, will void a policy “where the policy expressly declares that it shall avoid it.” [Fountain v. Connecticut Fire Ins. Co., 158 Cal. 760, 765, 112 P. 546, 549 (1910).] Because the policy expressly states that a breach of the cruising warranty will render the policy “null and void,” the consequences of a breach were clear and not buried in a maze of small type, but rather are clearly set forth in a separate paragraph on policy Endorsement No. 1. [Certain Underwriters at Lloyd's v. Montford, 52 F.3d 219 (9th Cir. 04/04/1995)]

Want to continue reading?
Become a Free
PropertyCasualty360 Digital Reader.

INCLUDED IN A DIGITAL MEMBERSHIP:

  • All PropertyCasualty360.com news coverage, best practices, and in-depth analysis.
  • Educational webcasts, resources from industry leaders, and informative newsletters.
  • Other award-winning websites including BenefitsPRO.com and ThinkAdvisor.com.

Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Recommended Stories

PropertyCasualty360

Join PropertyCasualty360

Don’t miss crucial news and insights you need to make informed decisions for your P&C insurance business. Join PropertyCasualty360.com now!

  • Unlimited access to PropertyCasualty360.com - your roadmap to thriving in a disrupted environment
  • Access to other award-winning ALM websites including BenefitsPRO.com, ThinkAdvisor.com and Law.com
  • Exclusive discounts on PropertyCasualty360, National Underwriter, Claims and ALM events

Already have an account? Sign In Now
Join PropertyCasualty360

Copyright © 2024 ALM Global, LLC. All Rights Reserved.