Warranty (English insurance law)
An undertaking by the insured whose breach, under English law, automatically discharged the insurer for the future even without any link to the loss, a rule softened in 2015 into a mere suspension of cover.
In English insurance law, a warranty is an undertaking by the insured concerning a fact or conduct: a watchman will be present at night, the alarm will be set, the vessel will not sail beyond a certain latitude. The word misleads a French reader, since it does not designate cover granted by the insurer but a promise made by the insured. Its traditional sanction was uniquely harsh: any breach, however minor and unrelated to the loss, automatically discharged the insurer from all liability from the moment of breach, and later remedy changed nothing. So-called basis of the contract clauses made the regime harsher still by turning every answer in the proposal form into a warranty. The Insurance Act 2015 reformed the regime for contracts concluded from August 2016: basis of the contract clauses are abolished, breach of a warranty now suspends cover only for the duration of the breach, and the insurer cannot rely on it if the non-compliance could not have increased the risk of the loss that actually occurred. Contracts placed in London nonetheless remain full of warranties, which require precise drafting from the underwriter.
In The Good Luck, decided by the House of Lords in 1991, an insured vessel had entered a war zone in breach of a warranty, where it was then struck. The House held that the insurer was automatically discharged from the moment of entry into the zone, without needing to give notice. Since 2016, the same situation would only suspend cover while the vessel was in the zone.
insurance warranty, promissory warranty, basis of the contract clause
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