How Do You Differentiate Between Express and Implied Warranty Under Marine Insurance

Warranties in marine insurance are critical promises or conditions set forth within the insurance contract. These warranties are made by the insured to the insurer and are intended to establish the terms under which the insurance coverage will remain valid.

Essentially, they are assurances that certain actions will or will not be undertaken by the insured regarding the usage, maintenance or operation of the insured vessel or ship.

Why are Warranties Important

The primary purpose of warranties is to safeguard the insurer by ensuring that the insured adheres to conditions that mitigate risks. By requiring compliance with these warranties, insurers can better assess and control the level of exposure they face in underwriting marine cargo insurance policies.

Warranties also encourage responsible conduct by the insured, ensuring that the vessel is operated and maintained in accordance with the policy's terms.

The breach of a warranty can have significant consequences, often leading to the voidance of the insurance policy. This means that if the insured fails to comply with a warranty, the insurer may be released from liability for any claims arising after the breach.

For example, suppose a vessel deviates from its agreed route without prior approval, and an incident occurs. In that case, the insurer may deny the claim on the grounds of non-compliance with the warranty.

Such outcomes highlight the importance of understanding and adhering to warranties in marine insurance. They are not merely formalities but fundamental conditions that ensure the smooth operation of the insurance contract and the equitable management of risks for both parties.

Also Read: Warranties in Marine Insurance

Express warranties in marine insurance are explicit and clearly articulated promises or conditions that are written into the insurance policy. These are deliberately drafted and agreed upon by both the insured (such as a shipowner or cargo owner) and the insurer. These warranties serve as conditions precedent, meaning they must be strictly adhered to for the insurance coverage to remain valid.

Express warranties provide clarity and specificity, ensuring both parties understand the obligations and limitations associated with the insurance contract. They address various aspects of the insured vessel or cargo, offering precise guidelines that mitigate risks and ensure compliance.

Implied warranties in marine insurance are unwritten obligations that form an integral part of the insurance contract, even though they are not explicitly mentioned. These warranties are fundamental to the agreement and are automatically assumed to exist to ensure the validity and enforceability of the policy.

The two primary types of implied warranties in marine insurance are Legality and Seaworthiness. For the insurance policy to remain valid, the insured is expected to comply with all conditions and act in good faith. This includes ensuring absolute transparency and avoiding any fraudulent activities. The principle of utmost good faith, or uberrimae fidei, governs the relationship between the insurer and the insured, emphasising honesty and full disclosure.

Failure to adhere to implied warranties can result in claim denial or policy termination, underscoring their critical role in marine insurance contracts.

Also Read: Difference Between Warranty & Condition in Marine Insurance

In marine insurance, policyholders often face challenges in understanding and adhering to the warranties outlined in their policies. These warranties, whether implied or express, are critical to the validity of the insurance contract.

Non-compliance can lead to claim rejection or policy voidance, leaving the insured financially vulnerable. Many policyholders are unaware of the full extent of their obligations under implied warranties, as these are not explicitly stated in the policy.

Certain common challenges could also be:

• Factors such as weather, regulatory changes or unforeseen events can make compliance with warranties challenging.

• Deviations from the agreed route or changes in cargo details, even if accidental, can result in a breach of warranty.

• Adhering to warranties like seaworthiness or compliance with regulations may require significant investment in maintenance, training or legal oversight.

Strict adherence to warranties ensures that claims are not rejected due to technical breaches. Also, following warranties maintains the trust between the insurer and the insured, upholding the principle of utmost good faith.

Hence, the policyholders need to keep in mind that compliance ensures that they are protected from potential legal liabilities and financial losses.

Understanding the differences between express and implied warranties is crucial for anyone involved in marine insurance. Both types of warranties play a pivotal role in ensuring the integrity of the insurance agreement and protecting the interests of both the insurer and the insured.

For policyholders, strict compliance with these warranties is essential to maintain the validity of their insurance coverage and ensure smooth claim settlements. Breaching these warranties, whether intentionally or unintentionally, can result in severe financial and operational repercussions.

At TATA AIG, we understand the complexities of marine insurance and the challenges policyholders face in navigating warranties. Our comprehensive cargo insurance policy is designed to offer robust coverage while simplifying the process for our customers.

Choose TATA AIG for your marine insurance needs and experience the peace of mind that comes with reliable coverage.

What is the significance of a warranty of neutrality in Marine Insurance?

A warranty of neutrality ensures that the insured vessel remains neutral and does not engage in hostile actions against any nation or power. This warranty is crucial as it protects the insurer from liability for losses caused by war or piracy. Breaching this warranty voids the policy.

How do warranties in Marine Insurance impact policy validity in India?

In India, warranties in Marine Insurance are binding conditions of the policy. If a warranty is breached, the policy becomes void, even if the breach did not cause the loss. However, insurers can waive the breach, allowing the policy to remain valid.

What is the Warranty of Merchantability?

The warranty of merchantability implies that a product is fit for its intended purpose and meets the quality standards claimed by the seller. If a product fails to perform as promised, the buyer can take legal action against the seller for breaching this warranty.

Who should consider purchasing marine insurance?

Marine insurance is essential for individuals or businesses involved in transporting goods via sea, air or land. It protects against financial losses arising from damage or loss of goods during transit, ensuring peace of mind and financial security.