REFORMING INSURANCE LAW: - Law Commission

oriented is not fully convincing: while marine and reinsurance are excluded from the 1984 Act,
that was more to do with the nature of the markets on which those risks were typically written
rather than anything intrinsic in the policies themselves. Although there are issues which remain
to be resolved under s 54 of the 1984 Act, most of the core points have now been resolved and
the argument that its adoption in marine insurance would give rise to uncertainty is not
persuasive. The Institute Time Clauses 2003 illustrate that the market is perfectly happy to
remove technical defences and to replace them with clear principles as to what is to happen when
a particular obligation is broken.
Implied marine warranties
7.26 The Marine Insurance Act 1906 contains two implied warranties: the seaworthiness
warranty in s 39, and the warranty of legality in s 41. The latter warranty is uncertain as to its
effect, although it probably adds little to the general law on legality of risks and the effects of
illegal conduct on the recoverability of claims. The former is in principle of greater significance,
although in practice seaworthiness has been governed by express terms for many years. Where s
39 is applicable, a distinction is drawn between seaworthiness in voyage policies, which operates
as a full warranty (s 39(1)-(4), and seaworthiness in time policies, which operates as a rule of
causation precluding recovery if the loss is attributable to seaworthiness of which the assured
was aware (s 39(5)). The ALRC reviewed each of these warranties and proposed that the use of
the word “warranty” be abandoned and replaced with more limited provisions. 379
7.27 As far as the seaworthiness warranty is concerned, the ALRC preferred the abolition so that
the matter could be dealt with by express term. As a fallback, the ALRC recommended that the
distinction between time and voyage policies should be abandoned 380 and that the causation
principle should be adopted 381 although modified to catch an assured who knew or ought to have
known that the vessel was unseaworthy rather than – as under the present law – assured who
actually knew of the unseaworthiness. 382 The ALRC also thought that the obligation should be a
continuing one, so that if a vessel became unseaworthy after the voyage had commenced the
insurers would be discharged if the vessel was lost by reason of the assured’s failure to take
remedial action.
7.28 As far as the warranty of legality is concerned, the ALRC’s view was that the law should
continue to provide that a marine adventure should have a lawful purpose but to modify the
assured’s continuing warranty that the adventure is to be carried out in a lawful manner. In its
place there should be a provision allowing recovery only where the loss was not caused or
379 The ALRC also recommended the repeal of the old rules on nationality, neutrality, good safety in ss 36 to 38 of
the 1906 Act, all of which are in any event predicated on an express warranty: ALRC 91, paras 9.217 to 9.219.
380 The difficulty of the distinction is demonstrated by the recent decision of the Supreme Court of Singapore in
Marine Offshore Pte Ltd v China Insurance Co (Singapore) Pte Ltd [2006] SGCA 28,
381 ALRC 91, paras 9.142 to 9.176.
382 Compania Maritima San Basilio SA v Oceanus Mutual Underwriting Association (Bermuda) Ltd, The
Eurysthenes [1976] 2 Lloyd’s Rep 171; The Star Sea [2001] Lloyd’s Rep IR 247.
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