REFORMING INSURANCE LAW: - Law Commission

contributed to by the illegality and the assured did not know and could not have known about the
illegality. 383
7.29 All of this may be thought to be over-elaborate. If marine warranties were to be brought
within the equivalent of s 54 of the Insurance Contracts Act 1984, the seaworthiness warranty
would be replaced with a test based on whether the seaworthiness caused the loss. The legality
warranty would disappear entirely, and recovery following an illegal act would depend upon
ordinary common law principles, namely, whether the assured had to rely upon his own illegality
to establish his claim and, if so, whether the illegality was of a nature which demanded denial of
indemnity on public policy grounds. 384
Other implied terms affecting marine policies
7.30 Sections 42 to 49 of the Marine Insurance Act 1906 set out a series of grounds on which
the risk under a voyage policy will determine automatically or may be determined. These are: if
the adventure is not commenced within a reasonable time, the insurers may terminate the policy
(s 42); if the place of departure is specified by the policy and is altered, the risk does not attach (s
43); if the destination is specified but the vessel sails for some other destination, the risk does not
attach (s 44); if the destination is changed after the commencement of the voyage, the risk
automatically determines (s 45); if there is deviation from the specified or usual route the risk
automatically determines (ss 46 and 47), subject to the defences in s 49; delay, which is
historically a form of deviation, automatically determines the risk (s 48) subject to the defences
in s 49. These principles are of little modern relevance. There is scarcely a modern reported case
involving any of them, mainly for the reason that voyage policies contain their own rules on
these matters. The most important recent authority is Nima SARL v Deves Insurance plc, 385
which pointed out the inconsistency between the rule in s 44 that a change of destination before
the voyage commences discharges the insurers and the long-established warehouse to warehouse
clause under which the risk attaches as soon as the goods leave the warehouse at the port of
origin. In Nima the Court of Appeal was forced to conclude that the risk attached to goods as
soon as they left the warehouse, but terminated once they were loaded on board a vessel destined
for a different destination. The sections are also problematic in their drafting. Insurers are
discharged where there is an anticipated change of voyage which has not been put into effect, but
they are only discharged by deviation once the deviation has commenced. There are no statutory
defences to change of voyage, but there are a number of such defences to deviation and delay. In
practice these matters are often regulated by a held covered clause under which the assured
remains covered, albeit at a higher premium.
7.31 It is almost inevitable that if the concept of a warranty automatically determining the risk is
abolished, these sections cannot survive unscathed. The ALRC recognised this, and
recommended that the rules relating to change of voyage, delay and deviation should be treated
in the same way as other breaches of contract, namely that insurers are not discharged
383 ALRC 91, paras 9.177 to 9.188.
384 The law on illegality in respect of insurance claims is unduly complex and requires clarification. See Effect of
Illegality on Contracts and Trusts, Law Commission Report 154, 1999.
385 [2002] Lloyd’s Rep IR 752.
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