WARRANTIES in Marine Insurance definition .pptx

Maine Insuarce Warranties

1. Warranties Warranties of Marine Insurance Contract

2. Marine insurance consist of several warranties. A warranty means a stipulation upon which the fulfillment of the very contract depends. It is an undertaking by the insured to the insurer that something shall or shall not be done or some conditions are to be fulfilled. Since it is undertaking of the insured, he should abide by the warranty and any breach of warranty will discharge the insurer from any liability. In the insurance contract, it is found in the form of a conditions which must be complied with. When these conditions are not attained by the insured, the insurance contract becomes avoidable at the option of the insurer.

3. Warranties are of two types like express warranties and implied warranties. Express Warranty Express warranty denotes to those undertakings which are explicitly expressed on the face of the insurance policy. The following are some of the general examples of express warranty. The ship will sail on the scheduled date. The time of sailing of the ship should be strictly followed. The subject matter insured is safe on a particular date. The navigation is prohibited during certain period or during certain regions. Both the ship and the cargo should remain in a neutral state. The sailing of ship will be conducted with the help of an armed guard.

4. Expressed….. Some more common express warranties are: (1) warranties establishing geographical (trading) limits, (2) warranties as to date of sailing, (3) warranties as to number of crew, (4) warranties against towage, (5) warranties as to additional insurance, and (6) warranties as to acting with reasonable despatch in all circumstances under the assured's control.

5. Implied Warranties Implied warranty denotes a type of warranty which is not explicitly expressed in the policy but is understood by the implication of the law. Like express warranties, implied warranties are binding to both the parties. The following are some of the common examples of implied warranties.

6. 1. Seaworthiness: The ship under voyage should be seaworthy at the commencement of the voyage. Seaworthiness denotes all-rightness of the ship in all respect. The ship must be alright, it must not be overloaded, it must be well equipped by experienced officers and crew and the sailing will be conducted with adequate provision for fuel and water. II. Legality of the voyage:  The venture or the voyage should be a legal one. The voyage should not be engaged in smuggling arms and ammunitions or illicit liquors. So the voyage on sail should take lawful goods and commodities. III. Non-Deviation:  There is an implied warranty that the ship should not deviate from its normal course. The ship must follow the specified course effected in the policy. If no course is effected in the policy, the ship should follow the normal course.

7. A. that a vessel insured should be sea-worthy at the beginning of the voyage; B. that the voyage described in the policy should be pursued directly without deviation; C. that the insured had communicated to the underwriter all facts pertaining to the risk assumed which were material thereto, provided they were known to the insured or ought to have been known to him in due course of business; D. that all material representations made by the insured respecting the risk should be substantially correct, without reference to the question of fraudulent intent.

8. The difference between a condition and a warranty in Insurance The definitions of a condition and a warranty are very specific in the context of insurance law.  A warranty can be a condition but a condition may not be a warranty. Generally, a condition is an essential part of a contract, and if breached, the party that has been deprived is permitted to claim damages and even terminate the contract because the breach has in effect repudiated the contract. On the other hand, a warranty would not be considered a vital part of the contract. In the event that one of the parties to the contract is found to be in breach of the contract, he or she is at liberty to make a claim in damages but this does not mean that the party who did not breach the contract could terminate the contract. The meaning of these terms is reversed in insurance law.   Warranties play a greater part in insurance law than conditions. A warranty is a term of insurance contract that if the insured has breached, the insurer is no longer held to be liable as of the date of the breach. So a breach of a warranty would invalidate the insurance claim. 

9. Neutrality of Expressed Warranty (1) Where insurable property, whether ship or goods, is expressly warranted neutral, there is an implied condition that the property shall have a neutral character at the commencement of the risk, and that, so far as the assured can control the matter, its neutral character shall be preserved during the risk. (2) Where a ship is expressly warranted "neutral", there is also an implied condition that, so far as the assured can control the matter, she shall be properly documented, that is to say, that she shall carry the necessary papers to establish her neutrality, and that she shall not falsify or suppress her papers, or use simulated papers. If any loss occurs through breach of this condition, the insurer may avoid the contract.

10. LIENS Definitions : A lien is a right in law . It gives the creditor the right to posses the property of the debtor until the debt is paid. It is also a legal claim against an asset used to secure a loan. In both cases one person can obtain an interest in another persons property. The possessory Lien : As the right to a lien is founded in common law , no application to the court is necessary. It comes into existence as soon as the debt arises. In common law there is a particular lien and a general lien. a) A particular lien arises when the person in possession of the goods bestows labour , skills or expense upon them, this service gives rise to lien. Example of Particular Lein A gives two cars – An Ambassador and a Fiat, for repairs to B . B repaired only the Ambassador car. A took delivery of the Ambassador car without making the payment of the repair charges. B cannot retain the Fiat car for the repair charges due in respect of the Ambassador car. It should be noted that lien is possessory; hence if possession is lost, the lien is also lost. Conditions for Exercise of Particular Lien To exercise a particular lien, the following conditions are essential: The right of lien can be exercised only when the bailee has expended his labor and skill on the goods bailed. Therefore, mere custody of goods does not give a right of lien. The right of lien can be exercised only when the work has been completed in lime. If the work has not been completed in lime, the lien cannot be exercised. The right of lien can be exercised only if the payment is due. In case the payment is to be made on delivery, but at a future date, then the lien cannot be exercised.

11. LIENS b) A General Lien arises not only when the person in possession of the goods or papers bestows a service on the goods , but also for other debts the owner of the goods may owe the possessor. A general lien is a right of one person to retain any property or goods which are in his possession belonging to another person until the promise or liability is discharged. It is a right to retain the property belonging to another for a general balance of the account. A general lien is available to bankers, attorneys of High Court and policy brokers. Example of General Lien; A has two accounts in a bank. In the savings bank account, he has a credit balance of $500. In the current account, lie has an overdraft of $1,000. The bank can exercise the right of lien on the savings account for the amount due on the current account. It should be noted that the right of the lien will not apply to properties deposited for safe custody or a specific purpose. This right can be exercised against any property belonging to the other party in possession of the person exercising the right. This right can be exercised for a general balance of the account, i.e., for any amount due. This right is available only to bankers, attorneys of High Courts and policy brokers.

12. LIENS The possessory lien applies when a person has applied services to or incurred expense on behalf of another person’s property but possession and control of that property may be retained until the service or expenses has been paid for. This lien gives no rights of ownership in the goods in common law ( They may not be sold under the lien to defray the expenses ) and the lien is lost once possession of the goods is lost by any means. The lien only applies to the particular goods or property in question. The common law lien gives no right of sale however there are some exceptional cases where the right is given by the statute. If the right to sell is given by the statute a reasonable period of notice needs to be given to the debtor to recover the goods. When a car is serviced by a garage then the garage will not return the car to the customer until the bill has been paid. A ship operator has a common law lien over cargo against the payment of freight or for a general average deposit . Although the master should deliver the cargo to the person presenting the bill of lading but if the freight has not been received, then the carrier may retain possession of the cargo until it is received. It is unlawful to set off a claim for cargo damage against freight . In law, if cargo has been carried and delivered then the freight is due in full. If the cargo has suffered damage the cargo owner must make a separate claim against the carrier.