In insurance, a warranty is a promise by the policyholder to adhere to certain conditions. Warranties are often neglected and yet, can have a huge impact when a claim arises. If it is found that you breached the warranty, it can render the policy void and the insurer can deny coverage entirely. In such cases, it is irrelevant whether or not the breach had any relation to the cause of the claim. Insurers are particularly strict when it comes to marine insurance policies.
There are numerous real examples of cases where marine insurance policies were rendered void due to the policyholders not complying with the warranties:
One involves a dry dock that sank during a typhoon in Guam. The owner of the dry dock had secured two marine insurance policies. One covered damage to the dry dock but included a warranty that required Navy certification. At the time the dock sank, it had no certification. The dock owner filed claims for the incident under both policies. The insurers denied coverage and the owner sued. The courts sided with the insurers that the lack of Navy certification and therefore, the breach of warranty, meant that the policy was no longer valid and there was no coverage.
In another case, a policy's warranty required that the policyholder keep their insured watercraft within specific boundaries. It was found that the policyholder had breached the warranty so even though the claim filed was pertaining to a loss that occurred within permitted boundaries, the policy was void.
The above cases demonstrate the importance of adhering to the warranties you sign when securing marine insurance. Otherwise, you risk having no coverage in the event of a claim.
Contact a CapriCMW Risk Advisor for more insurance and risk-related information and resources.
For more examples of how marine insurance warranties were applied, see "Beware of the Warranties in Marine Insurance" by Barry Zalma posted on Property Casualty 360 (September 1st, 2015).
