Warranties

Question 1

What is a warranty?

Answer 1

Terms that require absolute or exact performance of the obligation undertaken by the contracting party.

Question 2

What is an insurance warranty according to Lewis v Norwich?

Answer 2

A statement or stipulation upon the exact truth of which or the exact performance of which, as the case may be, the validity of the contract depends.

Question 3

What are the two classic forms of warranties?

Answer 3

1. Affirmative
2. Promissory

Question 4

What is an affirmative warranty?

Answer 4

Where an insured guarantees the truth of a representation that they made, be it in the past or present.

Question 5

What is a promissory warranty?

Answer 5

Where an insured guarantees that a stated fact or state of affairs will continue to be true or exist or meet some particular standard on an ongoing basis in the future.

Question 6

What is the common law position on warranties?

Answer 6

The mere breach of warranty entitles the insurer to cancel the contract, regardless of the triviality, materiality and irrelevance to the risk in question or even the lack of fault, bad faith or knowledge on the part of the insured.

Question 7

What are the kinds of affirmative warranties?

Answer 7

1. Warranty of fact
2. Warranty of knowledge
3. Warranty of opinion

Question 8

How do you determine the kind of affirmative warranty?

Answer 8

Contractual interpretation.

Question 9

What is relevant to a promissory warranty?

Answer 9

The conduct of the insured during the existence of the insurance contract.

Question 10

What does a warranty do for the insured?

Answer 10

It places a duty of strict compliance on the insured.

Question 11

What are the statutory reforms to combat the harsh common law position?

Answer 11

1. Section 53 of STIA
2. Rule 21 of the LTI PPR

Question 12

To which kind of warranty does the legislative and regulatory provisions apply?

Answer 12

Affirmative warranty/

Question 13

What are the facts of Beyer’s Estate v Southern Life?

Answer 13

Insured got a life insurance policy and only disclosed one doctor’s visit when he had two.

Question 14

What is the principle in Beyer’s Estate?

Answer 14

If you make something the basis of the contract it constitutes a warranty.

Question 15

What are the facts of Zeeman v Royal Exchange?

Answer 15

Insured had to estimate the weight/quantity of wheat in a stack, insured had warranted the market value of the stack.

Question 16

What is the holding in Zeeman v Royal Exchange?

Answer 16

Where an insured has made a statement in a proposal form which he believed to be true, the presumption is that it is true, and the onus is on the insurer to prove that is not true.

Question 17

What are the facts of Cole v Bloom?

Answer 17

Jewellery salesman gave two hitch-hikers a lift who then stole his car when he left it unlocked and unattended, car had jewellery inside.

Question 18

What are the facts of Jordan v New Zealand Insurance?

Answer 18

Jordan got confused as to his age his next birthday on the proposal form.

Question 19

What legal principle is relied on in Jordan v New Zealand Insurance?

Answer 19

Doctrine of substantial performance.

Question 20

What are the facts of the Norman Welthagen case?

Answer 20

Insured warranted that all vehicles would be locked and keys kept in a locked safe outside of business hours, keys were actually kept in a cupboard in insured’s locked premises.

Question 21

What are the facts of Viking case?

Answer 21

Fishing boat sank after colliding with a bigger ship, insurance contract contained inchmaree, due diligence and MSA clauses. MSA clause was a warranty guaranteeing that the insured would always comply with MSA pertaining to the vessel’s safety and seaworthiness.

Question 22

What are the holdings in the Viking case?

Answer 22

1. Promissory warranties are to be construed favourably towards the insured because of their impact upon the liability of the insured
2. Promissory warranties are to be given a practical, businesslike construction in the light of the purpose of the clause and insurance policy.