Marine insurance warranties: perceptions of fairness

Insurance contracts often contain provisions calling upon the insured to maintain a certain pattern of behaviour or state of affairs failing which cover will cease automatically. In English law they are called ‘warranties’ albeit warranties cover encompass other situations as well. Warranties are familiar to readers of Shipping and Trade Law because they originated and are common in marine insurance. When used responsibly they have public policy benefits strongly advocated by economists because they can be used as a tool to classify risk and also as a means of encouraging risk decreasing behaviour and the converse. But in some jurisdictions such as New Zealand these tools are condemned by law where the actual loss to the individual insured was not in the event caused by non-compliance with the provision. The justification for this intervention is that the legal results where there is no causal link are ‘wrong and unjust’, unfair, ‘Draconian’ or contrary to the ‘reasonable expectations’ of the policyholders.

Chris Nicoll, Email: c.nicoll@auckland.ac.nz

This article describes a recent survey which sought to test this intuitive response by law reformers; ‘intuitive’ as there appears never to have been any empirical work done on the perceptions of consumers in this area.