Page 24 - The Insurance Times March 2025

in three cases: (a) when the changed circumstances made or implied) in the contract has been breached but before
the warranty inapplicable to the circumstances of the con- the breach has been remedied.
tract or when compliance with the warranty is rendered
unlawful by any change of subsequent law. (2)Where a The above changes were effected by IA Act 2015 - by Sec-
warranty is broken, the assured cannot avail himself of the tion 10 (7) - changes were made in the Marine Insurance
defence that the breach has been remedied and the war- Act 1906 (a) in section 33 (nature of warranty), in subsec-
ranty complied with before loss. (3) The insurer may waive tion (3), the second sentence( where the insurer is dis-
a breach of warranty. charged from liability as from the date of the breach of
warranty, but without prejudice to any liability incurred by
The Marine Insurance Act 1906 didn't allow for any remedy him before that date) is omitted. Similarly, Section 34 (when
(other than mentioned above) of a breach, which changed for the breach of warranty is excused) is also omitted.
the better with the enactment of the Insurance Act 2015 (UK).
Nowadays, a flexible approach emphasises the effect of a
It may be noted that Conditions and Warranties are con- breach on the injured party. The seriousness of the breach
tract terms based on the importance of the terms in ques- decides whether a condition or a warranty has been bro-
tion and the subsequent consequences if they are breached. ken. This is called as intermediate or innominate terms.-
In most contracts, the Warranty impacts only some relatively terms not clearly defined beforehand either as a condition
minor aspects of the agreement. The affected or wronged or warranty. These conditions relate only to a side issue,
party has a right to claim damages but no right to termi- such as the premium adjustment. Mere conditions in insur-
nate the contract altogether. ance are interpreted as innominate terms in a contract. As
stated above, the severity of the breach decides whether it
On the other hand, a Condition impacts essential aspects of was a breach of warranty or condition - a minor breach is
the agreement as it travels to the root'. The wronged party treated as a warranty and gives rise to damages. In con-
can both claim damages and terminate the policy as well. trast, a major breach is treated as a breach of condition,
leading to contract repudiation.
In insurance contracts, the distinction between condition
and warranty is somewhat blurred, and all warranties are Basis of Contract Clauses-
treated as a major part of the contract. Insurance contracts
In India, a pre-contractual statement, like a statement
don't have the same meaning as the general contract law.
made at the end of the proposal form, is converted into a
In insurance law, the term 'warranty' is given a different
warranty using the 'basis of contract' language. Any inex-
meaning and refers to a major contract term.
actness discharges the insurer from all liability for loss. The
Act has abolished the basis of contract clauses. A represen-
Before the Insurance Act 2015 (IA 2015) (UK), warranties
tation cannot be converted into a warranty using any pro-
were the most critical terms in an insurance contract, with
vision in the consumer insurance contract. Converting the
severe effects if broken. However, the introduction of IA
statements made by the insured into a warranty is not per-
2015 gave respite to policyholders as it mitigated some of
mitted. In this respect, it is not possible to contract out of
the drastic impacts of a breach of an insurance warranty. A
the IA 2015.
breach of a warranty in an insurance contract was used to
terminate the risk before enactment of this Act. In this re-
The 'basis of contract' clause is forbidden for consumer in-
spect, a warranty was similar in effect to a condition in the
surance. For consumer and non-consumer insurance, a
general contract law.
breach of the warranty suspends an insurer's liability only.
Where the breach is rectified before the loss, the insurer
IA Act 2015 states that any rule of law that breaches a
must pay the claim.
warranty (express or implied) in a contract of insurance
results in the discharge of the insurers' liability under the Terms not relevant to the actual loss - an inter-
contract is abolished. Similarly, an insurer has no liability
under a contract of insurance for any loss occurring or at- esting twist to the warranty
tributable to something happening after a warranty (express In the case of a warranty or other term intended to reduce

22 March 2025 The Insurance Times