The construction of warranties

An insurance warranty is widely regarded as a draconian provision. It imposes obligations on the assured which must be complied with strictly according to the terms of the warranty, and in the event of breach the insurers are automatically discharged from liability as of the date of the breach even if the matters in question are beyond the control of the assured. Unsurprisingly, the courts have adopted a series of devices to overcome the harsh consequences of a breach, ranging from refusing to treat the clause as a warranty at all to adopting a narrow approach to construction. The decision of HHJ David Mackie QC in A C Ward & Sons Ltd v Catlin (Five) Ltd [2008] EWHC 3585 (Comm), upheld by the Court of Appeal [2009] EWCA Civ 1098 is illustrative of the approach taken by the English courts. The insurers in this case sought summary judgment, it was necessary to decide only if the assured had a case worthy of going to trial. However HHJ Mackie QC chose to express his views in the interests of promoting a settlement between the parties, and the Court of Appeal undertook a similar exercise. Subsequently, in a full trial of the issues in this case, Flaux J decided that there had not been any breach of the warranties by the assured, but the insurers succeeded on a non-disclosure issue. Flaux J’s ruling will be discussed in a forthcoming issue of I nsurance Law Monthly.

Ward: the policy

The assured obtained from the insurers a Multiline Commercial Contract of Insurance which covered, amongst other things, theft from secure premises up to a limit of £1.5m. The policy imposed a series of obligations on the assured. In particular there were two terms, described as warranties. The first, a Protection Maintenance Warranty was in the following terms: