Warranty In Insurance Contract

In contract law, a warranty has various meanings but gewwnerally means a guarantee or promise which provides assurance by one party to the other party that specific facts or conditions are true or will happen. This factual guarantee may be enforced regardless of materiality which allows for a legal remedy if that promise is not true or followed.

A warranty in an insurance policy is a promise by the insured party that statements affecting the validity of the contract are true. Most insurance contracts require the insured to make certain warranties. For example, to obtain a Health Insurance policy, an insured party may have to warrant that he does not suffer from a terminal disease. If a warranty made by an insured party turns out to be untrue, the insurer may cancel the policy and refuse to cover claims.

To qualify as a condition or warranty, the statement must be expressly included in the contract, and the provision must clearly show that the parties intended that the rights of the insured and insurer would depend on the truth of the statement.

Warranties in insurance contracts can be divided into two types: affirmative or promissory. An affirmative warranty is a statement regarding a fact at the time the contract was made. A promissory warranty is a statement about future facts or about facts that will continue to be true throughout the term of the policy. An untruthful affirmative warranty makes an insurance contract void at its inception. If a promissory warranty becomes true, the insurer may cancel coverage at such time as the warranty becomes untrue. For example, if an insured party warrants that property to be covered by a fire insurance policy will never be used for the mixing of explosives, the insurer may cancel the policy if the insured party decides to start mixing explosives on the property. Warranty provisions should contain language indicating whether they are affirmative or promissory.

Examples of warranties: “It is warranted that stock contained in the lowest storey of the Buildings is kept on racks or stillages at least 15cm above the surface of the floor.” or “It is warranted that trade waste, cuttings and clippings are swept, gathered and bagged daily and removed from the premises at least once a week.”