Marine insurance contracts in Australia will be regulated by one of two insurance acts;
- Insurance Contracts Act 1984 (Cth)
- Marine Insurance Act 1909 (Cth)
Most insurance policies in our personal lives are regulated by the consumer friendly Insurance Contracts Act 1984. The Marine Insurance Act 1909 is a maritime industry focused piece of legislation that protects the interests of the insurer.
A vessel used for commercial purposes automatically falls into the ambit of the Marine Insurance Act 1909. However a recreational, or pleasure craft is excluded from the application from the Marine Insurance Act 1909 and is regulated by the Insurance Contracts Act 1984. A pleasure craft is defined by the Insurance Contracts Act 1984 s 9A to be;
- used or intended to be used:
- wholly for recreational activities, sporting activities, or both; and
- otherwise than for reward; and
- legally and beneficially owned by one or more individuals; and
- not declared by the regulations to be exempt from this subsection.
The Marine Insurance Act 1909 is strictly applied to contraventions of insurance policies. Where an insurance policy warranty is breached the Marine Insurance Act 1909 dictates that the insurer is discharged from liability from the date of the breach of warranty. This rule is strictly applied meaning that even if the breach is remedied soon after the breach the insurance cover will not be re-enlivened.
For example, if the insurance contract contains an express warranty of navigational limits and the insured vessel is sailed outside of those limits the insurers liability ceases. Even once the vessel returns inside the navigational limits the insurance does not begin again.
Insurance policies contain express warranties, but the Marine Insurance Act 1909 also implies certain warranties:
- Warranty of neutrality: Where insurable property, whether ship or goods, is expressly warranted neutral, the Marine Insurance Act 1909 implies that the property have neutral character at the commencement of the risk, and so far as can be controlled, neutrality shall be preserved.
- Warranty of good safety: where the subject-matter insured is warranted well or in good safety on a particular day, it is sufficient if it be safe at any time during that day.
- Warranty of seaworthiness: a ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured. Different requirements apply as to whether the insurance policy is a policy to insure the vessel for a period, or for a certain voyage.
Voyage policy: there is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured.
Time policy: If the insurance policy is a time policy there is no implied warranty that the ship be seaworthy at any stage of the adventure, however if the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.
- Implied warranty that goods are seaworthy: there is no implied warranty that goods or movables are seaworthy. However, there is an implied warranty for voyage insurance policies where goods or movables are to be carried, that the ship is reasonably fit to carry the goods or other movables to the destination.
- Implied warranty of legality: there is an implied warranty that the adventure insured is a lawful one, and that, so far as the assured can control the matter, the adventure shall be carried out in a lawful manner.
It is important to be aware of both the implied and express warranties as a contravention of either can have immediate and severe effects on insurance cover.