Many of us are familiar with warranties that pay us for something, like ones that cover HDTVs or cars. In the case of a marine insurance policy, however, a warranty that is violated voids a policy. That means no coverage, plain and simple.
Since this is an important point, I’ll try to define this one more time. A warranty is an “expressed” or “implied” action. If it is not followed to the letter, it halts or suspends insurance coverage.
An example of an expressed warranty is the so-called “trading warranty” on a vessel insurance policy. A trading warranty may require that your vessel be used as a passenger vessel. If you begin using the vessel to carry propane tanks, your insurance coverage is voided.
There’s also a “navigation warranty” that spells out where your vessel can operate. If you operate outside of that particular navigation area, your insurance coverage will be suspended until you return to your expressed navigation area.
Crew warranties specify that you must have a certain number of crew to safely operate your vessel. If you have less crew onboard, your coverage is voided until you properly crew the vessel.
In one case, an insurance policy required that a cargo vessel have three crew. On a calm Sunday, a friend of the owner used the vessel, with no crew, to scout for recreational beaches. The vessel’s front loading ramp deployed while the vessel was underway and the vessel sank in more than 200 feet of water. Since the craft was being used for pleasure and was not properly manned, the insurance policy was voided. The owner received nothing, absorbing a $365,000 loss.
“Implied warranties” are another matter. There is the implied warranty of seaworthiness, which means that the vessel, without stating it, must be seaworthy at the beginning of each journey. Most tug operators are aware of this and make certain that tows are in a seaworthy condition before they go on the hip to take the tow out of port.
The implied warranty of “legality” is universal. If you are doing something illegal, your policy is voided. There have been many court tests of these warranties and I’m positive there will be many more.