A practical guide to warranties in insurance policies

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A breach of warranty within an insurance contract, no matter how immaterial to the insured risk, operates automatically to discharge the insurer from all liability under that contract as from the date of breach. The effect of this is expanded by the existence of ‘basis clauses' which operate so as to turn certain pre-contractual representations made by the insured into warranties.

The Law Commission has made a number of recommendations to reform the law in relation to warranties, including that warranties should become ‘suspensive conditions' so that the breach of a warranty, once it has been remedied, does not discharge the insurer of liability.

This guide builds on work undertaken by Airmic earlier in 2013 preparing guidance to assist members in understanding the effect of ‘basis clauses' and taking steps to remove them from their contracts.