Breach of Warranties

In the recently reported case of Overseas-Chinese Banking Corporation v ArgoGlobal Underwriting Asia Pacific Pte Ltd and Others [2025] SGHC 82, the Singapore High Court considered a range of issues relating to a marine insurance claim, including: constructive total loss; perils of the seas; insurable interest; the duty of fair presentation; and breach of policy warranties.

The policy was governed by English law, so the case included detailed consideration of the Marine Insurance Act 1906 and the Insurance Act 2015.

The case involved the loss of the vessel “Tera Lyza” whilst under tow from Vietnam to Taiwan. During the tow the vessel listed, capsized and was ultimately submerged by salvors in deep waters off the Philippines.

One of the express policy warranties related to towage arrangements and the like. It is this warranty, and comments during the case in relation to the Insurance Act 2015, which will be of relevance to certain oil and gas policyholders.

The warranty stated as follows:

“Warranted tug, tow, stowage, towage arrangements, crew competency,

voyage and weather routing to be carried out by …. and all recommendations

to be complied with prior to sailing and during the sailing.”

At English law, section 10(2) of the Insurance Act 2015 provides that an insurer has no liability for “any loss occurring, or attributable to something happening, after a warranty (express or implied) in the contract has been breached but before the breach has been remedied.” 

However, section 11 of the Act is sub-headed “Terms not relevant to the actual loss”. These are terms, “other than a term defining the risk as a whole”, if compliance with the term would tend to reduce the risk of: loss of a particular kind; loss at a particular location; or loss at a particular time. In relation to such terms, Section 11 of the Act provides that if “a loss occurs, and the term has not been complied with, the insurer may not rely on the non-compliance to exclude, limit or discharge its liability under the contract” if the Insured later shows that “the non-compliance with the term could not have increased the risk of loss which actually occurred in the circumstances in which it occurred.”

Accordingly, a policyholder is in a far more favourable position if a warranty is deemed to be a risk mitigation warranty, as opposed to a term defining the risk as a whole. A breach of the latter suspending all coverage under the policy until the breach is remedied. 

To date, there is no authority on the meaning of the phrase “risk as a whole”. In the case of the “Tera Lyza”, the court could find no evidence of a breach of the aforementioned towage warranty. Therefore, the court did not need to decide whether the terminology of such a towage warranty was a risk mitigation warranty (subject to the less onerous provisions of section 11 of the Act) or a term defining the risk as a whole (and so subject to the more onerous suspensive provisions of section 10(2) of the Act). However, obiter, the court favoured the approach that the towage warranty would have fallen within the less onerous provisions of section 11 of the Act. Although the court was careful to state that “it would not be fruitful to delve further into this.”

The court’s reluctance to delve further into the matter, and insurers attempts to categorise the warranty as a term that defined the risk as a whole, should act as a warning to oil and gas policy holders. Various different oil and gas policyholders will find themselves exposed to specific towage, stowage and weather warranty terminology. Accordingly, particularly careful attention should be paid to the drafting and negotiation of any such warranties underwriters may seek to impose, so as to minimise the impact of such policy terminology.