warranty and mansfield and representation and portland and fire insurance and maritime insurance and materiality

By 1779, the year after Pawson, the warranty/representation distinction was reiterated in MacDowell v. Fraser. "A representation must be fair and true...But the differnce between the fact as it turns out, and as represented, must be material" [Hence the materiality prong of representation analysis]. But not until another case in 1779 did Mansfield articulate the theory that warranties must be complied with precisely in the context of a set of facts from a case.

The case was Kenyon v. Berthon. In that case insurance was issued upon a vessel described in the policy as "in port 20th of July, 1776." In fact the ship sailed on July 18. After loss, coverage was denied. In Mansfield's words, "though the difference of two days may not make any material difference in the risk, yet as the condition has not been complied with, the underwriter is not liable."

It is not until 1786 that the fully developed doctrine of warranty, which will then bedevil American law, was articulated. In De Hahn v. Hartley a vessel was insured for a voyage to the West Indies. The vessel was described as "warranted copper sheathed, and sailed from Liverpool with fourteen six-pounders....fifty hands or upwards." The vessel sailed with 46 men though it landed six hours later in Anglesea, taking on 6 additional men. The craft was captured and the cargo was lost. Originally the insurers paid up but then brought an action to recover the money thus paid on the ground that the insruance was void for breach of warranty. In addition, you should know that the voyage was only assured from Africa to the Indies, the owners probably believing that the ship would be safe in European waters.

Mansfield wrote:

"There is a material distinction between a warranty and a representation. A representation may be equitably and substantially answered; but a warranty must be strictly complied with...A warranty in a policy of insurance is a condition or a contingency, and unless that be performed, there is no contract. It is perfectly immaterial for what purpose a warranty is introduced....Now, in the present case, the condition was the sailing of the ship with a certain number of men; which not being complied with, the policy is void."

Implications of the Decision

Not only was the lost cargo at sea. Lawyers on both sides were too. Since Mansfield put so much weight on the distinction between warranty and representation, lawyers simply had to know which was which. And, lawyers being lawyers, they will ask all kinds of seemingly nit-picky questions to try to figure it out. Mansfield, picking up on some stray comments from a decade earlier, decided that a statement written in a policy was a warranty, while one written anywhere else, or not written at all, was only a representation. Later cases refined this test. If it was written on the face of the policy or the margin, it was a warranty, but if it was on a different piece of paper folded inside the policy, it was not a warranty. Even if it was fastened to the policy, it was not a warranty, but a representation.

Commenting on This Development

Professor Vance, of Yale Law School, commented in 1911 on this history. "This rule [is] so inherently unreasonable and so highly dangerous in its technicality, [that it] cannot be justified on the ground that it accorded with the usage of merchants. Even the meagre reports of the time contain sufficient information to show that merchants and brokers were not infrequently surprised by Mansfield's decisions, and they were sometimes ordered in a very summary fashion to change their customary way of doing business in order to comply with the law as Mansfield declared it." 20 YLJ 523, 531-32.

Yet unreasonability has never been a reason for lawyers and courts to stop doing something. This "theory" of warranty and representation came, like most of the English common law, to America in the late 18th century. But, even though America was a shipping nation for many decades, gradually the focus on our development was internal. Homes and businessess were built. Fire was the big problem, and it is not unusual as you study the history of 19th century America that you read about frequent fires destroying even a large section of downtown (Portland, for example, had a major fire in the 1870s, leading to the development of a pretty impractical cast iron architecture--impractical because the buildings couldn't rise over four stories-- and this architecture can still be seen on SW 1st in Portland, between Alder and Taylor).

But fire became the issue and therefore fire policies were written. Actually most big insurance companies that wrote policies were originally named "Fire Insurance companies." And, the drafters of the policies had to adopt what they knew from the English common law tradition regarding writing policies. They knew that Mansfield had made a big distinction between warranties and representations. Hence, to protect themselves, the fire insurance companies began to write policies with warranties sprinkled throughout. Why? The answer should be obvious by now.

Conclusion

So now we should know why there was such a "warranty" in a policy like that owned by Vlastos. It was put there to protect the insurer, really. But the injustice of such a system of warranties which the insurers wanted the courts to uphold regardless of materiality of risk caused both judicial and legislative second-thinking of the issue. The final mini-essay on this subject will discuss those "rethinkings" in a brief way.