Category: Insurance case law · Reviewed by Al Jabbar, Broker · Specialist Risks · Last reviewed June 2026
Commercial Court decision concerning the construction of warranties and waiver in a marine hull insurance policy, addressing whether insurers had affirmed the contract by their conduct following an alleged breach. [verify citation]
The case arose out of the loss of a vessel insured under a marine hull policy issued by Liberty Insurance Pte Ltd to Argo Systems FZE. The policy contained warranties typical of marine cover, including warranties as to the vessel’s class, condition and trading limits. Following the casualty, the insurers declined the claim, contending that the assured had been in breach of one or more warranties.
The assured advanced two principal answers. First, it contested the insurers’ construction of the warranty in question, arguing that the obligation was less stringent than the insurers contended and that on the true construction there had been no breach. Secondly, the assured contended that the insurers had, by their conduct after becoming aware of the relevant facts, waived any right to rely on the breach or were estopped from doing so. In particular, the insurers had continued to engage with the claim, requested further information and arguably treated the contract as on foot for a period before purporting to rely on the alleged breach. [verify citation]
The case proceeded in the Commercial Court before a judge familiar with marine insurance practice. The factual issues required close examination of the policy wording, the surveyor’s reports, communications between the parties’ representatives following the loss, and the chronology of the insurers’ decision-making.
This summary should be checked against the law report before citation, as the precise factual matrix and the names of the parties to similar disputes in this period are sometimes confused in secondary sources. [verify citation]
The Court was required to address two related questions. First, on the true construction of the policy, did the relevant warranty impose a continuing obligation, a single obligation discharged at inception, or a descriptive warranty as to the state of the vessel at a particular time? Secondly, even if there had been a breach, had the insurers waived the breach or affirmed the contract by their conduct in handling the claim, with the consequence that they were precluded from relying on automatic discharge under the principle in Bank of Nova Scotia v Hellenic Mutual War Risks Association (The Good Luck)?
A subsidiary issue was the interaction between the doctrine of automatic discharge and the principles of waiver by election and waiver by estoppel, including what knowledge the insurer must possess before its conduct can amount to an unequivocal affirmation. [verify citation]
The judge approached the construction of the warranty by reference to its language read in the context of the policy as a whole and the surrounding commercial circumstances. Applying the cautious approach to identifying and construing warranties emphasised in HIH v AXA, the Court was reluctant to give the term a strict and discharging effect where another, less drastic, construction was available. [verify citation]
On the waiver issue, the Court applied orthodox principles. To establish waiver by election, the insurers must have had full knowledge of the facts giving rise to the breach and must, by an unequivocal communication or course of conduct, have made plain that they would not rely on the breach. Waiver by estoppel additionally requires the assured to have relied on the insurers’ representation to its detriment. The Court found, on the facts as it found them, [verify citation] that the insurers’ conduct following the loss was capable of amounting to affirmation, given their continued engagement with the claim after they had sufficient information about the alleged breach.
The outcome on the merits should be checked in the report before being cited. [verify citation]
Even under the pre-2015 Act regime in which breach of warranty automatically discharged the insurer’s liability under section 33(3) of the Marine Insurance Act 1906, insurers could be precluded by waiver or estoppel from relying on the breach where, with knowledge of the relevant facts, they had unequivocally indicated by words or conduct that they would treat the policy as continuing. The construction of warranties is to be approached with caution, and the Court will not readily give a contractual term the discharging effect of a warranty where the wording admits of another construction.
Argo Systems sits within a line of post-Good Luck Commercial Court decisions which addressed the practical operation of the doctrine of automatic discharge for breach of warranty. While The Good Luck established that breach occurs by operation of law and not by election, the courts have consistently held that the insurer’s subsequent conduct may give rise to waiver by election (treating the contract as continuing) or estoppel by representation. The case is therefore part of a body of authority which ameliorated, in practice, the harshness of automatic discharge by holding insurers to their post-breach conduct.
After the Insurance Act 2015, the immediate force of the discharge doctrine is much reduced. Section 10 provides that breach of warranty suspends rather than terminates cover, and section 11 limits reliance on warranty breaches where compliance would have made no difference to the loss. Nevertheless, the principles of waiver and estoppel illustrated in cases such as Argo Systems remain relevant: insurers must be careful, when handling claims, not to give unequivocal indications that they will treat cover as continuing if they wish to preserve all defences, including reliance on suspension of cover under the 2015 Act, on non-disclosure remedies, or on contractual conditions precedent.
The case is a useful working example for brokers and claims handlers of the importance of reservation-of-rights letters and disciplined claims correspondence. [verify citation]
By Matt Bartlett, Director, on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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