Held covered clauses Introduction

The reason for incorporating an express warranty into a marine policy is to give the insurer an opportunity to assess the extent of the risk he undertakes. Since the risk is altered dramatically when a breach of warranty occurs, the insurer is discharged automatically from liability in such a case. The insurer may be willing to provide insurance cover, even after the warranty is breached, provided the essential arrangements as to premium or otherwise are made so that the altered risk may be properly underwritten. This is achieved by the use of held covered clauses, which are usually, but not invariably, drafted subject to two conditions: that immediate notice be given to the insurer and that any variation in conditions or additional premium be agreed.26 Thus, with these clauses, the insurer agrees, prior to a breach of warranty, not to take any action against the assured, if he chooses to operate the clause by satisfying the conditions stated above. Put another way, the general object of such a clause is to give the assured the right to elect to maintain cover in circumstances when, otherwise, it would be terminated by the insurer.