The Impact of Warranties in Insurance Contracts: A Study of Expom Ghana Limited v Vanguard Assurance Company Limited & Anor [2022] 178 G.M.J 117 SC

The Supreme Court has in a recent decision touched on the application of the doctrine of warranties in insurance contracts. The doctrine of warranties is an important subject in insurance contract law. It has, however, undergone significant modification in other jurisdictions in recent times. The decision by the Supreme Court in this case ultimately turned on the proper construction to be put on a term in an insurance contract. The relevant term that formed the basis of the dispute between the insurance company and its client was the so-called “Watchmen’s Clause”. The insurance company (the Respondent) repudiated liability for a claim on a “Combined All Risk Policy” issued to the Appellant (the insured). By a 3-2 majority decision, the Supreme Court held that the Appellant was not in breach of the “Watchmen’s Clause” and that the Respondent was liable for the claim. The majority decision of the Court was delivered by Prof. H.J.A.N. Mensa-Bonsu (Mrs.), JSC with a concurring opinion by Amadu Tanko, JSC and supported by Mariama Owusu (Ms.), JSC while Gabriel Pwamang, JSC and Anin Yeboah, CJ dissented with the dissenting opinion being delivered by Pwamang, JSC. This article provides a comment on this decision which was delivered by the apex court on 25 May 2022 and makes a case for a reform of the doctrine of warranties under Ghanaian insurance law. The case is analyzed in the context of the applicable principles in insurance law that informed the decision of the Court. The judgment will be better understood with a full appreciation of the relevant facts of the case. Relying on the relevant facts of the case, the Plaintiff sued the Defendant and the broker who arranged the policy for the Plaintiff. The claim against the broker was dismissed as it was determined that there was no cause of action against them. The Defendant’s claim was for the sum of EUR 4,942,311.53 being the value of the raw materials and the goods that were destroyed by the fire and an interest on this amount together with the expenses incurred for clearing the debris which was stated as EUR 400,000. The High Court found the Defendant liable. The Court found that the Defendant failed to prove that the fire was caused by arson and that there was “overwhelming evidence that the cause of the fire was electrical”. The Defendant was ordered by the trial court to pay the Plaintiff the sum of EUR 4,942,311.53 which was the claim for the value of the raw materials and other goods that were destroyed by the fire. The Defendant was further ordered to pay to the Plaintiff an amount of EUR 400,000.00 being the cost of clearing the debris and additionally, the Defendant was slapped with a hefty cost of EUR 500,000. The Defendant immediately appealed the decision. The Plaintiff’s case having been turned on its head by the Court of Appeal, they appealed to the Supreme Court on three grounds: The
Court of Appeal erred in its interpretation of the warranty in the Watchmen’s Clause in the insurance contract to mean a detachment of security personnel instead of the ordinary meaning of “security personnel”. The Honourable Court’s conclusion that there was a breach of warranty of the Watchmen’s Clause on the sole grounds that the persons who watched the property on the night of the fire had other professions e.g. driver and carpenter is unjustifiable. The judgment is against the weight of the evidence. The Plaintiff’s case was upheld by the Supreme Court in a narrow 3-2 split decision which highlights the highly contentious nature of the case. The Supreme Court restored the judgment of the trial High Court except the order for costs of EUR 500,000 which the court found to be without merit. The Plaintiff was therefore awarded the full amount of the claim which was EUR 4,942,311.53 and an interest on this amount to be calculated using the prevailing commercial rate from 11 May 2010 till date of final payment. The Defendant was further held liable for the cost of the clearing of debris which was EUR 400,000. The evidence or the lack of