Circular No. 22/98 - Rule Changes for the 1999 Policy Year
DECEMBER 14, 1998
CIRCULAR NO. 22/98
TO MEMBERS OF THE ASSOCIATION
CHANGES TO THE RULES OF THE ASSOCIATION FOR THE 1999 POLICY YEAR
Please note that your Board of Directors recently approved the following changes to the Club's Rules to take effect from February 20, 1999.
Automatic cesser of insurance by reason of a vessel becoming a Total Loss, Constructive Total Loss, etc.
In conformity with practice elsewhere in the International Group of P&I Clubs, and in order to ensure that the automatic cesser of cover takes place with immediate effect from the time and date of the occurrence of one of the above events, the first paragraph of Rule 5, Section 1(1) will be replaced with the following language:
Section 1 1 Unless otherwise agreed by the Association in writing, any insurance in respect of a Member's interest in an insured vessel shall cease upon the happening of any of the following events:
Termination on notice at the Club's option
Most Group Clubs have a provision in their Rules allowing for termination of cover at the Club's option without giving a reason. This is a very general power, rarely exercised in practice, intended to protect the mutuality against circumstances where the nature of an individual risk may have changed, for whatever reason, in a way considered unconducive to the interests of the membership as a whole.
Accordingly, the current terms of Rule 5, Section 1(4) will be replaced with the following language:
4 Any contract of insurance in respect of a Member's interest in an insured vessel may be terminated:
Cover for fines and penalties
The International Group's working party on fines and penalties made recommendations earlier in the year which incorporated model wordings for the standardization of cover in regard to such exposures. A number of Clubs have adopted these recommendations. Given this, and bearing in mind that the Club's existing Rule would benefit from greater clarity, the first paragraph of Rule 2, Section 8 will be replaced with the following language which reflects the model wordings mentioned above:
Section 8 Fines and penalties imposed by any court, tribunal or authority for:
Pollution costs recoverable in General Average
As a result of extensive discussion within the Group over the last year, a common position has been taken for 1999 so as to exclude cover for any costs and expenses incurred by a Member which would have been allowed in General Average under the York-Antwerp Rules 1994. This position was taken in response to oil industry attempts to impose upon shipowners broader liabilities than they would normally face under the York-Antwerp Rules in cases of General Average as exemplified, in particular, by the Exxon General Average Clause.
Accordingly, a new proviso will be added as follows at the end of Rule 2, Section 13:
Provided that any recovery hereunder may be reduced if and to the extent that the Member shall not have taken steps to ensure that costs and expenses recoverable hereunder are included in general average to the extent permitted under the York-Antwerp Rules 1994.
The duty to act as a prudent uninsured in regard to millennium compliance
Reference is made to Club Circulars 8/98, 10/98 and 16/98.
Following extensive discussion within the Group over the last several months, as evidenced by the content of the Circulars mentioned above, a general consensus has arisen that some responsibility for ensuring that operating systems are millennium compliant should be devolved upon individual Club Members. Bearing in mind, however, the scale of the problem generally, there is no desire to import an absolute exclusion of claims arising from millennium non-compliance, but rather one based on principles of reasonableness.
To this extent, the "prudent uninsured" test has been adopted as a criterion. Accordingly, and as notified in Circular 16/98, a new Section 21 will be added to Rule 1, as follows:
Section 21 In relation to any claims arising directly or indirectly from millennium non-compliance, Members will be expected to demonstrate to the satisfaction of the Directors that they have taken such steps as an uninsured person acting reasonably in similar circumstances would have taken to avoid such a claim. The Directors shall have discretion to reject or reduce any claim when it appears that the Member has not so acted.
The amendments and additions described above will be incorporated in the Club's new By-Laws and Rules for 1999 and made available to Members as soon as possible.
If, in the meantime, any Member has any questions in regard to the foregoing, the Managers will be pleased to respond.
Joseph E.M. Hughes, Chairman & CEO