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Class I - Protection and Indemnity Insurance


Class II - Freight, Demurrage and Defense Insurance


Class III - Insurance for Charters' Risks


Rule 1 - Introductory: Interpretation Membership : General Provisions

SECTION 1 - INTRODUCTORY PROVISIONS

  1. Each and every provision of the By-Laws of the Association and these Rules of Class I are applicable to all Protection and Indemnity insurances of the Association. However, without prejudice to the generality of these provisions so far as they apply to this Class I, they shall only apply to Protection and Indemnity insurances contracted under Class III to the extent that they have been expressly incorporated therein.
  2. The standard Protection and Indemnity cover afforded by the Association to a Member who has insured his vessel with the Association is set out in Rule 2 below.
  3. The cover set out in these Rules may be excluded, limited, modified or otherwise varied by any special terms expressly agreed in writing between a Member and the Managers.
  4. The Managers may accept the insurance of vessels on terms which afford cover to a Member against any special or additional risks not set out in Rule 2. The nature and extent of the risks and the terms of such cover shall be as expressly agreed in writing between the Member and the Managers.
  5. A Member is only insured against loss, damage, liability or expense incurred by him which arises:
    1. out of events occurring during the period of the policy year when his vessel is insured with the Association; and
    2. in respect of the Member’s interest in the insured vessel; and
    3. in connection with the operation of the insured vessel by or on behalf of the Member.
  6. Notwithstanding the terms of Rule 1.1.5 above, a Member maybe insured otherwise than in respect of the insured vessel, or otherwise than in connection with the operation of the insured vessel, but only where this has been expressly agreed in writing between the Member and the Managers.
  7. Subject to the provisions of Rule 1.1.8 below, a Member who has insured his vessel with the Association for insurance against any or all of the aforesaid risks is obligated to pay premium to the Association in accordance with Rule 4, such insurance being hereinafter referred to as mutual insurance and premium payable by reason thereof mutual premium.
  8. Notwithstanding the provisions of Rule 1.1.7 above, a Member may be insured on special terms to the effect that he is liable to pay fixed premium to the Association, such insurance being hereinafter referred to as fixed insurance, and premium payable by reason thereof fixed premium, but only where this has been expressly agreed in writing between the Member and the Managers.
  9. The insurance provided by these Rules is solely for the benefit of a Member, Joint Member, Co-assured, Affiliate or such other parties as set out and defined in Rule 1.3.
  10. In these Rules, the words set out in Rule 1.2 below shall have the meaning ascribed to them in the said Rule 1.2.

SECTION 2 - INTERPRETATION

In these Rules the following words and expressions shall have the following meanings, if not inconsistent with the subject or context thereof:

AFFILIATE:

Any person who is insured in accordance with Rule 1.3.12.

APPLICANT MEMBER:

In relation to a vessel which is desired or intended to be insured with the Association means an owner, operator or charterer (including a bareboat or demise charterer) of such vessel and any other person by whom or on whose behalf an application has been, is being or is to be made for the insurance of such vessel with the Association whether or not he is or is to be a Member of the Association.

ASSOCIATION:

American Steamship Owners Mutual Protection and Indemnity Association, Inc.

BILL OF LADING:
A bill of lading or similar document of title.

BY-LAWS:

The By-Laws of the Association at the relevant times.

CARGO:

Goods, including anything used or intended to be used to secure goods, which are subject to a contract of carriage to which the Member is party, but excluding containers or other equipment owned or leased by the Member.

CERTIFICATE OF ENTRY:

The document issued by the Managers on behalf of the Association evidencing the contract of insurance between a Member and the Association pursuant to the provisions of Rule 1.4.6 to 9 inclusive.

CO-ASSURED:

Any person who is insured in accordance with the terms of Rule 1.3.8 to 1.3.11.

CONTAINER:

A container or similar receptacle, including trailer, flat, pallet or tank, as  may have been expressly agreed to be such in writing by the Managers.

CONTRACT OF INSURANCE:
The contract of insurance between the Member and the Association includes the provisions of the Certificate of Entry and any endorsements thereto issued by the Association's Managers to the Member and the provisions of the Association's By-Laws and Rules in effect as of the date the Certificate of Entry was issued.


CONVENTION LIMIT:

Has the meaning ascribed to it in Rule 4.16.

DIRECTORS:

The Board of Directors of the Association at the relevant times.

EFFECTS:

Personal property, documents, navigational or other technical instruments and tools brought on board, or being taken to or from an insured vessel by a seaman or supernumerary but excluding cash, valuables, or any other article which, in the opinion of the Directors, is not an essential requirement for a seaman.

ENDORSEMENT:

A document issued by the Managers on behalf of the Association evidencing any variations or additions to the contract of insurance as contained in a Certificate of Entry of which it forms an integral part.

FINES:

Fines, penalties and other impositions similar in nature to fines imposed in respect of any insured vessel by any court, tribunal or authority of competent jurisdiction.

FIXED PREMIUM:

Any premium which is not mutual premium.

FLEET:

Any two or more vessels insured hereunder having common nominal, or beneficial, ownership, management or control.

GROUP EXCESS LOSS CONTRACT:

The excess loss reinsurance contract entered into by the parties to the Pooling Agreement.

GROUP REINSURANCE LIMIT

Has the meaning ascribed to it in Rule 4.16.

HULL INSURANCE(S)/HULL POLICY(IES):

Insurance in respect of the insured vessel’s hull and machinery, increased value and excess liability.

INSURED VESSEL:

A vessel which has been insured with the Association.

IN WRITING/WRITTEN:

Visibly expressed in any mode of permanently representing or reproducing words including telegram, facsimile transmission and other electronic communication.

JOINT MEMBER:

Any person who is insured in accordance with the terms of Rule 1.3.5.

MANAGERS:

Shipowners Claims Bureau, Inc.

MEMBER:

An owner, operator or charterer (including a bareboat or demise charterer) of a vessel insured by the Association who according to the By-Laws and these Rules is entitled to membership of the Association, provided that, where the context requires or allows, the term Member shall, in these Rules, include a Joint Member, Co-assured and Affiliate.

MUTUAL PREMIUM:

Premium payable by a Member in consideration of the affording by the Association of mutual insurance and subject to the relevant provisions of Rule 4.

NET PREMIUM:

Has the meanings ascribed to it in Rule 4.7 or Rule 4.11 as the context requires.

OVERSPILL CALL:

Has the meaning ascribed to in it Rule 4.16.

OVERSPILL CLAIM:

Has the meaning ascribed to in it Rule 4.16.

OVERSPILL CLAIM DATE:

Has the meaning ascribed to in it Rule 4.16.

PASSENGER:

A person carried on board an insured vessel under a contract of carriage or who, with the consent of the carrier, is accompanying a vehicle or live animals covered by a contract for the carriage of goods.

POLICY YEAR:

A year from noon GMT on any February 20 to noon GMT on the next following February 20.

POOLING AGREEMENT:

The agreement, to which the Association is a party, between certain protection and indemnity associations dated February 20, 1998 and any addendum to, variation or replacement of, the said agreement, or any other agreement of a similar nature or purpose.

PREMIUM TO RELEASE:

That part of mutual premium capable of being levied and collected under the provisions of Rule 4.8 to 10 inclusive.

RULES:

These Rules as originally framed or as may from time to time be altered, abrogated or added to and in force at relevant times.

SEAMAN:

An employee of a Member falling within the categories of person set out in Rule 2.1.B or, solely and exclusively for purposes of the interpretation of Rule 1.4.35, any person on board an insured vessel who is not a passenger.

SUPPLEMENTARY PREMIUM:

That part of mutual premium capable of being levied and collected under the provisions of Rule 4.5 to 7 inclusive.

VESSEL:

Any ship, boat, hydrofoil, hovercraft or other description of vessel (including a lighter, barge or similar vessel howsoever propelled but excluding (a) a unit or vessel constructed or adapted for the purpose of carrying out drilling operations in connection with oil or gas exploration or production and (b) a fixed platform or fixed rig) used or intended to be used for any purpose whatsoever in navigation or otherwise on, under, over or in water or any part of such vessel or any proportion of the tonnage thereof or any share therein.

Words importing the singular number only shall include the plural number and vice versa.

Words importing the masculine gender only shall include the feminine and neuter genders. 
 
Words importing persons shall include individuals, partnerships, corporations, associations, 
joint ventures and any other business entities

 

SECTION 3 - MEMBERS, JOINT MEMBERS, AFFILIATES AND CO-ASSUREDS
 
Membership
  1. Any insurance of a vessel provided to any party falling within the definition of Member in Rule 1.2 above shall give rise to membership in the Association, except where such is expressly excluded by the terms of this Rule 1.3 or where such has been denied through the exercise of a permitted discretion hereunder
  2. Any reinsurance by the Association of a vessel insured by another insurer may (at the absolute discretion of the Managers) give rise to the membership in the Association of that other insurer and/or of any party falling within the definition of Member in Rule 1.2 above in relation to that vessel.
  3. Membership may be in respect of one or more of the vessels owned, operated, chartered or insured by the Member and shall continue until all of the Member’s insurances shall have ceased or been terminated.
  4. All contracts of insurance effected by the Association shall, save and insofar as they shall contain any special terms inconsistent with that part of the insurance contract contained in these Rules, be deemed to incorporate all of the provisions of these Rules and the Association's By-Laws.
    All contracts of insurance effected by the Association shall be deemed to have been issued in New York.
  5. If any application for insurance of interests in the same vessel is made in the names or on behalf of more than one person, whether jointly or separately interested, then such persons maybe treated as Joint Members and the insurance of such vessel as joint insurance, the consequences of which, unless otherwise expressly agreed by the Managers in writing, shall be as set out in Rules 1.3.13 to 18 below.
Cover for Co-assureds and Affiliates
  1. The Managers may agree, subject to the provisions of this Rule1.3 and to such other terms as they may in their absolute discretion require, to extend the cover afforded by the Association to a Member to:
    1. any person who is affiliated to or associated with that Member (not being a Co-assured or an Affiliate as referred to in Rule 1.3.11), and who shall not be specifically named in the terms of entry; and
    2. any other named co-assured.
  2. The cover afforded to a Co-assured in categories (i), (ii) and (iii)below shall extend only to liabilities, losses, costs and expenses arising out of operations and/or activities customarily carried on by, or at the risk and responsibility of, shipowners:
  1. any person interested in the operation, management or manning of the insured vessel;
  2. the holding company or the beneficial owner of the Member or of any Co-assured falling within category (i) above;
  3. any mortgagee of the insured vessel.
  1. Notwithstanding the provisions of Rule 1.4.31 below, the cover afforded to a Co-assured who is a time or voyage charterer of an insured vessel and who is affiliated to or associated with a Member (other than a  Co-assured expressly given cover by the Association in accordance with Rule1.3.10) shall extend  only to the risks, liabilities, losses, costs and expenses in respect of which that Member has cover, and is limited as follows:

    to the lesser of either (a) the sum to which such Member shall be deemed to be entitled to limit his liability under Rule 1.4.30 plus an additional $50,000,000, or (b) $350,000,000; but if his liability is in respect of oil pollution, recovery shall be limited to $100,000,000.

    Provided that where a vessel is separately insured for charterers’ risks by more than one time charterer with the Association or any other association which participates in the International Group of P&I Clubs’ Pooling Agreement and Excess Reinsurance Policies, the aggregate recovery in respect of all claims for oil pollution liability following any one occurrence brought against all time charterers of such insured vessel and/or against the Association and/or against any other association shall be limited to $350,000,000. The liability of the Association in respect of such claims shall be limited to that proportion of $350,000,000 that each claim recoverable from the Association bears to the aggregate of the claims recoverable against the Association and such other associations.
  1. The cover afforded to a Co-assured who has entered into a contract with the Member for the provision of services for or by the  insured vessel, and any sub-contractor of the Co-assured, shall extend only to liabilities, losses, costs and expenses which are to be borne by the Member under the terms of the contract and which would, if borne by the Member, be recoverable by the Member from the Association, provided that:
    1. the contract has been expressly approved by the Managers; and
    2. the contract provides that each party shall be similarly responsible for any loss or damage to its own (or its sub-contractors’) property or loss of life or personal injury to its own (or its sub-contractors’) personnel.
  2. The cover afforded to all other categories of Co-assureds, other than those referred to in Rules 1.3.7 to 9 inclusive, shall only extend insofar as such Co-assured may be found liable to pay in the first instance for loss or damage which is properly the responsibility of the Member, and nothing herein contained shall be construed as extending cover in respect of any amount which would not have been recoverable from the Association by the Member had the claim in respect of such loss or damage been made and enforced against him.
  3. The cover afforded to an Affiliate shall extend only to claims made and enforced through the Affiliate in respect of any liabilities for which the Member has cover and nothing herein contained shall be construed as entitling an Affiliate to recover any amount which would not have been recoverable from the Association by the Member had the claim been made and enforced against the Member.
  4. To the extent that the Association has indemnified a Co-assured or an Affiliate in respect of a claim, it shall not be under any further liability and shall not make any further payment to any person whatsoever, including the Member, in respect of that claim or of the loss or damage in respect of which that claim was brought.
Joint Members, Co-assureds and Affiliates
  1. The Managers shall not be bound to issue any Certificate of Entry or Endorsement to more than one Member, delivery of which to whom shall be sufficient delivery to any and all Joint Members and to any and all Co-assureds and Affiliates.
  2. Joint Members, Co-assureds (except those granted only misdirected arrow coverage under Rule 1.3.10), and Affiliates insured on any one insurance or in respect of any fleet as defined in Rule 1.2 above, shall be jointly and severally liable for all sums due to the Association in respect of such insurance or such fleet, always provided that nothing stated herein shall be construed as a waiver of any of the Association's rights under the contract of insurance.
  3. Any payment by the Association to one Joint Member, Co-assured or Affiliate shall fully discharge the obligations of the Association in respect of such payment.
  4. Any communication by the Association to one Joint Member, Co-assured or Affiliate shall be deemed to be communication to all.
  5. Any communication from one Joint Member, Co-assured or Affiliate shall be deemed to have been made with the full approval and authority of all.
  6. The conduct or omission of one Joint Member, Co-assured or Affiliate which under these Rules would constitute a breach of the contract of insurance, shall be deemed to be the conduct or omission of all Joint Members, Co-assureds and Affiliates.

 

SECTION 4 - GENERAL INSURANCE PROVISIONS

Application for Insurance

1.      Any applicant Member who desires to insure a vessel with the Association shall make application for such insurance in such form or manner as may from time to time be required, or which may otherwise satisfy, the Managers.

2.     The particulars given by an applicant Member in any form of application, together with any other particulars or information given to the Managers in the course of applying for insurance, or negotiating changes in its terms, shall, if the insurance of the vessel be accepted, be deemed fundamental to the contract of insurance between the Member and the Association. It shall be a condition precedent of such insurance that all the said particulars and information were true so far as the applicant Member knew or could with reasonable diligence have ascertained.

3.     The Managers shall be entitled, as a matter of their absolute discretion and without giving any reason, to refuse any application of a vessel for insurance in the Association whether or not the applicant Member of such vessel is already a Member of the Association.

Premium Rating and Other Variable or Special Terms

4.     Before an application is accepted for the insurance of a vessel either by way of mutual insurance, or by way of fixed premium insurance, the applicant Member and the Managers shall agree the premium rating of the vessel concerned in addition to any other variable or special terms and conditions of insurance as shall be considered appropriate for acceptance of the vessel to be insured. The said premium rating may be expressed as an estimated total premium in the case of mutual insurance or as a fixed premium in the case of fixed premium insurance. In either case, the provisions of Rule 4 below will apply.

5.     In deciding upon the premium rating of any vessel, as well as any other variable or special terms and conditions of insurance, the Managers may, in their absolute discretion, take into account all matters which they may regard as relevant including, but not limited to, the level of risk estimated to be involved in the insurance for which application is being made.

Certificates of Entry and Endorsements

6.     After accepting an application for insurance, the Managers shall issue on behalf of the Association a Certificate of Entry for the vessel concerned, setting out, inter alia:

–         the dates of commencement and termination of the period of insurance;

–         such mutual or fixed premium details as may be appropriate and/or necessary;

–         the gross tonnage of the insured vessel;

–         the name of the Member and all other insured persons and their respective interests in the insured vessel; and

–         any special terms of entry, including any special deductibles.

7.     If at any time it is mutually agreed between the Member and the Managers to vary the terms of any insurance, the Managers may, on behalf of the Association, issue an Endorsement detailing such variation and the date from which it is to be effective.

8.     Fresh Certificates of Entry may be issued setting out the terms effective from noon GMT each successive February 20 for all vessels whose insurances are then continuing.

9.     Every Certificate of Entry and every Endorsement issued as aforesaid, together with any other agreement made in writing between a Member and the Managers, shall be conclusive evidence and binding for all purposes as to the commencement and termination of the period of insurance, as to the terms and conditions on which the vessel has been insured, and as to the terms of any variation and the date from which such variation is to be effective; provided however that, in the event that any Certificate of Entry or any Endorsement shall in the opinion of the Managers contain any error or omission, the Managers may in their absolute discretion issue a new Certificate of Entry or a new Endorsement which shall be conclusive evidence and binding as aforesaid.

Assignment

10.    No insurance provided by the Association and no interest under these Rules or under any contract between the Association and any Member, Joint Member, Co-assured or Affiliate may be assigned without the written consent of the Managers who shall have the right in their absolute discretion to give or refuse such consent without stating any reason, or to give such consent upon any terms or conditions as they may think fit. Any purported assignment made without such consent or without there being due compliance with any terms and conditions as the Managers may impose shall, unless the Managers in their absolute discretion otherwise decide, be void and of no effect.

11.    Notwithstanding any written consent of the Managers or specific agreement contained in a Certificate of Entry or Endorsement thereto allowing assignment in accordance with Rule 1.4.10 above, the Association shall be entitled in settling any claim presented by the assignee to deduct or retain such amount as then estimated to be sufficient to discharge any liabilities of the assignor to the Association, whether existing at the time of the assignment or having accrued or being likely to accrue thereafter.

Subrogation

12.    The Association shall be subrogated to all the rights which the Member may have against any other person or entity, in respect of any payment made in accordance with these Rules, to the extent of such payment, and the Member shall, upon the request of the Association, execute all documents necessary to secure to the Association such rights.

13.    The Association shall have the right to sue in the name of the Member, and the Member shall execute all papers and documents in connection therewith, as requested by the Managers, and shall lend all assistance to the prosecution of any suit. The balance of any amount recovered after full reimbursement of the Association for its loss and all expenses incurred shall be paid to the Member. Compliance with this requirement may, in the Managers’ absolute discretion, be made a condition of the payment of a loss.

Classification and Statutory Requirements

14.    Unless otherwise expressly agreed in writing between a Member and the Managers, the following conditions are fundamental terms of the insurance of every insured vessel:

  1. The vessel must be and remain throughout the period of insurance classed with a Classification Society approved by the Managers.
  2. Any incident or condition in respect of which that Classification Society might make recommendations as to repairs or other action to be taken by the Member must be promptly reported to that Classification Society.
  3. The Member must comply with all the rules,recommendations and requirements of the Classification Society relating to the insured vessel within the time or times specified by that Society.
  4. The Member authorizes the Managers to inspect any documents and obtain any information relating to the maintenance of class of the insured vessel in the possession of any Classification Society or Societies with which the vessel is, or at any time has been, classed and will, where necessary, authorize such Classification Society or Societies to disclose and make available such documents and information to the Managers upon their request for whatsoever purposes the Managers may consider necessary.
  5. The Member must comply or procure compliance with all statutory requirements of the State of the insured vessel’s flag including without limitation those relating to the construction, adaptation, condition, fitment, equipment and manning of the insured vessel and must at all times maintain the validity of such statutory certificates as are issued by or on behalf of the State of the insured vessel’s flag in relation to such requirements and in relation to the International Safety Management (ISM) Code and the International Ship and Port Facility  Security (ISPS) Code or any equivalent mandatory flag State regime. In the event that a Member is, or comes to be, in breach of any of the conditions referred to in this Rule 1.4.14, cover automatically ceases with immediate effect without notice. Unless and to the extent that the Directors in their absolute discretion otherwise decide, a Member shall not be entitled to any recovery from the Association for any claim of whatsoever nature and howsoever arising during a period in which the Member is or was in such breach of condition.
  6. Notwithstanding anything to the contrary contained in these Rules, it is a condition of this insurance that the Member shall give the Managers prior notice in writing of any proposed change in the Classification Society of the insured vessel(s) and/or of any change of flag of the insured vessel(s) as may be intended during the currency of the cover provided hereunder.  In the event that:

- the Member shall have failed to give the required notice to the Managers of such change as aforesaid; or

- the Managers shall have notified the Member that they do not approve of the Classification Society and/or flag to which the insured vessel(s) has been changed; 

cover hereunder shall be null, void and of no effect as of the date of such change, save to the extent that the Managers, in their sole discretion, may otherwise determine.

General Conditions in Regard to Claims

15.   Without prejudice to any other provision of these Rules and without waiving any of the Association’s rights hereunder, the Managers may at any and all times appoint and employ on behalf of a Member, upon such terms as the Managers may think fit, lawyers, surveyors or other persons for the purpose of dealing with any matter liable to give rise to a claim by a Member upon the Association, including investigating or advising upon any such matter and taking or defending legal or other proceedings in connection therewith. The Managers may also at any time discontinue such employment if they think fit.

16.    All lawyers, surveyors and other persons appointed by the Managers on behalf of a Member, or appointed by a Member with the prior consent of the Managers, shall at all times be and be deemed to be appointed and employed on the terms that they have been instructed by the Member at all times (both while so acting and after having retired from the matter) to give advice and to report to the Managers in connection with the matter without prior reference to the Member and to produce to the Managers without prior reference to the Member any documents or information in their possession or power relating to such matter, all as if such person had been appointed to act and had at all times been acting on behalf of the Association.

Members’ Obligations in Regard to Claims

17.    Any happening, occurrence, event or matter (including, but not limited to, any legal or arbitration proceedings commenced against the Member) which may be liable to cause the Member to incur loss, damage, liabilities, costs or expenses for which he may be insured by the Association shall be notified promptly to the Managers by the Member on it being known by him. In so far as there may be any difference of opinion between the Member and the Managers as to whether any happening, occurrence, event or matter is or was such as might be liable to cause the Member to incur loss, damage, liabilities, costs or expenses, or as to whether the Member knew or ought to have known of such happening, occurrence, event, or matter as aforesaid, or as to whether such happening, occurrence, event or matter was notified promptly to the Managers by the Member, the determination of the Managers shall be final. A Member shall take and continue to take all such steps as may be reasonable for the purpose of averting or minimizing any expense or liability in respect whereof he may be insured by the Association.

18.    A Member shall disclose and produce to the Managers all information, documents or reports in or coming into his or his agents’ (including lawyers’) possession, power or knowledge relevant to any such casualty, event or claim available at the time of notification and at any other time.

19.    Whenever required by the Managers, a Member shall aid in securing information and evidence and in obtaining witnesses and shall cooperate with the Managers in the defense of any claim or suit or in the appeal from any judgment, in respect of any happening or occurrence as herein provided.

20.    A Member shall neither settle nor make any admission in respect of liabilities, costs or expenses for which he is insured without the prior written consent of the Managers.

21.    If a Member commits any breach of any of his obligations under this Rule 1.4.17 to 20 inclusive, the Managers may reject or reduce any recovery to which such breach may appear to the Managers to be relevant.

Powers of the Managers in Regard to Claims

22.    The Managers shall have the right if they so decide to control or direct the conduct of any claim or legal or other proceedings relating to any liability, loss or damage in respect whereof a Member is or may be insured in whole or in part, and to require a Member to settle, compromise or otherwise dispose of such claim or proceedings in such manner and upon such terms as the Managers see fit.

23.    If a Member does not settle, compromise or dispose of a claim or legal or other proceedings after being required to do so by the Managers in accordance with Rule 1.4.22 above, any eventual recovery by the Member from the Association in respect of such claim or proceedings shall be limited to the amount he would have recovered if he had acted as required by the Managers.

Powers of the Directors in Regard to Claims

24.    The Directors shall meet, or otherwise be consulted by the Managers, as often as may be required for settlement of claims which shall be paid by the Association as the Directors may determine in accordance with these Rules, but the Directors shall have power from time to time to authorize the Managers to effect settlement of claims without prior reference to them. No Director shall act as such in the settlement of any claim in which he is interested.

25.    Without prejudice to the generality of Rule 1.4.24 above, the Directors shall have power in their absolute discretion to effect a compromise of any claim made against the Association.

Time Bar

26.  

  1. In the event that:

     

    • a Member fails to fulfill his duty of prompt notification as contained in Rule 1.4.17 above; and/or
    •  a Member fails to submit a claim to the Managers for reimbursement of any liabilities, costs or expenses within six months after discharging or settling the same;

    the Member’s claim against the Association shall be discharged and the Association shall be under no liability in respect thereof unless the Directors in their absolute discretion shall otherwise determine.

  2. Without prejudice to paragraph (a) of this Rule, in no event shall any claim be recoverable from the Association unless written notice thereof has been given to the Managers within two years after the Member knew or ought to have known of the happening, occurrence,  event or matter giving rise to the claims. In so far as there may be any difference of opinion between the Member and the Managers as to whether the Member knew or ought to have known of such happening, occurrence, event or matter giving rise to the claim as aforesaid, the  determination of the Managers shall be final.

     

Other Provisions in Regard to Claims

27.    Unless otherwise expressly agreed in writing by the Managers, where the Association has paid a claim to or on behalf of a Member, the whole of any recovery from a third party in respect of that claim shall be credited and paid to the Association up to an amount corresponding with the sum paid by the Association together with any interest element on that sum comprised in the recovery; provided however that where, because of a deductible in his terms of entry, the Member has contributed to settlement of the claim, any such interest element shall be apportioned between the Member and the Association taking into account the payments made by each and the dates on which those payments were made.

28.    It is a condition precedent of a Member’s right to recover from the funds of the Association in respect of any liabilities, costs or expenses that he shall first have discharged and paid the same out of funds belonging to him unconditionally and not by way of loan or otherwise.

29.    Notwithstanding the provisions of Rule 1.4.28 above and of the first (introductory, unnumbered) paragraph of Rule 2 below, where a Member shall have failed to discharge a legal liability to pay damages or compensation for personal injury, illness, death or repatriation of a seaman, the Association shall discharge or pay such claim on the Member's behalf directly to such seaman or to the legal dependant therof.

PROVIDED ALWAYS THAT:

  • The seaman or dependant has no enforceable right of recovery against any other party and would otherwise be uncompensated; and
  • Subject to (c) below, the amount payable by the Association shall under no circumstances exceed the amount which the Member would have been able to recover from the Association under the Rules and the Member's terms of insurance with the Association; and
  • Where the Association is under no liability to the Member in respect of such claim by reason of termination of cover under the terms of Class I, Rule 5.1.2.b for non-payment of amounts due to the Association, or by reason of cesser of cover under the terms of Class 1, Rule 5.1.3, the Association will nevertheless discharge or pay that claim to the extent only that it solely arises from a happening, occurrence, event or matter occurring prior to the date of such termination or cesser of cover, except as to repatriation of seamen, only, the claim solely arises from a happening, occurrence, event or matter occurring within the earlier of three months after
    • the date of such cesser or termination, or
    • the expiry of the insurance hereunder or any disposal by the Member of his interest in the insured vessel in whole or in part; and
  • This Rule shall apply only to claims by or regarding a seaman employed on an entered vessel and to the personal injury, illness, death or repatriation of such seaman solely arising from a happening, occurrence, event or matter occurring at or after noon GMT, February 20, 2017; and
  • The Association's agreement to discharge or pay Members' liabilities regarding repatriation of seamen is applicable only to such liabilities  in states which implement or otherwise give effect to guideline B2.5 of Regulation 2.5 of the 2006 Maritime Labor Convention (MLC 2006); and
  • Any payment by the Association to a seaman or dependant shall be as agent of the Member and the Member shall be liable to and agrees to reimburse the Association for the full amount of such payment.

30.   In the event that more than one class of claims as provided for by these Rules shall arise as the result of any one accident or occurrence, only one deductible shall be made, which deductible shall be the highest deductible of those applying to the classes of claims involved.


General Limitations

31.     If and when a Member has any interest other than as an owner or bareboat charterer of the insured vessel, in no event shall the Association be liable hereunder to any greater extent than if such Member were the owner or bareboat charterer and were entitled to all the rights of limitation of liability to which a shipowner is entitled.

32.    Subject to these Rules and to any special terms and conditions upon which a vessel may be insured, the Association covers the liability of a Member in respect of an insured vessel as this liability may be determined and fixed by law, including any laws pertaining to limitation of liability. The Association shall in no circumstances be liable for any sum in excess of such legal liability. If a Member is entitled to limit his liability, the liability of the Association shall not exceed the amount of such limitation.

33.    Notwithstanding the provisions of Rule 1.4.30 and 1.4.31 above, recovery shall be limited to ONE BILLION DOLLARS ($1,000,000,000) any one occurrence in respect of any one insured vessel for oil pollution liability including fines, costs and expenses and clean-up, and damages payable to any other person as may arise in respect of such oil pollution liability, whether under Rule 2.3 or Rule 2.5 or Rule 2.13 or any other section or endorsement or combination thereof; and

Provided further that if the aggregate amount of any oil pollution claims against a Member, Co-assured and/or Affiliate exceeds the aforesaid $1,000,000,000, the Association will not be liable to make any payment in respect of that amount by which any such claim exceeds $1,000,000,000; and

Provided further that where an insured vessel gives or attempts to give salvage or other assistance to another vessel following a casualty, any oil pollution liability incurred by the insured vessel in consequence thereof shall be aggregated with any oil pollution liability incurred by any other vessels similarly assisting in connection with the same casualty which are insured in respect of oil pollution liability either by the Association or by any other association which participates in the International Group of P&I Clubs’ Pooling Agreement or Excess Reinsurance Policies, and recovery in respect of the oil pollution liability of any insured vessel assisting as aforesaid shall not exceed such proportion of the above $1,000,000,000 limit as that vessel’s oil pollution liability bears to the aggregate of the oil pollution liabilities of all the similarly assisting vessels; and

Provided further that where an insured vessel is separately insured on behalf of its owner, demise charterer, manager or operator with the Association or any other association which participates in the International Group of P&I Clubs’ Pooling Agreement or Excess Reinsurance Policies, recovery in respect of all claims for oil pollution liability following any one occurrence brought against the owner, demise charterer, manager or operator of an insured vessel or against the Association or any other association shall be limited to $1,000,000,000. The liability of the Association in respect of such claims shall be limited to that proportion of $1,000,000,000 that each claim recoverable from the Association bears to the aggregate of the claims recoverable against the Association and such other associations, if any.

34.    In respect of the risks insured hereunder, to the extent a Member, Co-assured or Affiliate is insured for pollution risks under any other insurance, cover hereunder shall be null, void and of no effect, up to the limits of said other insurance. Above the limits of said other insurance, cover under this insurance shall remain in effect, subject always to the limits herein which are applicable to such risks, to any deductible(s), and to the Rules of the Association. In the event the limits available under such other insurance are the same as or greater than the limits available for pollution losses under this insurance, then this insurance shall be null, void and of no effect with regard to such claims. In the event the limits of said other insurance are less than the limits available hereunder, this insurance shall respond up to the limits set forth herein for pollution losses, but only for the amount by which any such losses exceed the stated limits of such other insurance, and then only up to the limits set forth herein for pollution losses. This insurance shall respond only in excess of the stated limits of the other insurance, whether or not the full amount of such policy limits, or any amount at all, is recoverable thereunder.

35.    Unless otherwise limited to a lesser sum, the Association's aggregate liability arising under any one Member's entry shall not exceed

  1. in respect of liability to Passengers US$2,000,000,000 any one accident or occurrence; and
  2. in respect of liability to Passengers and Seamen US$3,000,000,000 any one accident or occurrence.
Provided always that:

Where there is more than one Member's entry in respect of the same insured vessel in the Association and/or as provided by any other insurer which participates in the Pooling Agreement

(a) the aggregate of claims in respect of liability to Passengers recoverable from the Association and/or such other insurers shall not exceed US$2,000,000,000 any accident or occurrence and the liability of the Association shall be limited to such proportion of that sum as the claims recoverable by such persons from the Association bear to aggregate of all such claims otherwise recoverable from the Association and all such other insurers;
 

(b) the aggregate of all claims in respect of liability to Passengers and Seamen recoverable from the Association and/or such other insurers shall not exceed US$3,000,000,000 any one accident or occurrence and the liability of the Association shall be limited:
(i) where claims in respect of liability to Passengers have been limited to US$2,000,000,000 in accordance with proviso (a) to such proportion of the balance of US$1,000,000,000 as the claims recoverable by such persons in respect of liability to Seamen bear to the aggregate of all such claims otherwise recoverable from the Association and all such other insurers; and

(ii) in all other cases, to such proportion of the US$3,000,000,000 as the claims recoverable by such persons in respect of liability to Passengers and Seamen bear to the aggregate of all such claims otherwise recoverable from the Association and all such other insurers.

36.    If liabilities to passengers arising under a non-war certificate issued by the Club in compliance with either Article IV of the Athens Convention Relating to the Carriage of Passengers and their Luggage by Sea, 1974 as amended by the Protocol thereto of 2002 or Regulation (EC) No.392/2009 of the European Parliament and of the Council of 23rd April 2009 on the liability of carriers of passengers by sea in the event of accidents ("Athens Convention/EU/EEA Passenger Liabilities") exceed or may exceed in the aggregate the limit of cover specified in Rule 1.4.35:

a. the Managers, in their absolute discretion, may defer payment of a Member's indemnity claim in respect of such Athens Convention/EU/EEA Passenger Liabilities or any part thereof until those liabilities or such part thereof as the Managers may decide have been discharged by the Member; and

b. if  and to the extent any such liabilities discharged by the Club exceed the said limit of cover, any payment by the Club in respect thereof shall be by way of loan and the Member agrees to indemnify the Club in respect of such payment

37.    The Association shall not be liable for any loss, damage or expense against which, but for the insurance herein provided, the Member, Co-assured or Affiliate would have been insured under any other existing insurance, except as set forth above in Rule 1.4.33; nor shall the Association provide prorated or allocated cover on the basis of double insurance or otherwise, except as set forth above in Rule 1.4.33; nor will this insurance replace any other insurance where (for whatever reason) that other insurance does not or is not able to respond to a claim thereunder.

 

Association Rights

38.   No act, omission, course of dealing, forbearance, delay or indulgence by the Association in enforcing any of the terms of the contract of insurance issued to the Member by the Association shall prejudice or affect the rights and remedies of the Association under the contract of insurance, and no such occurrence shall be treated as any evidence of waiver of the Association’s rights thereunder or result in any form of estoppel as to such rights and remedies, nor shall any waiver of a breach by the Member of such contract operate as a waiver or estoppel with respect to any subsequent breach thereof. The Association shall at all times and without notice be entitled to insist on the strict application and enforcement of all of the terms of the contract of insurance it issued to the Member.

Provision of Security

39.   The Association may, but shall in no case be obligated to, provide on behalf of a Member security to prevent the arrest or attachment or obtain the release from arrest or attachment or any other form of restraint or detention in respect of an vessel or the Member’s other property or assets or funds. Should the Association do so, the security shall be provided on such terms as the Managers in their absolute discretion deem appropriate, and the Member shall upon first demand made at any time by the Managers in writing arrange such countersecurity (which countersecurity may in the Managers’ absolute discretion include a deposit of cash with the Association) as the Managers may require, and (with or without such countersecurity having been required or arranged) the Member shall promptly indemnify the Association in consequence of any security provided by the Association.

40.   In the event that a Member does not arrange such countersecurity as may have been required or does not indemnify the Association as aforesaid, the Association, without prejudice to its other rights, shall be entitled to retain any and all amounts which would otherwise be recoverable by such Member, notwithstanding that the same may have no connection with the liability in respect of which the original security was provided and may relate to other periods of cover before or after that liability was incurred by the Member or to another insured vessel. The provision of security by the Association shall be without prejudice to the Association's possible declination of liability to the Member for the claim in question.

41.   Notwithstanding the foregoing, in no circumstances shall the Association be liable for the detention of an insured vessel or for any other detention or attachment of a Member’s funds or assets, or for any damage whatsoever caused to a Member by reason of the provision or non-provision of security of whatever kind.

Surveys and Operational Audits

42.   The Managers may at any time in their absolute discretion appoint a surveyor or such other person as they may think fit to inspect an insured vessel on behalf of the Association. The Member shall afford such facilities as may be required for such inspection, and shall comply with such recommendations as the Managers may make following such inspection.

43.    Notwithstanding anything contained in these Rules to the contrary, and unless and to the extent that the Managers shall otherwise agree, the failure by a Member to present a vessel for survey by such time and date as shall have been stipulated by the Managers shall have the effect of automatically terminating cover as from such time and date without further notice.

44.   By applying to enter or upon the entry or continuation of the entry of a vessel for insurance in the Association, an Applicant Member or Member as the case may be:

  1. Consents to and authorizes the disclosure by the Managers to any association which is a party to the Pooling Agreement any survey or inspection of such vessel undertaken on behalf of the Association either pursuant to an application for, or after entry in, the Association;
  2. Waives any rights or claims against the Association of whatsoever nature arising in respect of or relating to the contents of or opinions expressed in any survey or inspection so disclosed.

PROVIDED ALWAYS that

  1. Such survey or inspection may only be disclosed to another association when an application for entry of such vessel is made thereto; and
  2. The disclosure of the survey inspection shall be for the limited purpose only of that association considering an application to enter such vessel for insurance.

45.   Unless and to the extent that the Directors in their absolute discretion otherwise decide, a Member who commits any breach of his obligations referred to in Rule 1.4.41 above shall not be entitled, in relation to any casualty, event or matter occurring during the period of the breach, to any recovery from the Association in respect of any claim arising out of such casualty, event or matter.

46.   Moreover, in the event that a vessel shall, in the opinion of the Managers, have failed to pass survey, cover shall cease automatically with immediate effect without further notice. Cover may be reinstated subject to any special terms and conditions as the Managers may in their absolute discretion wish to impose. In the absence of such reinstatement, unless and to the extent that the Directors may in their absolute discretion otherwise decide, a Member shall not be entitled to any recovery from the Association for any claim of whatsoever nature and howsoever arising during the period in which such automatic cesser shall have taken effect.

47.   The Managers may at any time in their absolute discretion:

a. Appoint representatives to visit the Member’s offices or those of any party or parties having operational control of an insured vessel entered on behalf of that Member and/or attend on board such vessel at such time specified by the Managers to audit the Member’s management systems, including, but not limited to, interviewing all relevant personnel and reviewing all relevant documentation. The Member shall be under a duty to ensure full cooperation with such representatives, making all requested personnel, information and documentation available, and unless otherwise agreed in writing by the Managers, shall pay for the reasonable costs of such audits; and

b. Make recommendations as to the rectification of any deficiencies as may have been identified during the course of such a review either forthwith or within such time as may be specified by the Managers.

The Member shall inform the Managers immediately on completion of the implementation of any recommendations which the Managers shall have made and provide them with such evidence as the Managers deem fit as to the rectification and any deficiencies they shall have identified, provided always however that the Managers shall have the right to carry out re-audits at whatever time and in whatever circumstances they deem appropriate to verify the same.

In the event of any noncompliance with any of the provisions of this Section 4, Sub-Section 46, the Managers shall be empowered in their absolute discretion to:

– terminate the entry of any or all insured vessels entered by the Member from a time and date specified by notice in writing to the Member; or

– determine that there shall be no right to recover from the Association in respect of any liability, cost or expense during a period commencing from the time and date at which the Member ceases to be in compliance, or such other date as is specified in writing, until the Managers are satisfied that compliance has been achieved; or

– exclude cover for claims arising out of or contributed to by such noncompliance; or

– reduce any recovery from the Association to the extent that a claim has been contributed to by such noncompliance; or

– vary the terms and conditions of entry including, but not limited to, the terms of any or all insured vessels’ premium rating. PROVIDED ALWAYS that the Directors shall have power in their absolute discretion to admit in whole or in part any claim which may be excluded by reason of the foregoing. The exercise of their discretion by the Directors shall be final and conclusive for all purposes.

PROVIDED FURTHER that nothing in this Section 4, Sub-Section 46, or any action taken by the Association hereunder shall relieve the Member of his obligations with regard to those requirements in regard to classification and statutory regulation of the insured vessel as set out in Rule 1, Section 4, Sub-Section 14 of these Rules, or in regard to the maintenance and/or condition of the ship generally.

 

Adjudication of Differences and Disputes

48.   

a. If any difference or dispute shall arise between a Member and the Association and/or its agents (which shall include, without limitation, the Association's Manager and the Association's and the Manager's directors, officers and employees) concerning the construction of the Member's contract with the Association, or the insurance afforded by the Association under the contract, or any amount allegedly due from the Association to the Member, or any other difference or dispute, and the Member is dissatisfied with the Manager's final decision, the Member may submit a Notice of Appeal to the Association's Board of Directors asking it to adjudicate the difference or dispute. Such Notice of Appeal, if any, must be submitted by the Member through the Manager no later than sixty days after the Manager shall have provided its final decision to the Member regarding the difference or dispute.

b. The procedures for adjudication by the Directors, which are incorporated into this Rule, are stated in Appendix A to these Class I Rules.

c. No Member shall be entitled to maintain any action, suit or other legal proceedings against the Association and/or its agents upon any such difference or dispute unless and until the same has been appealed to the Association's Board of Directors and it shall have adjudicated the dispute and given its decision thereof. The Board of Directors' decision shall be made and published as soon as reasonably possible, but no more than six months after receipt of the last written submission permitted under Appendix A to these Class I Rules.

d. The decision of the Association's Board of Directors is intended to be final and binding. However, should the Member wish to appeal that decision, such appeal shall be brought only by suit against the Association in the United States District Court for the Southern District of New York and must be commenced no later than sixty days after the Board's decision has been provided to the Member.

Claims Against Members

 

49.   a The Member hereby submits to the jurisdiction of the United States District Court for the Southern District of New York in respect of any suit brought by the Association to recover any sums which the Association may consider to be due to it from the Member. b Provided always that, and without prejudice to the foregoing or the terms of Rule 1.4.50 below, the Association shall be entitled to commence and maintain in any jurisdiction whatsoever any action to recover any amounts which the Association may consider to be due to it from the Member. c The amounts due to the Association from a defaulting Member shall include, but not be limited to, unpaid premiums and assessments plus the Association's reasonable legal fees, collection expenses and other costs of recovering all amounts due from a Member or former Member plus interest at the rate specified in Rule 4, Section 11 of these Rules of Class I, or such higher or lower rate of interest as may be lawful in the jurisdiction in which the action is commenced.

Applicable Law

 

50.   The contract of insurance between the Association and a Member shall be governed by and construed in accordance with the law of the State of New York. This provision is not, in any way, to be construed as a waiver of any rights, claims or defenses available to the Association under any contract term, including, but not limited to, that part of the contract included in Rule 1.4.49.

Applicable Law

51.   The Association shall have a lien on the insured vessel under the contract of insurance and/or applicable law for all premium and all other sums of whatsoever nature due to it. Such lien shall extend to other insured vessels which are part of a fleet as defined in Rule 1.2 and shall be in addition to, and in no way may be construed as a waiver of, or amendment to, any other contractual or maritime lien which the Association may either expressly or impliedly possess in regard to the said insured vessel or vessels. Such lien shall apply notwithstanding that the cover of the Member in respect of any vessel insured by him with the Association may have ceased or been terminated.

Delegation

52.   Whenever any power, duty or discretion is conferred or imposed upon the Managers by virtue of the contract of insurance, such power, duty or discretion may, subject to any terms, conditions or restrictions contained in the contract, be exercised by any one or more of the Managers or by any servant or agent of the Managers to whom the same shall have been delegated or sub-delegated.

53.   Whenever any power, duty or discretion is stated in the contract of insurance to be vested in the Directors, such power, duty or discretion shall be exercisable by the Directors unless the same shall have been delegated to any Committee of the Directors or to the Managers in accordance with the provisions as regards delegation contained in the By-Laws, in which event the power, duty or discretion may be exercised by any person to whom the same shall have been so delegated.

Sanctions

54.   Notwithstanding and without prejudice to any other provision of these Rules or the Association's Charter or By-Laws or a Member's Certificate of Entry into the Association relating to the amendment of these Rules, these Rules may, on such notice as the Directors may in their absolute discretion decide, be amended at any time (including with effect from any time during the course of any current or future Insurance Year) in such fashion and to such extent as the Directors may in their absolute discretion determine is necessary as a result of the implementation of, or potential or proposed implementation of, any applicable change in legislation, regulation, prohibition, restriction, or requirement to obtain any license, consent, or authorization; or the potential or actual imposition of economic sanctions or penalties against the Association by any State, government, official body, regulatory or competent authority, international organization, or the like.

55.   Whenever coverage extended by the Association would be in violation of any law applicable to the Association including, but not limited to, the prohibitions and requirements of any economic, financial, or trade sanctions administered by any State or international or supranational organization, or would expose the Association to the risk of being or becoming subject to any sanction, prohibition, penalty or other adverse action in any form whatsoever by any State or international or supranational organization, such coverage shall be null, void and of no effect. Any coverage hereunder provided by the Association shall not include or, as the case may be, shall by operation of law or pursuant to this sub-section, cease or shall have ceased to include, coverage for, or with respect to, any prohibited or unlawful entity, cargo, subject matter, vessel, or activity under laws applicable to the Association, a Member, or an entered vessel, or any activity which could lead to the imposition of sanctions or penalties against the Association, a Member, or an entered vessel. Whenever coverage extended by the Association would be for any carriage, trade, voyage, or other activity that would violate economic sanctions laws applicable to the Member or an entered vessel, or that could lead to the imposition of sanctions or other penalties against a Member or an entered vessel under economic, financial or trade sanctions administered by any State or international or supranational organization, coverage shall not extend to or shall cease to extend to such carriage, trade, voyage or other activity and be null, void and of no effect. (See also, Class I, Rule 3, Section 1, subsection 4). In cases involving trade with or voyages to, from or within countries or territories subject to economic sanctions, to the extent permitted by applicable law(s) and these Rules, the Managers may, in their discretion, confirm the availability of cover only after disclosure by the Member to the Managers of all relevant facts and information concerning the subject carriage, trade, voyage, or other activity.

56.   Without prejudice to the generality of the provisions contained in Rule 3, Section 1.5 of these Rules of Class I, in the event that the Association is unable to recover from any reinsurer (such term to include, but not be limited to, any association party to the Pooling Agreement, or any reinsurer subscribing to the Group Excess Loss Contract, or any other of the Association's reinsurers whatsoever) such reinsurer's contributions to any claim, loss or expense to which such reinsurance may pertain, and for which the Association would otherwise be liable to the Member under these Rules, by reason of the said reinsurer being prohibited from making such payment to the Association under any economic, financial, or trade sanctions administered by any State, or international or supranational organization having jurisdiction over the said reinsurer, the liability of the Association for such claim, loss or expense shall be limited to that sum which the Association is itself lawfully permitted to pay and shall not extend to any amount which it is unable to recover from any reinsurer for the reasons set out above.

Members and Successors Bound by Rules

57.   A Member or other person by whom or on whose behalf an application is made for insurance or reinsurance by the Association shall be deemed to have agreed not only on his own behalf but also on behalf of his successors and each of them that both he and they will in every respect be subject to and bound by all of the provisions of the Member's contract of insurance with the Association.



Rule 2 - Risks and Losses Covered

Each Member of the Association shall be indemnified in connection with each vessel entered in the Association for Protection and Indemnity insurance against any loss, damage or expense which the Member shall become liable to pay and shall pay by reason of the fact that the Member is the owner (or operator, manager, charterer, mortgagee, trustee, receiver or agent, as the case may be) of the insured vessel, subject to the provisions of these Rules and to all the limitations herein stated or agreed to by the acceptance of the application for membership, or by the entry of the vessel, in the Association, and which shall result from the following liabilities, risks, events, occurrences and expenditures; provided that such liabilities, risks, events, occurrences and expenditures arise in respect of the Member’s interest in such vessel; and in connection with the operation of such vessel by or on behalf of the Member; and out of events occurring during the period of entry of such vessel.

SECTION 1 - LOSS OF LIFE, INJURY AND ILLNESS

  1. Liability for life salvage in respect of, or loss of life of, or personal injury to, or illness of, any person, (other than the persons specified in paragraphs B, C and D of this Section) and hospital, medical or funeral expenses incurred in relation to such injury, illness or death.
  2. Liability for life salvage in respect of, or loss of life of, or personal injury to, or illness of, any seaman and hospital, medical or funeral expenses incurred in relation to such injury, illness or death.
    1. Liability hereunder shall include liability arising ashore or afloat.
    2. For the purposes of this Rule 2, Section 1, B a seaman shall be defined as an employee of the Member:
      1. who is the master or a member of the crew of the insured vessel; or
      2. ho is on board the insured vessel with the intention of becoming a member of her crew; or
      3. who, in the event of the insured vessel being laid up and out of commission, is engaged in the upkeep, maintenance or watching of the insured vessel; or
      4. who is engaged by the insured vessel or its master to perform stevedoring work in connection with the insured vessel’s cargo at ports where contract stevedores are not readily available.

PROVIDED that:

  1. Where the liability arises, or the costs or expenses are incurred, under the terms of crew articles or other contract of service or employment and would not have arisen but for those terms, that liability shall not be covered by the Association unless and to the extent that those terms shall have been previously approved by the Managers in writing.
  2. There shall be no recovery in respect of liabilities, costs and expenses incurred by a Member in respect of the personal injury of a seaman under or pursuant to the terms of a contract of employment between the Member and that seaman, where that seaman has suffered injury while on leave, except where the claim on the Association is made under the entry of the last insured vessel on which the seaman served prior to suffering the injury.
  1. Liability for life salvage in respect of, or loss of life of, or personal injury to, or illness of, any person engaged to handle the cargo of an insured vessel and hospital, medical or funeral expenses incurred in relation to such injury, illness or death.
    1. Liability hereunder in connection with the handling of cargo for the insured vessel shall commence from the time of receipt by the Member of the cargo on dock or wharf, or on craft alongside, for loading, and shall continue until due delivery thereof to dock or wharf of discharge or until discharge from the insured vessel onto craft alongside;
    2. The Association shall not be liable for any loss, damage or expense sustained, directly or indirectly, by reason of any claim for loss of life, personal injury or illness in relation to the handling of cargo where such claim arises under a contract of indemnity between the Member and his subcontractor.
  1. Liability to pay damages or compensation
    1. for life salvage in respect of, or loss of life of, or personal injury to, or illness of, any passenger and hospital, medical or funeral expenses incurred in relation to such injury, illness or death;
    2. to passengers on board an entered ship arising as a consequence of a casualty to that ship, including the cost of forwarding passengers to destination or return to port of embarkation and of maintenance of passengers ashore;
    3. for loss of, or damage to, the effects of any passenger.

PROVIDED that:

  1. For the purposes of Rule 2, Section 1, D, 2 above a casualty shall be defined as an incident involving either:

  1. collision, stranding, explosion, fire or other cause affecting the physical condition of the insured vessel so as to render it incapable of safe navigation to its intended destination; or

  2. a threat to the life, health or safety of passengers.

  1. There shall be no recovery in respect of liabilities for personal injury or death, delay or any other consequential loss sustained by any passenger by reason of carriage by air, except where such liability occurs during repatriation by air of injured or sick passengers, or following a casualty to the insured vessel.

  2. There shall be no recovery from the Association in respect of the contractual liability of a Member to a passenger while on an excursion from the insured vessel in circumstances where either a separate contract has been entered into by the passenger for the excursion whether or not with the Member, or the Member has waived any or all of the Member’s rights of recourse against any subcontractor or other third party in respect of the excursion.

AND FURTHER PROVIDED that:

In the case of each and every head of cover, A, B, C and D as set out above in this Section 1, unless and to the extent that special cover has been agreed in writing by the Managers, there shall be no recovery from the Association in respect of claims relating to cash, negotiable instruments, precious or rare metals or stones, valuables or objects of a rare or precious nature

 

SECTION 2 - REPATRIATION AND SUBSTITUTE EXPENSES

Liability for expenses reasonably incurred in necessarily repatriating any member of the crew or any other person employed on board the insured vessel, or in necessarily sending a substitute to replace any member of the crew or any person employed on board the insured vessel: provided, however, that the Member shall not be entitled to recover any such expenses incurred by reason of the expiration of the shipping agreement, other than by sea perils, or by the voluntary termination of the agreement. Wages shall be recoverable hereunder only when payable under statutory obligation during unemployment due to the wreck or loss of the insured vessel.

Coverage under Section 2 shall include expenses incurred by the Member in discharging his obligations towards or making necessary arrangements for stowaways or refugees, but only if and to the extent that the Member is legally liable for the expenses or if they are incurred with the approval and agreement of the Association.

Coverage under Section 2 shall also include liability for loss of or damage to the effects of any seaman or any other person (other than passengers) provided that:

  1. Unless and to the extent that special cover has been agreed in  writing by the Managers, there shall be no recovery from the Association in respect of claims relating to cash, negotiable instruments, precious or rare metals or stones, valuables or objects of a rare or precious nature.
  2. Where the liability arises or the costs or expenses are incurred under the terms of a contract and would not have arisen but for those terms, that liability is not covered by the Association unless and to the extent that those terms shall have been previously approved by the Managers in writing.

SECTION 3 - COLLISION

Liability for loss or damage as set out in paragraphs 1, 2, and 3 below which arises from collision of the insured vessel with another ship or vessel, but only if and to the extent that such liability is not covered by the hull insurances of the insured vessel:

  1. one fourth, or such other proportion as may have been agreed, of the liabilities arising out of the collision other than those set out in paragraph 2 below;
  2. four-fourths of the liabilities arising out of the collision in consequence of, or in respect to:
    1. removal or disposal of obstructions, wrecks or their cargoes under statutory powers or otherwise pursuant to law;
    2. injury to real or personal property of every description;
    3. the discharge, spillage, emission or leakage of oil, petroleum products, chemicals or other substances of any kind or description whatsoever including, but not limited to, remuneration paid pursuant to the Special Compensation P & I Club (SCOPIC) Clause, or any revision thereof, in respect of the salvage of a ship or vessel with which the insured vessel is in collision;
    4. cargo or other property on the insured vessel;
    5. loss of life, personal injury or illness;
  3. that part of the Member’s liability arising out of the collision which exceeds the sums recoverable under the hull policies of the insured vessel solely by reason of the fact that the liability exceeds the hull insurance value.

PROVIDED always that:

  1. For the purpose of determining any sum recoverable under this Section 3, the Managers shall be entitled to determine the proper value at which the insured vessel should have been insured under the hull policies and the Association shall only be liable for the excess (if any) above the amount which would have been recoverable under the hull policies had the insured vessel been insured thereunder at such value. For the purpose of this Section 3 “proper value” is defined as an amount equal to the free, uncommitted market value of the insured vessel at the time of the collision.
  2. Coverage hereunder shall not extend to any liability, whether direct or indirect, in respect of the engagements of, or the detention or loss of time of, the insured vessel.
  3. Unless otherwise agreed in writing between the Member and the Association as a term of the vessel's entry in the Association, if both vessels are to blame, then where the liability of either or both of the vessels in collision becomes limited by law, claims under this Section shall be settled upon the principle of single liability.  In all other cases, claims under this Section shall be settled upon the principle of cross-liabilities, as if the owner of each vessel had been compelled to pay the owner of the other vessel such proportion of the latter's damages as may have been properly allowed in ascertaining the balance or sum payable by or to the Member in consequence of the collision.
  4. Where both vessels are insured vessels and are the property, in part or in whole, of the same owners or charterers, claims hereunder shall be settled on the basis of the principles set forth in the collision clauses contained in the hull policies of those insured vessels.
  5. Claims hereunder shall be separated among and take the identity of the several classes of liability for loss, damage and expense enumerated in this Rule and each class shall be subject to the deductions, inclusions, exclusions and special conditions applicable in respect to such class.
  6. Notwithstanding the foregoing, the Association shall not be liable for any claims hereunder where the various liabilities resulting from such collision, or any of them, have been compromised, settled or adjusted without the written consent of the Managers.
  7. In every case where the insured vessel is a tug, the hull policy thereof shall be deemed to be written on the American Institute Tug Form, August 1, 1976 and this Section 3 shall be deemed to incorporate the collision clause contained in the said policy and the following clause shall be substituted for and supersede Rule 3, Section 2.6 namely:

Loss of or damage to any vessel or vessels in tow and/or their cargoes, whether such loss or damage occurs before, during or after actual towage; provided, that this exception shall not apply to claims under Section 1 of Rule 2.

SECTION 4 - DAMAGE CAUSED OTHERWISE THAN BY COLLISION

Liability for loss of or damage to any other vessel or craft, or to property on board such other vessel or craft, caused otherwise than by collision of the insured vessel with another vessel or craft.

Where such other vessel or craft or property on board such other vessel or craft belongs to the Member, claims hereunder shall be adjusted as if it belonged to a third person; provided, however, that if such vessel, craft or property be insured, the Association shall be liable hereunder only insofar as the loss or damage, but for the insurance herein provided, is not or would not be recoverable by the Member under such other insurance.

SECTION 5 - DAMAGE TO DOCKS, BUOYS, ETC

Liability for loss of or damage to any dock, pier, jetty, bridge, harbor, breakwater, structure, beacon, buoy, lighthouse, cable, or to any fixed or movable object or property whatsoever, including infringement of rights, except another vessel or craft or property on another vessel or craft, or to property on the insured vessel other than to the extent that such property is covered under section 6 below or elsewhere herein.

Where any such object or property belongs to the Member, claims hereunder shall be adjusted as if it belonged to a third person; provided, however, that if such object or property be insured, the Association shall be liable hereunder only insofar as the damage, but for the insurance herein provided, is not or would not be recoverable by the Member under such other insurance.

SECTION 6 - PROPERTY ON BOARD THE INSURED VESSEL

Liability for loss of or damage to any containers, equipment, fuel or other property on board the insured vessel, other than to the extent that such property is elsewhere covered herein;

PROVIDED that:

 

  1. there is no cover under this section for loss of or damage to any property which forms part of the insured vessel which is owned or leased by the Member or by any company associated with or under the same management as the Member; and

 

  1.  unless the Member has obtained appropriate special cover by agreement with the Managers in writing, there is no cover under this section where any liability arises under a contract or indemnity entered into by him and would not have arisen but for such a contract or indemnity.

SECTION 7 - LIABILITY IN RESPECT OF WRECKS

Liability for costs or expenses relating to

  1. the raising, removal, destruction, lighting or marking of the wreck of an insured vessel, when such raising, removal, destruction, lighting or marking is compulsory by law or the costs thereof are legally recoverable from the Member.
  2. the raising, removal, destruction of any property (other than oil or other substance within the scope of Rule 2, Section 13) being carried or having been carried on an insured vessel, when such raising, removal or destruction is compulsory by law or the costs thereof are legally recoverable from the Member but only if and to the extent that such property does not form part of the insured vessel and is not owned or leased by the Member or by any company affiliated with the Member, and the Member is unable to recover such costs and expenses from the owner or insurer of such property, or from any other party.
  3. any such raising, removal or destruction of the wreck of an insured vessel or any property as is referred to in paragraphs A and B of this section, or any attempt thereat.
  4. the presence or involuntary shifting of the wreck of an insured vessel or as a result of the Member’s failure to remove, destroy, light or mark such wreck, including liability arising from the discharge or escape from such wreck of oil or any such substance.

PROVIDED that:

  1. The insured vessel became a wreck as a result of a casualty or event occurring during the period of that vessel’s entry in the Association, in which case the Association shall continue to be liable for the claim notwithstanding that in other respects the liability of the Association shall have terminated pursuant to Rule 5, Section 1(1)(b).
  2. In respect of a claim under paragraph A of this Section, the value of all stores and materials saved, as well as the wreck itself, shall first be deducted from such costs or expenses and only the balance thereof, if any, shall be recoverable from the Association.
  3. Nothing shall be recoverable from the Association under this Section if the Member shall, without the consent of the Managers in writing, have transferred his interest in the wreck otherwise than by abandonment, prior to the raising, removal, destruction, lighting or marking of the wreck or prior to the incident giving rise to the liabilities, costs and expenses referred to in this Section.
  4. Where the liability arises or the costs or expenses are incurred under the terms of a contract and would not have arisen but for those terms, that liability is not covered by the Association unless and to the extent that those terms shall have been previously approved by the Managers in writing.
  5. The Association shall not be liable for any costs or expenses of a type, character or kind which would be covered by the hull insurance of the insured vessel.
  6. In the event that the wreck of the insured vessel is upon property owned, leased, rented or otherwise occupied by the Member, the Association shall be liable for any liability or removal of the wreck which would be imposed upon the Member by law in the absence of contract if the wreck had been upon property belonging to another, but only for the excess over any amount recoverable under any other insurance applicable thereto.

SECTION 8 - CARGO

Liabilities and costs set out in subsections 1 to 4 below when and to the extent that they relate to cargo intended to be or being or having been carried in an insured vessel.

  1. Loss, Shortage, Damage or Other Responsibility

Liability for loss, shortage, damage or other responsibility arising out of any breach by the Member, or by any person for whose acts, neglect or default he may be legally liable, of his obligation properly to load, handle, stow, carry, keep, care for, discharge or deliver the cargo or out of unseaworthiness or unfitness of the insured vessel.

  1. Disposing of Damaged Cargo

The additional costs (over and above those which would have been incurred if the cargo had not been damaged) incurred by the Member in discharging or disposing of damaged cargo, but only if and to the extent that the Member has no recourse to recover those costs from any other party.

Provided always that where the said additional costs claimed represent the daily running costs of the insured vessel, such costs shall not be payable save to the extent that the Directors, in their absolute discretion, shall otherwise determine.

  1. Failure of Consignee to Remove Cargo

The liabilities and additional costs (over and above the costs which would have been incurred by him if the cargo had been collected or removed) incurred by a Member solely by reason of the total failure of a consignee to collect or remove cargo at the port of discharge or place of delivery, but only if and to the extent that such liabilities or costs exceed the proceeds of sale of the cargo and the Member has no recourse to recover those liabilities or costs from any other party.

  1. Through or Transhipment Bills of Lading

Liability for loss, shortage, damage or other responsibility in respect of cargo carried by a means of transport other than the insured vessel, when the liability arises under a through or transshipment bill of lading, or other form of contract, providing for carriage partly to be performed by the insured vessel.

Provided always that:

  1. Standard Terms of Carriage

Unless and to the extent that the Directors in their discretion otherwise decide, or special cover has been agreed in writing by the Managers, there shall be no recovery from the Association in respect of liabilities which would not have been incurred or sums which would not have been payable by the Member if the cargo (including cargo on deck) had been carried on terms no less favorable to the Member than the Hague Visby Rules or the U.S. Carriage of Goods by Sea Act and/or such other rules and/or conventions as the Directors may from time to time determine.

  1. Deviation

Unless and to the extent that the Directors in their discretion otherwise decide, or cover has been confirmed in writing by the Managers prior to the deviation, there shall be no recovery from the Association in respect of liabilities, costs or expenses which arise out of or which are incurred as a consequence of a deviation, in the sense of a departure from the contractually agreed voyage or adventure which deprives the Member of the right to rely on defenses or rights of limitation of liability which would otherwise have been available to him on the basis of the standard terms of carriage referred to in proviso (a) above to reduce or eliminate his liability.

  1. Claims Payable Only at the Discretion of the Directors

Unless and to the extent that the Directors in their discretion otherwise decide there shall be no recovery from the Association in respect of liabilities, costs or expenses arising out of:

  1. discharge of cargo at a port or place other than the port or place provided in the contract of carriage;
  2. delivery of cargo carried under a negotiable bill of lading or similar document of title without production of that bill of lading or document by the person to whom delivery is made, except where cargo has been carried in the insured vessel under the terms of a non-negotiable bill of lading, waybill or other non-negotiable document, and has been properly delivered as required by that document, notwithstanding that the owner of that insured vessel may be liable under the terms of a negotiable bill of lading or other similar document of title issued by or on behalf of a party other than that owner providing for carriage partly by a means of transport other than the insured vessel;
  3. the issue of an antedated or postdated bill of lading, waybill or other document containing or evidencing the contract of carriage, that is to say a bill of lading, waybill or other document recording the loading or shipment or receipt for shipment on a date prior or subsequent to the date on which the cargo was in fact loaded, shipped or received as the case may be;
  4. a bill of lading, waybill or other document containing or evidencing the contract of carriage, issued with the knowledge of the Member or the master of the insured vessel with an incorrect description of the cargo or its quantity or its condition;
  5. either the failure to arrive or late arrival of an insured vessel at a port of loading, or the failure to load any particular cargo or cargoes in an insured vessel other than liabilities, loss and expenses arising under a bill of lading already issued.
  1. Ad Valorem Bills of Lading

Unless and to the extent that special cover has been agreed in writing by the Managers, the Association shall not be liable for payments to cargo claimants of amounts exceeding whichever is the higher of $2,500 per unit, piece or package or the limitation per unit, piece or package specified in the standard terms of carriage, in respect of shipments of goods carried under an ad valorem bill of lading, waybill or other document containing or evidencing the contract of carriage in which the value of the relevant unit, piece or package has been stated to be in excess of $2,500.

  1. Rare or Valuable Cargo

Unless and to the extent that special cover has been agreed in writing by the Managers, there shall be no recovery from the Association in respect of claims relating to the carriage of specie, bullion, precious or rare metals or stones, plate or other objects of a rare or precious nature, bank notes or other forms or currency, bonds or other negotiable instruments.

  1. Property of the Member

In the event that any cargo lost or damaged on board the insured vessel shall be the property of the Member, such Member shall be entitled to recover from the Association the same amount as would have been recoverable from him if the cargo had belonged to a third party and that third party had concluded a contract of carriage of the cargo with the Member on the terms of the Association’s recommended standard terms of carriage.

SECTION 9 - FINES AND PENALTIES

Liability for fines and penalties imposed by any court, tribunal or authority for:

  1. short- or over-delivery of cargo, or failure to comply with regulations concerning the declaration of goods, or documentation of cargo, provided that the Member is insured by the Association for liability in respect of cargo and subject always to the provisions of these Rules generally and/or the Member’s terms of entry in respect of such cargo cover;
  2. breach of any immigration law or regulation, provided that such breach is unknown to the Member;
  3. the accidental escape or discharge of oil or any other substance from an insured vessel, provided that the Member is insured for pollution liability by the Association, and subject to the applicable limit of liability under the Rules of the Association and/or the terms of entry;
  4. smuggling by the master or members of the crew, provided that the Member upon becoming aware of such activity immediately notifies the Managers. All other fines and penalties will be recoverable only under Rule 2, Section 20, provided that:
    1. the Member has satisfied the Directors that it took such steps as appear to them to be reasonable to avoid the event giving rise to the fine or penalty; and
    2. any amount claimed in respect of such fines shall be recoverable to such extent as the Directors in their absolute discretion may determine without having to give any reason for their decision.

Coverage under Section 9 hereunder also extends to confiscation of an insured vessel by a legally empowered court, tribunal or authority for breach of any customs law or regulation, provided that:

  • recovery shall be limited to the market value of the insured vessel, free of commitment at the time of confiscation;
  • no claim shall be considered in respect of any confiscation which has not remained in effect for a continuous period of 183 days from such time as the Member shall have notified the Managers in writing of the confiscation, and if at any time before or after the expiry of the said period terms become available for the return of the insured vessel on payment of a monetary penalty, the Managers may require the Member to accept such terms and make the necessary payment which alone shall then be the subject of recovery from the Association;
  • the Directors in their sole discretion may refuse recovery to any extent whatever in respect of confiscation in circumstances regarded by the Directors as involving any element of fault or privity on the part of the Member.

 

SECTION 10 - MUTINY, MISCONDUCT

Liability for expenses incurred in resisting any unfounded claim by a seaman or other person employed on board the insured vessel, or in prosecuting such person or persons in case of mutiny or other misconduct; not including, however, costs of successfully defending claims elsewhere protected in this Rule.


 

SECTION 11 - QUARANTINE EXPENSES

Liability for extraordinary expenses, incurred in consequence of the outbreak of any disease on the insured vessel, for disinfection of the vessel or of persons on board, or for quarantine expenses, not being the ordinary expenses of loading or discharging, nor the ordinary wages or provisions of crew or passengers, provided, however, that no liability shall exist hereunder if the insured vessel be ordered to proceed to a port where it is known that she will be subjected to quarantine.


 

SECTION 12 - DIVERSION EXPENSES

Liability for expenses incurred solely for the purpose of putting in to land an injured or sick seaman or passenger, or for putting in to land stowaways or refugees or for saving life at sea; and the net loss to the Member in respect of bunkers, insurance, stores and provisions as the result of the diversion.

 

SECTION 13 - UNRECOVERABLE GENERAL AVERAGE CONTRIBUTIONS

General average (excluding ship’s sacrifice items), special charges or salvage chargeable to any other party to the marine adventure for which the Member may become liable or be unable to recover from such party solely by reason of a breach of the contract of carriage, provided that:

  1. the Member shall have notified the Managers in writing within twelve months both of the casualty out of which a claim under this Section 12 might arise, and of the reference of the matter to adjusters; and
  2. the provisos in Section 8 above shall apply to recovery under this Section 13; and
  3. he Member shall have obtained adequate general average security in the absence of which recovery from the Association will be available if, and only to the extent that, the Member can establish that, at the time of delivery of the cargo, he neither knew nor ought to have known that there had been an occurrence of a general average nature during the voyage, or if, and only to the extent that, the Directors, in their absolute discretion, shall otherwise determine.

SECTION 14 - DISCHARGE OF OIL OR OTHER SUBSTANCE

Liabilities, costs and expenses that are the result of the discharge or escape of oil or any other polluting substance, or the threat of such discharge or escape, from an insured vessel, namely:

  1. Liability for loss, damage or contamination;
  2. Liability of the Member as a party to any voluntary agreement previously approved by the Managers in writing, and the costs and expenses incurred by the Member in performing his obligations under such agreement;
  3. The costs of measures reasonably taken (or taken in compliance with any order or direction given by any government or authority) for the purpose of avoiding the threat of or minimizing pollution, and liability incurred as a result of such measures;
  4. Liability to pay special compensation to a salvor of an insured vessel in respect of work done or measures taken to prevent or minimize damage to the environment, but only to the extent that such liability is imposed on the Member pursuant to Article 14 of the International Convention on Salvage, 1989, or is assumed by the Member under the terms of a standard form of salvage agreement approved by the Managers, or the Lloyd’s Standard Form of Salvage Agreement (LOF 1995) and subsequent amendments thereto.

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.

  1. Liability, costs and expenses of the Member assumed in respect of an insured vessel which is a “Relevant Ship” as defined in the Small Tanker Owners Pollution Indemnification Agreement 2006 (STOPIA 2006) (as ammended).  A Member who has insurance in respect of such vessel shall, by virtue of entry with and through the agency of the Association, and unless the managers otherwise agree in writing, become a party to STOPIA 2006 (as amended) for the period of entry of such vessel in the Association.  In the event that the Member exercises his rights under STOPIA 2006 (as amended) to withdraw from that agreement, and unless the Managers have agreed in writing, or unless the Directors otherwise determine, there shall be no cover under this Rule 2, Section 13 in respect of such vessel so long as the Member is not a party to STOPIA 2006 (as amended).
  2. Liability, costs and expenses of the Member assumed in respect of an insured vessel which is a “Relevant Ship” as defined in the Tanker Owners Pollution Indemnification Agreement 2006 (TOPIA 2006) (as ammended).  A Member who has insurance in respect of such vessel shall, by virtue of entry with and through the agency of the Association, and unless the managers otherwise agree in writing, become a party to TOPIA 2006 (as ammended) for the period of entry of such vessel in the Association.  In the event that the Member exercises his rights under TOPIA 2006 (as ammended) to withdraw from that agreement, and unless the Managers have agreed in writing, or unless the Directors otherwise determine, there shall be no cover under this Rule 2, Section 13 in respect of such vessel so long as the Member is not a party to TOPIA 2006 (as ammended) .

 

SECTION 15 - SHIP'S PROPORTION OF GENERAL AVERAGE

The insured vessel’s proportion of general average, special charges or salvage not recoverable under the hull policies by reason of the value of the ship being assessed for contribution to general average or salvage at a sound value in excess of the insured value under the hull policies.

Provided always that for the purpose of determining any sum recoverable under this Section 14, the Managers shall be entitled to determine the proper value at which the insured vessel should have been insured under the hull policies and the Association shall only be liable for the excess (if any) above the amount which would have been recoverable under the hull policies had the insured vessel been insured thereunder at such value. For the purpose of this Section 14, “proper value” is defined as an amount equal to the free, uncommitted market value of the insured vessel at the time of the incident giving rise to the general average, special charges or salvage.

 

SECTION 16 - OFFICIAL INQUIRIES

Costs and expenses incurred by a Member in defending himself or in protecting his interests before an official inquiry into the loss of an insured vessel or into a casualty involving an insured vessel but only to the extent and on such conditions as the Managers in their sole discretion may determine.

 

SECTION 17 - SUE AND LABOR AND LEGAL COSTS

Extraordinary costs and expenses reasonably incurred after any casualty for the purpose of avoiding or minimizing any liabilities, costs or expenses against which the Member is insured by the Association.

Legal costs and expenses relating to any liabilities, costs or expenses against which the Member is insured by the Association, but only to the extent that such legal costs and expenses have been incurred with the prior approval of the Managers in writing or to the extent and on such conditions as the Directors in their sole discretion may determine.

SECTION 18 - EXPENSES OF INVESTIGATION AND DEFENSE

Liability for costs, charges and expenses reasonably incurred and paid by the Member in connection with any liability insured under this Rule, subject, however, to the same deduction that would be applicable by the terms of entry to the liability defended; provided that if any liability is incurred and paid by the Member as aforesaid, the deduction shall be applied to the aggregate of the claim and expenses; and provided further that the Member shall not be entitled to indemnity for expenses unless they were incurred with the approval in writing of the Managers, or the Managers shall be satisfied that such approval could not have been obtained under the circumstances without unreasonable delay, or that the expenses were reasonably and properly incurred; and provided further that any suggestion or approval of counsel, or any incurring of expenses in connection with liabilities not insured under this Rule, shall not be deemed an admission of the Association’s liability.

It is understood and agreed that the Managers may undertake the investigation of any occurrence which might develop into a claim against the Member, and may undertake the investigation and defense of any claim made against the Member with respect to which the Member shall be or may claim to be insured by the Association, and that during such investigation and/or defense the Association may incur expenses, which expenses shall be for the account of the Member, and such investigation and/or defense shall not be considered as an admission of the Association’s liability for such claim or expenses, and the liability of the Association to the Member for any loss, damage or expense shall not be affected by any acts of the Association prior to formal presentation to the Association of the Member’s claim for reimbursement or indemnity.

 
SECTION 19 - EXPENSES INCURRED UNDER AUTHORIZATION OF THE MANAGERS
 
Expenses which the Member may incur under special written authorization of the Managers of the Association in cases in which the Managers decide that it is in the interests of the Association that the direction be given.

 

SECTION 20 - 'OMNIBUS' CLAUSE

Liability for costs and expenses not expressly excluded elsewhere in these Rules, incidental to the business of owning, operating or managing ships which the Directors, in their sole discretion, shall consider to fall within the scope of the insurance protection afforded by the Association under these Rules.



Rule 3 - Risks and Losses Excluded

SECTION 1 - RISKS EXCLUDED

Notwithstanding anything to the contrary contained in these Rules of Class I, there shall be no right of recovery from the Association in respect of any liabilities, costs or expenses, whether or not a contributory cause of their being incurred was any neglect on the part of a Member, Co-assured or Affiliate or any of their servants or agents, when the incident giving rise to the liability, cost or expense was caused by the following:

War Risks

  1.  
  1. War, civil war, revolution, rebellion, insurrection or civil strife arising therefrom, or any hostile act by or against a belligerent power or any act of terrorism;
  2. Capture, seizure, arrest, restraint or detainment (barratry and piracy excepted) and the consequences thereof or any attempt thereat;
  3. Mines, torpedoes, bombs, rockets, shells, explosives or similar weapons or devices, provided that this exclusion shall not apply to any liabilities, costs or expenses which arise solely by reason of
  1. the transport of any such weapons whether on board the insured vessel or not, or
  2. the use of any such weapons, either as a result of government order or through compliance with a written direction given by the Association where the reason for such use was the avoidance or mitigation of liabilities, costs or expenses which would otherwise have fallen within the cover given by the Association.

AND PROVIDED ALWAYS that the exclusions in this Section 1, Sub-Section 1 shall not apply to any liabilities, costs or expenses insofar only as they are discharged by the Association on behalf of a Member pursuant to a demand made under:

  • a guarantee or other undertaking given by the Association to the Federal Maritime Commission under Section 2 of US Public Law 89-777, or
  • a certificate issued by the Association in compliance with Article VII of the International Conventions on Civil Liability for Oil Pollution Damage 1969 or 1992 or any amendments thereto, or
  • an undertaking given by the Association to the International Oil Pollution Compensation Fund 1992 in connection with the Small Tanker Oil Pollution Indemnification Agreement (STOPIA 2006),
  • a non-war certificate issued by the Association in compliance with either Article IV bis of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002 and Guidelines for its implementation or Regulation (EC) No. 392/2009 of the European Parliament and of the Council which gives effect thereto, or
  • a certificate issued by the Association in compliance with Article 7 of the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001, or
  • an undertaking given by the Association to the International Oil Pollution Compensation Fund 1992 in connection with the Small Tanker Oil Pollution Indemnification Agreement 2006 (STOPIA 2006) (as amended), or except where such liabilities, costs or expenses arise from or are caused by an act of terrorism, the Tanker Oil Pollution Indemnification Agreement 2006 (TOPIA 2006) (as amended), or
  • a certificate issued by the Association in compliance with Article 12 of the International Convention on the Removal of Wrecks, 2007,
to the extent that such liabilities, costs and expenses are not recovered by the Member under any other policy of insurance or extension to the cover provided by the Association. Where any such guarantee, undertaking or certificate is provided by the Association on behalf of a Member as guarantor or otherwise, the Member agrees that any payment by the Association thereunder in discharge of the said liabilities, costs and expenses shall, to the extent of any amount recovered under any other policy of insurance or extension to the cover provided by the Association, be deemed to be by way of loan and that there shall be assigned to the Association all the rights of the Member under any such other insurance and against any third party.

AND FURTHER PROVIDED ALWAYS THAT:

The Directors may resolve that special cover be provided to Members against any or all of the risks set out in Rule 2 of these Rules of Class I, notwithstanding that the liabilities, costs or expenses arising from such risks would otherwise be excluded by this Rule 3.1.1. Such special cover where provided may be limited to such sum or sums and be subject to such terms and conditions as the Directors may from time to time in their absolute discretion determine.

In the event of any dispute as to whether or not any act constitutes an act of terrorism, the decision of the Directors shall be final.

Nuclear Risks

  1. Ionizing radiations from or contamination by radioactivity from any nuclear fuel or from any nuclear waste or from the combustion of nuclear fuel; the radioactive, toxic, explosive or other hazardous or contaminating properties of any nuclear installation, reactor or other nuclear assembly or nuclear component thereof; or any weapons or devices employing atomic or nuclear fission and/or fusion or other like reaction of radioactive force or matter.

Provided always that this Rule 3.1.2 shall not apply to liabilities, losses, costs or expenses arising out of or in consequence of the emission of ionizing radiations from, or the toxic, explosive or other hazardous properties of:

  1. isotopes prepared for use for industrial, commercial, agricultural, medical or scientific purposes;
  2. natural uranium; or
  3. depleted uranium,
     

being carried as cargo in an insured vessel, and such further exceptions as the Managers may approve.

Blockade Running, Unlawful Trade etc.

  1. An insured vessel carrying contraband, blockade running or being employed in an unlawful trade or if the Managers, in their absolute discretion, shall be of the opinion that the carriage, trade or voyage was imprudent, unsafe, unduly hazardous or improper.

 

Preclusion of/exclusion from cover of certain voyages involving Iran and other countries subject to US economic sanctions

  1. Notwithstanding anything to the contrary contained in these Rules or in the Association’s Charter or By-Laws or in a Member’s Certificate of Entry into the Association, and until and unless authorized by the Directors through any subsequent amendment of the Association’s Rules, coverage hereunder shall not include or, as the case may be, shall terminate and cease to include, any voyage or service to, from or within Iran and other countries or territories subject to economic sanctions, including in the territorial waters of Iran and other countries subject to sanctions, of any vessel otherwise insured hereunder if such voyage and/or service is an activity by the Member that violates or could violate applicable US economic sanctions laws or is a trade, carriage or activity that could cause the imposition of US sanctions against the Member or an entered vessel. (See also, Class 1, Rule 1, Section 4, subsection 55, which, inter alia, excludes cover where extension of cover would be prohibited by economic sanctions laws applicable to the Association) In cases involving trade with or voyages to, from or within Iran and other countries or territories subject to US economic sanctions, to the extent permitted by applicable law(s) and these Rules, the Managers may, in their discretion, confirm the availability of cover only after disclosure by the Member to the Managers of all relevant facts and information concerning the subject carriage, trade, voyage, or other activity.
 

Preclusion/exclusion of cover where reinsurers are subject to economic sanctions, prohibitions or the imposition of sanctions

  1. Notwithstanding anything to the contrary contained in these Rules or in the Association’s Charter or By-Laws or in a Member's Certificate of Entry into the Association, there shall be no cover for any liability, cost or expense to the extent that such liability, cost or expense is not recoverable from the Association's reinsurers (such term to include, but not be limited to, any association party to the Pooling Agreement, or any reinsurer subscribing to the Group Excess Loss Contract, or any other of the Association’s reinsurers whatsoever) by reason of the fact that the provision of cover, the payment of any claim or the provision of any benefit in respect of such liability, cost and expense is prohibited by applicable economic sanctions laws or the same would expose the said reinsurer to economic, financial or trade sanctions administered by any State, or international or supranational organization having jurisdiction over the said reinsurer.

 

SECTION 2 - LOSSES EXCLUDED

Save to the extent as may be expressly agreed in writing between a Member and the Managers, and notwithstanding anything to the contrary contained in these Rules of Class I, there shall be no right of recovery from the Association in respect of any loss, damage or expense a Member may have sustained, directly or indirectly, by reason of:

Hull Damage etc. to the Insured Vessel

  1. Loss of, or damage to, the insured vessel or any part thereof.
  2. Loss of, or damage to, any equipment on board the insured vessel or to any containers, lashings, stores or fuel thereon, to the extent that the same are owned or leased by a Member or by any party associated with or under the same management as the Member.
  3. The cost of repairs to the insured vessel or any charges or expenses in connection therewith.

Cancellation of Contracts, Loss of Hire etc.

  1. Cancellation or breach of any charter or contract, detention of an insured vessel, bad debts, insolvency, fraud of agents, loss of freight, passage money, hire, demurrage or any other loss of revenue incurred by a Member in respect of any vessel insured by the Member;

Provided always that where any loss of hire or freight forms part of a claim in respect of cargo covered under Rule 2.7 or is, with the consent of the Managers, included in the settlement of such a claim, such loss of hire or freight may be recoverable from the Association notwithstanding the terms of this Rule 3.2.4.

Sums Insurable Under Hull Policies

  1. Any loss, damage, sacrifice or expense of a type, character or kind which would be fully payable without deductible under the terms of a policy written on the American Institute Hull Clauses (June 2, 1977) Form and a policy written on the American Institute Increased Value and Excess Liabilities Clauses (November 3, 1977) Form, or other equally wide form of insurance, whether or not the insured vessel is fully covered under such policies by insurance and excess insurance sufficient in amount to pay in full and without limit all such loss, damage, sacrifice or expense.

Towage by an Insured Vessel

  1. Loss of or damage to, or wreck removal of, a vessel or other floating structure towed by an insured vessel or the cargo or other property on such tow (together with costs and expenses associated therewith), save insofar as either:
    • the towage or attempt thereat is made for the purpose of saving or attempting to save life or property at sea; or
    • the insured vessel is towing under a contract, or in other circumstances, approved by the Managers, and provided always that this exclusion shall not apply to claims covered under Rule 2.1.

Towage of an Insured Vessel

  1. Liabilities, costs and expenses incurred under or pursuant to the terms of a contract for the towage of an insured vessel other than
    1. a contract entered into for the purpose of entering or leaving port, or maneuvering within the port, during the ordinary course of trading; or
    2. a contract entered into in the ordinary course of trading of the insured vessel, being a vessel which is habitually towed from port to port or from place to place provided always that
      1. such liabilities, costs and expenses shall only be recoverable to the extent that a Member is not insured against such liabilities, costs and expenses under the hull policies on the insured vessel; and
      2. the insured vessel has been insured with the Association on such basis; or
    3. towage under Lloyd’s Open Form of Salvage Agreement (1980, 1990 or 1995, whether or not incorporating SCOPIC) or any other form of salvage contract approved by the Managers; or
    4. a contract incorporating a term to the effect that the Member and the owner of the towing vessel shall each be responsible for any loss or damage to his own vessel, and for loss of life or personal injury on his own vessel, without any recourse whatsoever against the other.
       

Contracts and Indemnities

  1. Liabilities, costs and expenses which would not have arisen but for the terms of a contract or indemnity entered into by a Member, unless those terms have been expressly approved in writing by the Managers.

Specialist Operations

  1. Any liabilities, costs and expenses incurred by the Member during the course of performing specialist operations including but not limited to dredging, blasting, pile-driving, well stimulation, cable or pipelaying, construction, installation or maintenance work, core sampling, depositing of spoil, professional oil spill response or professional oil spill response training (but excluding firefighting), to the extent that such liabilities, costs and expenses arise as a consequence of:
  1. claims brought by any party for whose benefit the work has been performed, or by any third party (whether connected with any party for whose benefit the work has been performed or not), in respect of the specialist nature of the operations; or
  2. the failure to perform such specialist operations by the Member or the fitness for purpose and quality of the Member’s work, products or services, including any defect in the Member’s work, products or services; or
  3. any loss or damage to the contract work.

Provided that this subsection 7 shall not apply to liabilities, costs and expenses incurred by the Member in respect of:

  • loss of life, injury or illness of crew and other personnel on board the insured vessel; or
  • the wreck removal of the insured vessel; or
  • oil pollution emanating from the insured vessel; but only to the extent that such liabilities are covered under Sections 1 through 19 of Rule 2 of these Rules.

Willful Misconduct

  1. Claims arising in circumstances where there has been willful misconduct on the part of the Member, defined as an act intentionally done, or a deliberate omission, by the Member with knowledge that the performance or omission will probably result in injury, or an act done or omitted in such a way as to allow an inference of a reckless disregard of the probable consequences.

Drilling and/or Production Operations

  1. Liabilities, costs and expenses incurred in respect of a drilling vessel or barge or any other vessel or barge employed to carry out drilling or production operations in connection with oil or gas exploration or production, including any accommodation unit moored or positioned on site as an integral part of any such operations, to the extent that such liabilities, costs or expenses arise out of or during drilling or production operations.

Waste Disposal and Sub-Sea Activities

  1. Liabilities, costs and expenses incurred by a Member in connection with any claim brought against such Member arising out of waste incineration or disposal operations carried out by the insured vessel (other than any such operations carried out as an incidental part of other commercial activities) or the operation by the Member of submarines, mini-submarines or diving bells or the activities of professional or commercial divers where the Member is responsible for such activities.

Refugees

  1. Consequential loss of profit or depreciation arising from the rescue of refugees.

 

Salvage of an Insured Vessel

  1. Salvage of an insured vessel or services in the nature of salvage provided to an insured vessel and any costs and expenses in connection therewith other than such liabilities, costs or expenses as may arise by reason of life salvage, or costs and expenses under any of the following:

    Article 14 of the International Convention on Salvage 1989; or

    Article 14 of the International Convention on Salvage 1989 as incorporated into Lloyd’s Open Form of Salvage Agreement (1980, 1990 or 1995) or into any other salvage contract approved by the Managers; or

    cargo’s contribution to general average payable by the Member solely by reason of a breach of the contract of carriage.

Salvage by an Insured Vessel

  1. Liabilities, costs and expenses arising out of salvage operations, including, for the purpose
    of this Sub-Section 15, wreck removal, conducted by an insured vessel or provided by the Member, other than
    1. liabilities, costs and expenses arising out of salvage operations, including, for the purpose
      of this Sub-Section 15, wreck removal, conducted by an insured vessel for the purpose of saving or attempting to save life at sea; and
    2. liabilities, costs and expenses incurred by the Member (being a professional salvor) which are covered by a special agreement between the Member and the Association.

Non-Marine Personnel

  1. Liabilities, costs and expenses incurred by a Member in respect of any of the following:

 

  1. personnel (other than seamen) on board the insured vessel (being an accommodation vessel) employed otherwise than by the Member where there has not been a contractual allocation of risks as between the Member and the employer of the personnel which has previously been approved by the Managers in writing;
  2. hotel and restaurant guests and other visitors and catering staff of the insured vessel when the insured vessel is moored (otherwise than on a temporary basis) and is open to the public as a hotel, restaurant, bar or other place of entertainment.

Heavy Lifts

  1. Loss of or damage to, or wreck removal of, cargo carried on a semi-submersible heavy lift vessel or any other vessel designed exclusively for the carriage of heavy lift cargo, save to the extent that such cargo is being carried under the terms of a contract on Heavycon terms or any other terms previously approved by the Managers in writing.

CERCLA-type Liabilities

  1. Unless the Directors shall otherwise determine, there is no cover in respect of any liability for loss, damage, costs and expenses arising as a consequence of the discharge or escape, or the threat of discharge or escape, of any hazardous waste (previously carried on an insured vessel) from any land-based dump, storage or disposal facility.

Paperless Trading

  1. Any liabilities, costs or expenses whatsoever and howsoever arising from the use of any electronic trading system, other than an approved electronic trading system, to the extent that such liabilities, costs or expenses would not (except insofar as the Managers may in their sole discretion otherwise determine) have arisen under a paper trading system.

For the purposes of this Sub-Section 19,

  • An electronic trading system is any system which replaces or is intended to replace paper documents used for the sale of goods and/or their carriage by sea or partly by sea and other means of transport and which:
    1. are documents of title, or
    2. entitle the holder to delivery or possession of goods referred to in such documents, or
    3. evidence a contract of carriage under which the rights and obligations of either of the contracting parties may be transferred to a third party.
  • a "document" shall mean anything in which information of any description is recorded including, but not limited to, computer or other electronically generated information.

 

 



Rule 4 - Association Funding: Premiums and Calls

SECTION 1

Mutual and Fixed Premium Insurance

  1. Every Certificate of Entry issued to a Member of the Association shall clearly state whether or not the insurance is mutual or fixed premium insurance. Certificates of Entry evidencing mutual insurance shall contain a clear statement of the liability of the Member for the payment of his proportionate share of any deficiency as provided by law within the limit provided by the contract of insurance, and shall further state that any premiums and calls shall be for the exclusive benefit of Members who are subject to such a contingent liability. Members who are insured on mutual premium terms shall not be liable to make contribution in an amount greater in proportion to the total deficiency than the ratio that the deficiency attributable to mutual premium business bears to the total deficiency. All Certificates of Entry evidencing fixed premium insurance shall provide that Members insured on such terms shall not be liable for deficiencies in the funding of the Association, and such Members shall not be liable to make contribution to such deficiencies in the funding of the Association.
  2. The Managers may on behalf of the Association issue Certificates of Entry evidencing mutual insurance which, save insofar as claims in respect of oil pollution are concerned, do not contain an express monetary limit on the Association’s liability for the payment of claims covered by virtue of these Rules. Notwithstanding this, however, the liability of the Association in respect of the insurance of such claims shall be subject always to the provisions of Rule 4.14 herein and the limits on collectability of overspill claims as defined therein.
  3. Certificates of Entry issued by the Managers on behalf of the Association evidencing fixed premium insurance shall in all cases contain an express monetary limit on the Association’s liability for the payment of claims covered by virtue of these Rules.
  4. For the purposes of adjusting mutual premium in relation to any surpluses or deficiencies to the Association’s funding, the business of the Association shall be divided into policy years which shall have the meaning ascribed to them in Rule 1.2 above.

Treatment of Mutual Premium in Relation to Policy Year Results

  1. From time to time when the Managers shall determine that it is practicable to estimate with a reasonable degree of certainty the minimum, probable or final surplus or deficiency resulting from all of the Association’s insurances in effect during any policy year, the Managers shall place before the Directors a statement of such financial results. After receipt of any such statement, the Directors from time to time may:
    1. fix and determine an amount to be declared and paid as an interim or final return of mutual premium, after retaining such sums as they may deem necessary to meet outstanding obligations or for the maintenance of reserves and surplus of the Association; or
    2.  order an interim or final levy of supplementary premium to be made against Members insured on mutual premium terms, fix the due date or payment of such a levy, and otherwise provide for the collection thereof.
  2. If at any time or times after any policy year has been closed, any additional costs or expenses attributable to such policy year(s) are incurred by the Association, the Directors may in their absolute discretion decide to fund such costs or expenses:
    1. by transferring funds from the reserves of the Association; and/or
    2. by levying interim or final supplementary premium in respect to any open policy year(s).
  3. Any return of mutual premium or any supplementary premium levied shall be based solely on such surplus or such deficiency, respectively, resulting from the mutual premium business for the policy year in question. All returns declared and all supplementary premiums levied shall be distributed or spread in the ratio that the net premium paid by a Member bears to the net premiums paid by all Members insured on mutual premium terms for the policy year. The term “net premium” as used in this Rule 4.7 shall mean the total premium paid less lay-up, cancellation or other returns of premium. In any case, however, all actions of the Directors in respect of returns of premium or levies of supplementary premium shall conform with the law and with the Charter and By-Laws of the Association.

Premium to Release

  1. Upon or at any time after the cesser or termination of the insurance of an insured vessel for any reason, or at any other time as may have been expressly agreed between a Member and the Managers, the Managers, on behalf of the Association, may calculate and charge premium to release a Member from liability for further contribution to mutual premium in respect of such vessel at a percentage of the then estimated total premium for any policy year which has not at that time been declared closed for the levy of mutual premium in accordance with Rule 4.16 and 17 below. The said percentage shall be as from time to time determined by the Directors in their absolute discretion.
  2. The amount of such premium to release shall be payable by a Member on demand without set-off, and payment thereof will not affect a Member’s liability for overspill calls as set out in Rule 4.15 herein. Provided always, however, that the Association may accept in lieu of payment of such premium to release a guarantee given or confirmed by a bank acceptable to the Managers for the Member’s future liability for mutual premium and overspill calls.
  3. Once paid, premiums to release shall not in any circumstances be returnable, notwithstanding any subsequent reduction in the amounts chargeable for the policy years concerned; nor shall a Member have any right to share in any returns of mutual premium for any such policy year in respect of a vessel for which premium to release has been paid or is payable, but payment of premium to release shall discharge a Member from any future liability for that mutual premium in lieu of which such premium to release has been charged.
     

 Interest on Premium and other sums due to the Association
 

  1. Notwithstanding any provisions contained herein to the contrary, interest at the rate of 1% per month shall be payable on any premium or other sums due to the Association as from the due date of payment of such premium or other sums or from such later date as may be specified by the Managers.

  Returns of Premium Consequent Upon Lay-up

  1. Subject to any special terms and conditions which may have been expressly agreed between a Member and the Managers, if an insured vessel shall be without cargo on board and so remain in any safe port for a period of 45 or more consecutive days after finally mooring there (such period being computed from the day of arrival to the day of departure, excluding the day of arrival and the day of departure), a Member is to be allowed a return of premium calculated at a rate of eighty per cent (80%) of the total net premium payable for such vessel.

        Provided always that:

  1. An insured vessel shall not be treated as laid up if she has either seamen (other than for maintenance or security) or cargo on board except that the Managers in their absolute discretion may agree to a reduced allowance if there are additional seamen on board;
  2. The Managers shall have absolute discretion in deciding whether the port involved or the place of the vessel’s lay-up is a safe port within the meaning of this Rule, and/or to determine how many seamen may be required for such maintenance or security within the meaning of this Rule 4.11;
  3. No return of premium shall be made under this Rule unless the Member shall submit his notice in writing to and submits his claim for the lay-up return, along with supporting documentation acceptable to the Managers of such lay-up, to the Managers not later than 60 days after the end of the policy year. If the lay-up period continues into a new policy year, written notice shall be given to the Association within 30 days of the start of the new policy year;
  4. The percentage of premium returnable shall be calculated upon the net premium only, i.e. premium payable excluding overspill calls, less such allowance for reinsurance, administrative expenses and other outgoings as the Managers in their absolute discretion may from time to time determine;
  5. This Rule 4.11 shall not apply to overspill calls.

 Member’s Obligation to the Association

  1. The liability of a Member to pay supplementary premium is an obligation to the Association and not to any other Members.

 Set-off

  1. The Association shall be entitled to set off any amount due from a Member against any amount due to such Member from the Association.

 Contingency Fund

  1. During any policy year, or thereafter, the Directors may, from time to time, set aside as an expense of the Association for that year such sum or sums as they may consider necessary or proper to be added to a contingency fund of the Association.

 Overspill Claims / Calls

  1. Interpretation

1.1    In this Section 16 the following words and expressions shall have the following meanings:

CONVENTION LIMIT: in respect of a vessel, the limit of liability of the shipowner of that vessel for claims (other than claims for loss of life or personal injury) at the Overspill Claim Date, calculated in accordance with Rule 6 Section 1(b) of the International Convention on Limitation of Liability for Maritime Claims 1976 (the “Convention”) and converted from Special Drawing Rights into United States Dollars at the rate of exchange conclusively certified by the Association as being the rate which prevailed on the Overspill Claim Date, provided that:

  1. where a vessel is entered for a proportion (the “relevant proportion”) of its tonnage only, the Convention Limit shall be the relevant proportion of the limit calculated and converted as aforesaid; and
  2. each vessel shall be deemed to be a seagoing ship to which the Convention applies, notwithstanding any provision in the Convention to the contrary.

GROUP REINSURANCE LIMIT: the amount of the smallest claim (other than any claim arising in respect of oil pollution) incurred by the Association or by any other party to the Pooling Agreement which would exhaust the largest limit for any type of claim (other than a claim arising in respect of oil pollution) from time to time imposed in the International Group Excess Loss Contract.

OVERSPILL CALL: a call levied by the Association pursuant to this Section 16 for the purpose of providing funds to pay part of an Overspill Claim.

OVERSPILL CLAIM: that part (if any) of a claim (other than a claim arising in respect of oil pollution) incurred by the Association or by any other party to the Pooling Agreement under the terms of entry of a vessel which exceeds or may exceed the Group Reinsurance Limit.

OVERSPILL CLAIM DATE: in relation to any Overspill Call, the time and date on which there occurred the incident or occurrence giving rise to the Overspill Claim in respect of which the Overspill Call is made or, if the Policy Year in which such incident or occurrence has been closed in accordance with the provisions of this Rule, noon GMT on August 20 of the Policy Year in respect of which the Association makes a declaration under this Section 16.

1.2    All claims (other than claims arising in respect of oil pollution) incurred by the Association or by any    other party to the International Group Pooling Agreement (“the Pooling Agreement”) under the entry of any one vessel arising from any one incident or occurrence including any claim in respect of liability for the removal or non-removal of any wreck shall be treated for the purposes of this Section 16 as if they were one claim.

1.3    Any reference to a claim incurred by the Association or by any other party to the Pooling Agreement shall be deemed to include the costs and expenses associated therewith.

Recoverability of Overspill Claims

2.1    Without prejudice to any other applicable limit, any Overspill Claim incurred by the Association shall not be recoverable from the Association in excess of the aggregate of:

  1. that part of the Overspill Claim which is eligible for pooling under the Pooling Agreement but which, under the terms of the Pooling Agreement, is to be borne by the Association; and
  2. the maximum amount that the Association is able to recover from the other parties to the Pooling Agreement as their contributions to the Overspill Claim.

2.2    The aggregate amount referred to in 2.1 above shall be reduced to the extent that the Association can evidence:

  1. that costs have been properly incurred by it in collecting or seeking to collect:
  1. Overspill Calls levied to provide funds to pay that part of the Overspill Claim referred to in 2.1 section (a); or
  2. the amount referred to in 2.1 section (b),
  1. that it is unable to collect an amount equal to that part of the Overspill Claim referred to in 2.1 section (a) which it has intended to pay out of the levy of Overspill Calls because any Overspill Calls so levied, or parts thereof, are not economically recoverable, provided that if, due to a change in circumstances, such amounts subsequently become economically recoverable, the aggregate amount referred to in 2.1 shall be reinstated to that extent.

2.3    In evidencing the matters referred to in 2.2 section (b) the Association shall be required to show that:

  1. it has levied Overspill Calls on all Members entered in the Association on the Overspill Claim Date in accordance with and in respect of the Overspill Claim referred to in 2.1 in maximum amounts permitted in accordance with this Rule; and
  2. it has levied those Overspill Calls in a timely manner, has not released or otherwise waived a Member’s obligation to pay those Calls, and has taken all reasonable steps to recover those Calls.

Payment of Overspill Claims

3.1    The funds required to pay any Overspill Claim incurred by the Association shall be

         provided:

  1. from such sums as the Association is able to recover from the other parties to the Pooling Agreement as their contributions to the Overspill Claim, and
  2. from such sums as the Association is able to recover from any special insurance which may, in the discretion of the Association, have been effected to protect the Association against the risk of payments of Overspill Claims, and
  3. from such proportion as the Association in its discretion determines of any sums standing to the credit of such Overspill reserves as the Association may in its discretion have established, and
  4. by levying one or more Overspill Calls in accordance with this Section 15, irrespective or whether the Association has sought to recover or has recovered all or any of the sums referred to in 3.1 section(c) and
  5. from any interest accruing to the Association on any funds provided as aforesaid.

3.2    The funds required to pay such proportion of any overspill claim incurred by any other party to the Pooling Agreement which the Association is liable to contribute under the terms of the Pooling Agreement shall be provided in the manner specified in 3.1 sections (b)-(e).

3.3    To the extent that the Association intends to provide funds required to pay any Overspill Claim incurred by it in the manner specified in 3.1 section (d), the Association shall only be required to pay such Overspill Claim as and when such funds are received by it, provided that it can show from time to time that, in seeking to collect funds, it has taken the steps referred to in 2.3 sections (a) and (b).

 

Overspill Claims – Expert Determinations

4.1    Any of the issues referred to in 4.2 on which the Association and the Member cannot agree shall be referred to a panel (the “Panel”) constituted in accordance with arrangements established in the Pooling Agreement which, acting as a body of experts and not as an arbitration tribunal, shall determine the issue.

4.2    This Section 16 shall apply to any issue of whether, for the purpose of applying any of 2.2, 2.3 and 3.3 in relation to any Overspill Claim (“the relevant Overspill Claim”):

  1. costs have been properly incurred in collecting or seeking to collect Overspill Calls; or
  2. any Overspill Call or part thereof is economically recoverable; or
  3. in seeking to collect the funds referred to in 3.3, the Association has taken the steps referred to in that section.

4.3    If the Panel has not been constituted at a time when a Member wishes to refer an issue to it, the Association shall, on request by the Member, give a direction for the constitution of the Panel as required under the Pooling Agreement.

4.4    The Association may (and, on the direction of the Member, shall) give such direction as is required under the Pooling Agreement for the formal instruction of the Panel to investigate any issue and to give its determination as soon as reasonably practicable.

4.5    The Panel shall in its discretion decide what information, documents, evidence and submissions it requires in order to determine an issue and how to obtain these, and the Association and the Member shall cooperate fully with the Panel.

4.6    In determining any issue referred to it under this Rule the Panel shall endeavor to follow the same procedures as it follows in determining issues arising in respect of the relevant Overspill Claim which are referred to it under the Pooling Agreement.

4.7    In determining an issue the members of the Panel:

  1. shall rely on their own knowledge and expertise, and
  2. may rely on any information, documents, evidence or submission provided to it by the Association or the Member as the Panel sees fit.

4.8    If the three members of the Panel cannot agree on any matter, the view of the majority shall prevail.

4.9    The Panel shall not be required to give reasons for any determination.

4.10  The Panel’s determination shall be final and binding upon the Association and the Member (subject only to 4.11) and there shall be no right of appeal from such determination.

4.11  If the Panel makes a decision on an issue referred to in 4.2 sections (b) or (c) the Association or the Member may refer the issue back to the Panel notwithstanding Clause 4.10, if it considers that the position has materially changed since the Panel made its determination.

4.12  The costs of the Panel shall be paid by the Association.

4.13  Costs, indemnities and other sums payable to the Panel by the Association in relation to any Overspill Claim, whether the reference to the Panel has been made under this Section 16 or under the Pooling Agreement, shall be deemed to be costs properly incurred by the Association in respect of that Overspill Claim for the purposes specified in 2.2 section (a).

Levying of Overspill Calls

5.1    If :

  1. the Association shall at any time determine that funds are or may in the future be required to pay part of an Overspill Claim (whether incurred by the Association or by any other party to the Pooling Agreement), and
  2. the Association shall have made a declaration under 6.1 or 6.3 that a Policy Year shall remain open for the purpose of levying an Overspill Call or Calls in respect of that Overspill Claim, the Association in its discretion, at any time or times after such declaration has been made, may levy one or more Overspill Calls in respect of that Overspill Claim in accordance with 5.2.

5.2    The Association shall levy any such Overspill Call:

  1. on all Members entered in the Association on the Overspill Claim Date in respect of vessels entered by them at the time, notwithstanding the fact that, if the Overspill Claim Date shall be in a Policy Year in respect of which the Association has made a declaration under 6.3, any such vessel may not have been entered in the Association at the time the relevant incident or occurrence occurred, and
  2. at such percentage of the Convention Limit of each such vessel as the Association in its discretion shall decide.

5.3    An Overspill Call shall not be levied in respect of any vessel entered on the Overspill Claim Date with an overall limit of cover equal to or less than the Group Reinsurance Limit.

5.4    The Association shall not levy on any Member in respect of the entry of any one vessel an Overspill Call or Calls in respect of any one Overspill Claim exceeding in the aggregate two and one-half percent of the Convention Limit of that vessel.

5.5    If at any time after the levying of any Overspill Call upon the Members entered in the Association in any Policy Year, it shall appear to the Association that the whole of such Overspill Call is unlikely to be required to meet the Overspill Claim in respect of which such Overspill Call was levied, the Association may decide to dispose of any excess which in the opinion of the Association is not so required by returning the excess or any part thereof to those Members who have paid that Overspill Call in proportion to the payments made by them.

Closing of Policy Years for Overspill Calls

6.1    If at any time prior to the expiry of a period of thirty-six months from the commencement of a Policy Year (the “relevant Policy Year”), any of the parties to the Pooling Agreement sends a notice (an “Overspill Notice”) in accordance with the Pooling Agreement that an incident or occurrence has occurred in the relevant Policy Year which has given or at any time may give rise to an Overspill Claim, the Association shall as soon as practicable declare that the relevant Policy Year shall remain open for the purpose of levying an Overspill Call or Calls in respect of that claim and the relevant Policy Year shall not be closed for the purpose of making an Overspill Call or Calls in respect of that claim until such date as the Association shall determine.

6.2    If at the expiry of the period of thirty-six months provided for in 6.1, no Overspill Notice as therein provided for has been sent, the relevant Policy Year shall be closed automatically for the purpose of levying Overspill Calls only, whether or not closed for any other purposes, such closure to have effect from the date falling thirty-six months after the commencement of the relevant Policy Year.

6.3    If at any time after the Policy Year has been closed in accordance with the provisions of 6.1 and 6.2, it appears to the Association that an incident or occurrence which occurred during such closed Policy Year may then or any time in the future give rise to an Overspill Claim, the Association shall as soon as practicable declare that the earliest subsequent open Policy Year (not being a Policy Year in respect of which the Association has already made a declaration in accordance with 6.1 and 6.2) shall remain open for the purpose of levying an Overspill Call or Calls in respect of that claim and such open Policy Year shall not be closed for the purpose of making an Overspill Call or Calls in respect of that claim until such date as the Association shall determine.

6.4    A Policy Year shall not be closed for the purpose of levying Overspill Calls save in accordance with this Section 16.

Security for Overspill Calls on termination or cesser
 
7.1    If :
  1. the Association makes a declaration in accordance with 6.1 or 6.3 that a Policy Year shall remain open for the purpose of levying an Overspill Call or Calls; and
  2. any Member who is liable to pay such Overspill Call or Calls as may be levied by the Association in accordance with this Section 16 ceases or has ceased to be insured by the Association for any reason, or the Association determines that the insurance of any such Member may cease the Association may require such Member to provide to the Association by such date as the Association may determine (the “due date”) a guarantee or other security in respect of the Member’s estimated future liability for such Overspill Call or Calls, such guarantee or other security to be in the form and amount (the “guarantee amount”) and upon such terms as the Association in its discretion may deem to be appropriate in the circumstances.
 
7.2    Unless and until such guarantee or other security as is required by the Association has been provided by the Member, the Member shall not be entitled to recover from the Association any claims whatsoever and whensoever arising in respect of any and all vessels entered in the Association for any Policy Year by him or on his behalf.
 
7.3    If such guarantee or other security is not provided by the Member to the Association by the due date, a sum equal to the guarantee amount shall be due and payable by the Member to the Association on the due date, and shall be retained by the Association as a security deposit on such terms as the Association in its discretion may deem to be appropriate in the circumstances.
 
 
7.4 The provision of a guarantee amount or other security as required by the Association (including a payment in accordance with 7.3) shall in no way restrict or limit the Member’s liability to pay such Overspill Call or Calls as may be levied by the Association in accordance with this Rule.
 
Closing of Policy Years
 
  1. Subject always to the provisions of Rule 4.16 above, with effect from such date as the Directors in their absolute discretion may determine after the end of each policy year, but no sooner than thirty-six months from its commencement, they may declare that policy year closed for the purpose of levying mutual premium, after which no further mutual premium or premium to release shall be levied in respect thereof.
  2. The Directors may declare any policy year closed for the purpose of levying mutual premium or premium to release notwithstanding that it is known or anticipated that there are in existence, or may in the future arise, legal costs, charges or disbursements recoverable in respect of such policy year which have not yet accrued or the validity, extent or amount of which have yet to be established.
 


Rule 5 - Cesser and Termination of Cover
  1. Unless otherwise agreed by the Managers in writing, any insurance in respect of a Member’s interest in an insured vessel shall cease upon the happening of whichever shall be the earliest of the following events:

 

  1. the Member parting with or assigning his interest in the vessel whether by bill of sale or other formal document or in any other way whatsoever, the Association to allow a pro-rata daily return of premium for the unexpired term of the insurance with respect to said vessel;
  2. the vessel becoming an actual total loss, or being accepted by the hull underwriters as an actual or constructive total loss, or where there is a compromise reached with hull underwriters that the vessel shall be considered to be an actual or constructive total loss;
  3. a decision by the Managers that the vessel is to be considered or deemed to be an actual or constructive total loss;
  4. in the case of an alleged constructive total loss of the vessel, the acceptance by hull underwriters of notice of abandonment, the tendering of which must be immediately notified to the Managers in writing;
  5. the vessel being missing for ten days from the date it was last heard from, or from its being listed at Lloyd’s as missing, whichever shall be the earlier;
  6. a Member being in breach of any of the conditions set out in Rule 1.4.14 above and as provided for thereunder;
  7. an insured vessel having failed to pass survey in accordance with the provisions of Rule 1.4.41 to 45 inclusive and as provided for thereunder.
  1. Should the Member fail to pay, either in whole or in part, any amount due from the Member to the Association (including any amount for which the Member may be jointly and severally liable to the Association) or any amount which the Managers shall have instructed the Member to pay to another party, the Managers may give the Member notice in writing requiring the Member to pay such amount by any date specified in such notice, not being less than five days from the date on which such notice is given.  In the event that the Member fails to make payment in full on or before the date so specified, the insurance of the Member (whether or not such insurance may already have ceased for any other reason) in respect of any and all vessels insured for account or on behalf of the Member shall be terminated immediately without further notice or other formality. 

In the event that a Member’s insurance is terminated by reason of the foregoing, the time of the occurrence of which being hereinafter referred to as “the date of termination”, the following consequences shall ensue:

 

  1. The Association shall in all cases have power in accordance with Rule 4.8 to 10 inclusive to charge premium to release in regard to any and all vessels insured for account or on behalf of the Member, notwithstanding the payment of which (or the establishment of bank guarantees or other security in lieu thereof), the Member shall be and remain liable for Overspill Calls in accordance with Rule 4.15 as well as for all premiums, calls, contributions and any other amount due from the Member to the Association;
  2. The Association shall with effect from the date of termination cease to be liable for any claims of whatsoever nature and howsoever arising under these Rules in respect of any and all vessels in relation to which the insurance of the Member has been terminated, irrespective of whether:
    1. such claims have arisen by reason of any event which has occurred at any time prior to the date of termination, including during previous years;     
    2. such claims arise by reason of any event occurring after the date of termination;
    3. the Association may have admitted liability for or appointed attorneys, surveyors or any other person to deal with such claims; or
    4.  the Managers at the date of or prior to the date of termination knew that such claims might or would arise;

and as from the date of termination any liability of the Association for such claims shall cease retroactively and the Association shall be under no liability to the Member for any such claims or on any account whatsoever;

 

PROVIDED ALWAYS that:

The Managers may in their absolute discretion and upon such terms as it thinks fit, including but not limited to terms as to payment of contributions, premiums or other sums, admit either in whole or in part any claim in respect of a vessel insured by the Member for which the Association is under no liability by virtue of this Rule, whether such claim has arisen before or arises after the date of termination as the case may be, or forgive wholly or partly any payment of contribution, premiums or other sums due to the Association.

 

  1. Should the Member or any affiliated company become insolvent or bankrupt or assign its property for the benefit of creditors or suffer the appointment of a receiver for its property or any part thereof or the institution of dissolution proceedings by or against it, the Association shall not be liable for any claims whatsoever under this insurance unless, within sixty days from the date of the occurrence of such insolvency, bankruptcy, assignment, receivership or dissolution proceedings, there are paid to the Association by or on behalf of the Member all premiums and/or assessments due, and the payment of any premiums to become due and all possible assessments is unconditionally guaranteed by a responsible surety, and unless the Member shall have paid the loss, damage or expense for which it is claiming out of monies belonging to it absolutely and not by way of loan or otherwise.
  2. In the event that Sections 30501 to 30512, both inclusive, of U.S. Code, Title 46, or any other existing law or laws determining or limiting liability of shipowners and carriers, or any of them, shall, while this policy is in force, be modified, amended or repealed, or the liabilities of shipowners or carriers be increased in any respect by legislative enactment, the Association shall have the right to cancel said insurance upon giving thirty days written notice of its intention so to do, and in the event of such cancellation, make a return of premium upon a prorata daily basis.
  3. Any contract of insurance in respect of a Member’s interest in an insured vessel may be terminated:

by the Member only as of Noon GMT on February 20th of any year with not less than thirty days’ prior written notice to the Association; and

by the Association at any time with not less than thirty days’ prior written notice to the Member.



Rule 1 - Introductory: Interpretation: Membership:
 

SECTION 1 - INTRODUCTORY PROVISIONS

1.      Each and every provision of the By-Laws of the Association and of these Rules of Class II are applicable to all Freight, Demurrage and Defense insurances of the Association. However, without prejudice to the generality of these provisions so far as they apply to this Class II, they shall only apply to Freight, Demurrage and Defense insurances contracted under Class III to the extent that they have been expressly incorporated therein.

2.      The standard Freight, Demurrage and Defense cover afforded by the Association to a Member who has insured his vessel with the Association is set out in Rule 2 below.

3.      The cover set out in Rule 2 may be excluded, limited, modified or otherwise varied by any special terms expressly agreed in writing between a Member and the Managers.

4.      A Member is only insured against costs and expenses incurred by him which arise:

 

               i.  out of events occurring during the period of the policy year when his vessel is insured with the Association;

 

PROVIDED that:

 

a.     as to claims and disputes arising under contract (other than those specified in Rule 1.1.4.i.b below), in tort or under statute, such claims and disputes will be deemed to have arisen at the date when the cause of action accrued;

b.     as to claims and disputes concerning salvage, or in respect of towage services, such claims and disputes will be deemed to have arisen at the date when the relevant services were commenced; and

 

               ii.   in respect of the Member’s interest in the insured vessel ; and

               iii.  in connection with the building, sale, purchase or operation of the insured vessel by or on behalf of the Member.

 

5.      Subject to the provisions of Rule 1.1.6 below, a Member who has insured his vessel with the Association for insurance against any or all of the aforesaid risks is obligated to pay premium to the Association in accordance with Rule 4 of the Rules of Class I, such insurance being hereinafter referred to as mutual insurance and premium payable by reason thereof mutual premium.

6.      Notwithstanding the provisions of Rule 1.1.5 above, a Member may be insured on special terms to the effect that he is liable to pay fixed premium to the Association, such insurance being hereinafter referred to as fixed insurance, and premium payable by reason thereof fixed premium, but only where this has been expressly agreed in writing between the Member and the Managers.

7.      The insurance provided by these Rules is solely for the benefit of a Member, Joint Member, Co-assured, Affiliate or such other parties as set out and defined in Rule 1.3 of Class I and to the extent incorporated herein.

8.      A deductible or deductibles may apply to insurances as provided for in this Class II.

9.      A limit of the Association’s liability to pay claims may apply to insurances as provided for in this Class II.

 

 

SECTION 2 - INTEPRETATION

To the extent that their meanings are consistent with the subject and context of these Rules of Class II, the words and expressions set out in Rule 1.2 of Class I shall have the same meanings in these Rules of Class II.

Words importing the singular number only shall include the plural number and vice versa.

Word importing the masculine gender only shall include the feminine and neuter genders.

Words importing persons shall include individuals, partnerships, corporations, associations, joint ventures and any other business entities.

 

 

SECTION 3 - MEMBERS, JOINT MEMBERS, AFFILIATES AND CO-ASSUREDS

The terms of Rule 1.3 of Class I, to the extent that they are consistent with the subject and context of these Rules of Class II, shall be deemed to be incorporated in and form an integral part of these Rules of Class II except that any reference in the terms of Rule 1.3 of Class I as incorporated hereunder to Protection and Indemnity insurance shall be deemed to be a reference to the Freight, Demurrage and Defense cover afforded under these Rules of Class II.

 

 

 

SECTION 4 - GENERAL INSURANCE PROVISIONS

1.     The terms of Rule 1.4 of Class I, to the extent that they are consistent with the subject and context of these Rules of Class II, shall be deemed to be incorporated in and form an integral part of these Rules of Class II except that any reference in the terms of Rule 1.4 of Class I as incorporated hereunder to Protection and Indemnity insurance shall be deemed to be a reference to the Freight, Demurrage and Defense cover afforded under these Rules of Class II.

2.      Provided further that any vessel insured under the terms of these Rules of Class II shall be deemed to be fully insured under the terms of the Rules of Class I and a Member shall not be entitled to recover any costs and expenses under the terms of these Rules of Class II which would have been recoverable under the terms of the Rules of Class I had the vessel been so insured.

 

Special Conditions in Regard to Claims Under Class II

 

3.      Notwithstanding the generality of the foregoing, the following additional special conditions shall apply to claims arising under this Class II cover.

4.      Whenever a request has been made or may be made by a Member for the support of the Association in any proceedings or for legal or other advice in connection with matters covered by these Rules, the Managers may at any time appoint and employ on behalf of the Member, upon such terms as the Managers think fit, lawyers or other persons with a view to supplying services to the Member by investigating, advising upon or otherwise dealing with such matters and/or taking, continuing or defending proceedings or acting for or representing the Member therein; furthermore, the Managers may thereafter at any time in their discretion discontinue such employment.

5.      In the exercise of their discretion whether or not to lend the Association’s support as provided for in Rule 1.4.4 above, the Managers may, but shall not be obligated to, take the following matters into account in addressing the appropriateness and/or prospects for success of pursuing or defending any claim and/or proceedings and/or resolving any dispute:

 

               i.    the applicable law and jurisdiction.

               ii.    the value of the claim or sum in issue or the significance of the dispute.

               iii.   the level of the legal costs and expenses likely to be incurred.

               iv.   the legal merit of the Member’s position.

               v.    any alternative means for pursuing or defending the claim or resolving the          dispute.

               vi.   the prospect of enforcement of any claim by or against the Member.

               vii.  the conduct of the Member.

               viii. the importance of any issues that arise to the shipping community generally.

 

6.      All lawyers, surveyors and other persons appointed by the Managers on behalf of the Member or appointed by the Member with the prior consent of the Managers to supply services to the Member shall be and be deemed to be appointed and employed on the terms that they have been instructed by the Member at all times (both while so acting and after they have ceased so to act) to give advice and to report to the Managers in connection with the matter without prior reference to the Member and to produce to the Managers without prior reference to the Member any documents or information in their possession or power relating to such matter, all as if such person had been appointed to act and had at all times been acting on behalf of the Association.

 

PROVIDED THAT:

 

Where a Member employs, without the prior written approval of the Managers, lawyers or other persons for the purposes of giving advice in connection with matters covered by these Rules, then the costs of such person or persons shall not be recoverable from the Association unless the Directors in their absolute discretion otherwise decide.

 

Power of the Directors in Regard to Supporting Members

 

7.      Where the applicable law governing a Member's claim or dispute against a third party allows the prevailing party to recover legal fees, expenses and/or costs, and where the Managers have exercised their discretion to support such a claim or dispute in full or in part under Class II, the Association shall be entitled to recover legal fees, expenses and/or costs, plus any interest thereon, awarded to the Member by a court, tribunal, or other competent authority in any decision, order, award, or judgment, or by a settlement or agreement of the parties concerning any such claim or dispute. To the extent that such legal fees, expenses and/or costs are not recoverable in full, or if the Member settles or otherwise resolves its claim or dispute with a third party without the Managers' prior written consent or agreement, the Association shall be entitled to recover such legal fees, expenses and/or costs, plus interest thereon, on a pro rata basis from any or all recoveries by the Member on its principal claim, legal fees, expenses and/or costs and/or interest thereon.

8.      Notwithstanding the discretion vested in the Managers as provided for in Rule 1.4.4 and 5 above, a Member may seek the exercise of an overriding discretion from the Directors whether or not to support any claim and/or proceedings and/or the resolution of any dispute and the determination of the Directors in exercising such discretion shall be final.

9.      The Directors shall furthermore be entitled at any time in their absolute discretion to decide that the Association shall discontinue its support or decline to provide further support in connection with any claim and/or proceedings and/or the resolution of any dispute and the determination of the Directors in exercising their absolute discretion shall be final.

10.      Notwithstanding the provisions of Rules 1.4.7 and 8 above, the Directors shall have power to authorize the Managers to act on behalf of the Directors for the purposes of the said Rules 1.4.7 and 8 above.

11.     Approval by the Managers of any contract referred to in Rule 2 below shall in no circumstances be taken to connote acceptance or approval of the terms of such contract either on behalf of the Managers or of the Directors.

 



Rule 2 - Risks and Losses Covered

 

Cover hereunder includes all those costs and expenses necessarily incurred by a Member (including the costs of an opponent party where such costs are ordered to be paid by a court or tribunal of competent authority, or are to be paid pursuant to the terms of any settlement concluded with the express approval in writing of the Managers) in pursuing or defending claims, or in seeking to resolve disputes, on such terms as the Managers shall have approved in writing, arising in respect of the following:

 

            i.    any contract for the building of an insured vessel, which has the prior approval in writing of the Managers.

            ii.    any contract for the purchase or sale of an insured vessel which has the prior approval in writing of the Managers.

            iii.   any contract for the conversion, alteration, repair, refit, drydocking or maintenance of an insured vessel.

            iv.   any charterparty, contract of carriage, bill of lading or contract of affreightment, to which a Member is party in respect of an insured vessel and disputes as to the rights of the parties under, or legal effect, of any such charterparty, contract of carriage, bill of lading or contract of affreightment.

            v.    any contract for operational services provided to or in respect of an insured vessel, including but not limited to agency, stevedoring, towage or salvage, or harbor authority services.

             vi.  any contract for administrative services provided to or in respect of an insured vessel for insurance broking or ship broking services, management services or the provision of technical advice.

             vii.  any contract in respect of goods or materials, necessaries and stores including bunkers and lubricating oil provided to an insured vessel.

             viii.  the employment of seamen.

             ix.  any contract of marine insurance in respect of an insured vessel, or which a Member contends covers an insured vessel, other than that evidenced by the cover provided hereunder or otherwise provided by the Association.

             x.   any damage to an insured vessel, detention of an insured vessel, or the impairment of any right of a Member in respect of an insured vessel, caused by any third party.

             xi.   general average contributions.

             xii.  the presence on board an insured vessel of stowaways, refugees or persons rescued at sea.

             xiii.  the handling, loading, stowing, lashing and discharge of cargo which is to be carried, which is carried or which has been carried on board an insured vessel.

 



Rule 3 - Risks and Losses Excluded

 

1.      The terms of Rule 3 of Class I, to the extent that they are consistent with the subject and context of these Rules of Class II shall be deemed to be incorporated in and form an integral part of these Rules of Class II except that any reference in the terms of Rule 3 of Class I as incorporated hereunder to Protection and Indemnity insurance shall be deemed to be a reference to the Freight, Demurrage and Defense cover afforded under these Rules of Class II.

2.      Provided further that any vessel insured under these Rules of Class II shall be deemed to be fully insured under the terms of the Rules of Class I and a Member shall not be entitled to recover any costs and expenses under the terms of the these Rules of Class II which would have been recoverable under the Rules of Class I had the vessel been fully insured thereunder.

3.      Notwithstanding the generality of the foregoing, the following additional exclusions shall apply to this Class II cover.

 

Nonrecoverability Under Class II of Risks Excluded Under Class I

 

4.      Unless and to the extent that the Directors in their absolute discretion otherwise decide, there shall be no right of recovery to any extent whatsoever under these Rules of Class II in respect of any claims, costs, or expenses arising out of risks and losses either expressly or impliedly excluded under the Rules of Class I.

 

Nonrecoverability Under Class II in Regard to Disputes Between Members, etc.

 

5.      There shall be no recovery of costs and expenses incurred in pursuing or defending claims, or in seeking to resolve disputes, between or among any Member and/or his Joint Members, Co-assureds or Affiliates as defined and provided for under the terms of Rule 1.3 of Class I which shall be deemed fully incorporated herein.

 



Rule 4 - The Funding of Cover

 

1.      The terms of Rule 4 of Class I to the extent that they are consistent with the subject and context of these Rules of Class II, shall be deemed to be incorporated in and form an integral part of these Rules of Class II except that any reference in the terms of Rule 4 of Class I as incorporated hereunder to Protection and Indemnity insurance shall be deemed to be a reference to the Freight, Demurrage and Defense cover afforded under these Rules of Class II.

2.      Notwithstanding the generality of the foregoing, the following additional provision shall apply.

 

No Returns of Premium Consequent Upon Lay-up

 

3.      Notwithstanding the terms of Rule 4.11 of Class I, unless the Managers shall in their absolute discretion so agree, there shall be no returns of premium permitted under these Rules of Class II in consequence of an insured vessel being laid-up during her period of insurance with the Association.

 

 



Rule 5 - Cesser and Termination of Cover

 

The terms of Rule 5 of Class I to the extent that they are consistent with the subject and context of these Rules of Class II, shall be deemed to be incorporated in and form an integral part of these Rules of Class II except that any reference in the terms of Rule 5 of Class I as incorporated hereunder to Protection and Indemnity insurance shall be deemed to be a reference to the Freight, Demurrage and Defense cover afforded under these Rules of Class II.

 



Rule 1 - Introductory: Interpretation: Membership: General: Provisions

SECTION 1 - INTRODUCTORY PROVISIONS

1.      Each and every provision of the By-Laws of the Association and of these Rules of Class III are applicable to all insurances for Charterers’ Risks provided by the Association. Provided always, however, that the cover provided by these Rules of Class III shall in no circumstances apply to a charterer who has been named as a Co-assured in an insurance of a Member pursuant to the terms of Rule 1.3.8 of Class I, where such a charterer is affiliated to or associated with such a Member.

2.      The standard cover afforded by the Association to a Member who has insured his vessel with the Association for Charterers’ Risks only as defined herein is set out in Rule 2 below.

3.      The cover set out in these Rules may be excluded, limited, modified or otherwise varied by any special terms expressly agreed in writing between a Member and the Managers.

4.      The Managers may accept the insurance of vessels on terms which afford cover to a Member against any special or additional risks not set out in Rule 2. The nature and extent of the risks and the terms of such cover shall be as expressly agreed in writing between the Member and the Managers.

5.      A Member is only insured against loss, damage, liability or expense incurred by him which arises:

 

           i.     out of events occurring during the period when his vessel is insured with the Association; and

           ii.     solely and exclusively in respect of a Member’s interest in the insured vessel as time or voyage charterer thereof; and

           iii.    in connection with the operation of the insured vessel by the Member solely and exclusively as time or voyage charterer thereof.

 

6.      A Member who has entered his insured vessel for cover against any or all of the risks and losses set out in Rule 2 is obligated to pay premium to the Association in accordance with Rule 4, that is to say by way of fixed premium and not by way of mutual premium as provided for in Rule 4 of Class I. Such premium may hereinafter be referred to as charterers’ fixed premium.

7.      Notwithstanding the provisions of Rule 1.1.6 above, a Member may be insured on special terms to the effect that he is liable to pay mutual premium to the Association in accordance with Rule 4 of Class I where expressly agreed as between the Member and the Managers. This shall hereinafter be referred to as charterers’ mutual insurance and premium payable in respect thereof charterers’ mutual premium.

8.      Provided always, however, that irrespective of whether cover in accordance with these Rules of Class III has been agreed on the basis of the liability of the Member to pay premium as charterers’ fixed premium or as charterers’ mutual premium, each and every insurance provided under the terms of these Rules of Class III shall be subject to a Member’s maximum right of recovery which shall in all cases be set at a prescribed monetary figure for the various interests insured hereunder and as shall have been agreed in individual cases between the Member and the Managers.

 

  SECTION 2 - INTERPRETATION

 

Except as expressly provided for hereunder, and to the extent that their meanings are consistent with the subject and context of these Rules of Class III, the words and expressions set out in Rule 1.2 of Class I shall have the same meanings in these Rules of Class III. In these Rules the following words and expressions shall have the following meanings if not inconsistent with the subject or context thereof:

 

Member

 

A time or voyage charterer (being other than a bareboat or demise charterer) of an insured vessel, or any other party having a similar capacity in respect of an insured vessel which the Managers may in their absolute discretion deem to have an insurable interest under these Rules of Class III.

 

Charterparty

 

A contract governing the time or voyage charter (being other than a bareboat or demise charter) of an insured vessel, the form of which shall have been approved in writing by the Managers, or any other contract in the nature of a time or voyage charter which the Managers in their absolute discretion may consider sufficient to create an interest capable of insurance under these Rules of Class III.

 

Insured Vessel

 

A vessel which has been insured with the Association in Class III.

Words importing the singular number only shall include the plural number and vice versa.

Words importing the masculine gender only shall include the feminine and neuter genders.

Words importing persons shall include individuals, partnerships, corporations, associations, joint ventures and any other business entities.

 

  SECTION 3 - MEMBERS, JOINT MEMBERS, AFFILIATES AND CO-ASSUREDS

 

The terms of Rule 1.3 of Class I, to the extent that they are consistent with the subject and context of these Rules of Class III, shall be deemed to be incorporated in and form an integral part of these Rules of Class III. Provided always, however, that:

 

i.        references to a Member, Joint Member and membership contained in Rule 1.3 of Class I shall be interpreted in accordance with the definition of a Member contained in Rule 1.2 of these Rules of Class III as shall, mutatis mutandis, references to an Affiliate and Co-assured contained in the said Rule 1.3 of Class I; and

ii.        the terms of Rule 1.3.9 of Class I shall in no circumstances whatsoever apply to any insurance contracted under the terms of these Rules of Class III.

 

  SECTION 4 - GENERAL INSURANCE PROVISIONS

 

1.      The terms of Rule 1.4 of Class I, to the extent that they are consistent with the subject and context of these Rules of Class III shall be deemed to be incorporated in and form an integral part of these Rules of Class III insofar as cover hereunder is provided for Protection and Indemnity risks and losses as set out in Rule 2.A of these Rules of Class III.

2.      The terms of Rule 1.4 of Class I, to the extent that they are consistent with the subject and context of these Rules of Class III, shall be deemed to be incorporated in and form an integral part of these Rules of Class III except that any reference in the terms of Rule 1.4 of Class I as incorporated hereunder to Protection and Indemnity insurance shall be deemed to be a reference to the insurance of risks and losses arising from charterers’ liability for loss of or damage to an insured vessel and for financial loss arising therefrom as set out in Rule 2.B of these Rules of Class III.

3.      The terms of Rule 1.4 of Class II, to the extent that they are consistent with the subject and context of these Rules of Class III, shall be deemed to be incorporated in and form an integral part of these Rules of Class III insofar as cover hereunder is provided for Freight, Demurrage and Defense costs and expenses as set out in Rule 2.C of these Rules of Class III.

4.      Notwithstanding the provisions of Rule 1.4.1 to 3 above, and only to the extent that cover under this Class III of the Rules has been granted to a Member in respect of those risks and losses covered under Rule 2.A or Rule 2.B or Rule 2.C on a single and exclusive basis (such being available in any event only with the express agreement of the Managers), the cover set out in the said Rules 2.A, 2.B and 2.C shall be mutually exclusive in every respect.

5.      Provided further, and notwithstanding anything to the contrary contained elsewhere in these Rules of Class III, the terms of Rule 1.4.32 and 33 and Rule 4.14 of Class I shall in no circumstances apply to any insurances contracted under the provisions of these Rules of Class III.

 



Rule 2 - Risks and Losses Covered

 

A.     Protection and Indemnity Insurance

 

1.      The terms of Rule 2 of Class I, to the extent that they are consistent with the subject and context of these Rules of Class III, shall be deemed to be incorporated in and form an integral part of this Rule 2.A of Class III.

2.      However, notwithstanding the generality of the foregoing, cover provided by this Rule 2.A of Class III shall apply solely and exclusively to the extent that the relevant risk and/or loss arises out of, or is incurred in relation to, a Member’s status as time or voyage charterer of an insured vessel, or in another capacity in relation thereto as shall have been expressly agreed by the Managers as sufficient to create an interest capable of insurance under these Rules of Class III.

 

B.     Insurance of Charterers’ Liability for Loss of or Damage to an Insured Vessel and for Financial Loss Arising Therefrom

 

1.      Subject to any variations or modifications of cover as expressly provided for herein, and in any event to all the other terms of these Rules of Class III, cover hereunder applies to:

 

                i.         all those liabilities, costs and expenses incurred by a Member, as charterer, for loss of or damage to an insured vessel, her equipment, outfit, stores or supplies;

                ii.         claims in respect of demurrage, loss of use and/or hire of an insured vessel suffered as a result of an accident to the insured vessel in respect of which a Member, as charterer, has been or may be held legally liable;

                iii.        a Member’s contribution, as charterer, to general average, salvage, salvage charges and/or sue and labor expenses by reason of a Member’s interest in charter hire and/or freight and/or bunkers at risk;

                 iv.       expenses of investigation and defense in relation to any of the risks and losses set out in i. to iii. above.

 

C.     Freight, Demurrage & Defense Insurance

 

1.      The terms of Rule 2 of Class II, to the extent that they are consistent with the subject and context of these Rules of Class III, shall be deemed to be incorporated in and form an integral part of this Rule 2.C of Class III.

2.      However, notwithstanding the generality of the foregoing, cover provided by this Rule 2.C of Class III shall apply solely and exclusively to the extent that the relevant risk and/or loss arises out of, or is incurred in relation to, a Member’s status as time or voyage charterer of an insured vessel, or in another capacity in relation thereto as shall have been expressly agreed by the Managers as sufficient to create an interest capable of insurance under these Rules of Class III.

 



Rule 3 - Risks and Losses Excluded

 

A.       Protection and Indemnity Insurance

 

1.      The terms of Rule 3 of Class I, to the extent that they are consistent with the subject and context of these Rules of Class III, shall be deemed to be incorporated in and form an integral part of this Rule 3.A of Class III.

2.      Provided further that any vessel insured under the terms of Rule 2.A shall be deemed to be fully insured under Rules 2.B and 2.C and a Member shall not be entitled to recover any claims, costs and expenses under Rule 2.A which would have been recoverable under Rules 2.B or 2.C.

3.      Unless and to the extent that the Directors in their absolute discretion otherwise decide, there shall be no right of recovery under Rule 2.A in respect of any claims, costs or expenses arising out of risks and losses expressly or impliedly excluded under Rules 2.B and 2.C.

 

B.        Insurance of Charterers’ Liability for Loss of or Damage to an Insured Vessel and for Financial Loss Arising Therefrom

 

1.      The terms of Rule 3 of Class I, to the extent that they are consistent with the subject and context of the cover provided under Rule 2.B of these Rules of Class III, shall be deemed to be incorporated in and form an integral part of this Rule 3.B of Class III. Any reference in the terms of Rule 3 of Class I as incorporated hereunder to Protection and Indemnity insurance shall be deemed to be a reference to the insurance provided under Rule 2.B of Class III.

2.      Provided further that any vessel insured under the terms of Rule 2.B shall be deemed to be fully insured under the terms of Rule 2.A and 2.C and a Member shall not be entitled to recover any claims, costs and expenses under Rule 2.B which would have been recoverable under Rules 2.A or 2.C.

3.      Unless and to the extent that the Directors in their absolute discretion otherwise decide, there shall be no right of recovery under Rule 2.B in respect of any claims, costs and expenses arising out of risks and losses expressly or impliedly excluded under Rules 2.A and 2.C.

 

C.       Freight, Demurrage & Defense Cover

 

1.      The terms of Rule 3 of Class I, to the extent that they are consistent with the subject and context of these Rules of Class III, shall be deemed to be incorporated in and form an integral part of this Rule 3.C of Class III.

2.      Provided further that any vessel insured under the terms of Rule 2.C, shall be deemed to be fully insured under Rules 2.A and 2.B and a Member shall not be entitled to recover any costs and expenses under Rule 2.C which would have been recoverable under Rules 2.A or B.

3.      Unless and to the extent that the Directors in their absolute discretion otherwise decide, there shall be no right of recovery under Rule 2.C in respect of any claims, costs and expenses arising out of risks and losses expressly or impliedly excluded under Rules 2.A and 2.B.

 

D.       War Risks

 

1.      Notwithstanding the terms of Rule 3.1 of Class I to the extent that the said terms are incorporated in these Rules of Class III, cover provided by Rule 2A, B and C of these Rules of Class III shall extend to those liabilities, costs and expenses caused by or arising out of war risks as defined in the said terms of Rule 3.1 of Class I, provided always that the Member shall have used his best endeavors to ensure that:

 

                      i.   the ship is chartered on terms to the effect that:

       the owners are entitled to refuse to send the ship to any port or place that is dangerous by reason of war risks (as defined in any current standard war risks insurance policy), and

       the owners are in any event entitled to insure their interests against such war risks, and

       the charterers are liable to reimburse the owners in respect of any war risks premium incurred as a result of the ship being ordered to or employed in such port or place; or

 

                      ii.   the ship is chartered on terms no less favorable to the charterers as regards their liability for loss or damage caused by war risks as set out above; or

                      iii.   the ship is chartered on terms to the effect that:

 

         “charterers are under no circumstances whatsoever to be liable for any loss, damage or expense which is or could be covered by war risk insurance available commercially”.

 

Provided further that the cover for war risks is subject to the Institute Notice of Cancellation, Automatic Termination of Cover, War and Nuclear Exclusion Clause (Hulls etc. 01.01.95) but not subject to the current London Market War Risk Trading Warranties.

 



Rule 4 - The Funding of Cover

 

1.      Save to the extent provided for under Rule 1.1.7 of these Rules of Class III where the Managers shall have expressly agreed otherwise, all Members insured by the Association in this Class III shall be liable to pay fixed premium to the Association in a manner as shall have been expressly agreed with the Managers in individual cases.

2.      By reason of the insurance provided under these Rules of Class III being subject, in the absence of the Managers’ agreement otherwise, to the payment of fixed premium, a Member shall not have a right of recovery from the Association beyond a fixed monetary limit which shall have been agreed with the Managers at the time of contracting the insurance.

3.      In consequence thereof, neither the rights nor the obligations in regard to the funding of the Association as apply to Members insured on mutual premium terms shall apply to Members insured in accordance with the terms of this Class III and, in particular, such Members shall have no right to any returns of premium as provided for in Rule 4.5.i of Class I, nor shall such Members be subject to the terms and conditions of Rule 4.15 of Class I.

 

No Returns of Premium Consequent Upon Lay-Up

 

4.      Without prejudice to the generality of the foregoing, and notwithstanding the terms of Rule 4.11 of the Rules of Class I, there shall be no returns of premium permitted in any circumstances under these Rules of Class III in consequence of an insured vessel being laid-up during her period of insurance with the Association.

 



Rule 5 - Cesser and Termination of Cover

 

The terms of Rule 5 of the Rules of Class I to the extent that they are consistent with the subject and context of these Rules of Class III, shall be deemed to be incorporated in and form an integral part of these Rules of Class III.

 

 

 



Appendix A to the Association's Class I Rules

Procedures for Board Adjudication of Differences or Disputes

If a Member disagrees with the Manager’s decision regarding any difference or dispute with the Association and/or its agents under or related to the Member’s insurance contract or otherwise, the Member has the right to ask the Association’s Board of Directors to adjudicate such difference or dispute, provided the Member submits to the Manager a written Notice of Appeal addressed to the Board of Directors no later than sixty days after the date the Manager has provided its final decision to the Member. (See Rule 1.4.48 a.)

The Member shall promptly prosecute its appeal in accordance with the following procedures and any orders of the Board of Directors. It is expected and required that the Member and Manager shall clearly and concisely state their respective positions and also fully comply with these procedures and all orders of the Board, including without limitation those regarding scheduling and production of documents relevant to the adjudication.
The Member, as the party seeking modification of the Manager’s decision, has the burden of proving by a preponderance of credible evidence that it is entitled to such modification.

Adjudication Procedures

  1. The Member’s Notice of Appeal, which shall not exceed two pages, shall clearly and explicitly (a) identify each difference or dispute with the Manager’s decision, (b) state the specific relief it seeks from the Board, and (c) state the reasons why the Board should grant such relief, including identifying each provision of the insurance contract the Member deems relevant to its appeal.
  2. The Association’s Board of Directors meets four times each year, usually in the second week of March, June, September and November.
  3. After submitting its Notice of Appeal, the Member shall promptly ascertain the Board’s meeting schedule from the Manager and, allowing time to comply with the submission schedule in paragraphs 4 – 7 below, request in writing that the Board adjudicate each difference or dispute during a specified scheduled meeting.
  4. The Member’s and Manager’s written submissions referred to herein shall be addressed to the Board of Directors and submitted through the Manager, as described below.
  5. At least eight weeks before the specified Board meeting, the Member or its authorized agent or attorney shall submit the Member’s appeal in writing to the Manager by (a) stating in a letter or brief of no more than 20 pages, double spaced typed, all the Member’s reasons why the Manager’s decision regarding each difference or dispute should be modified by the Board and (b) submitting as lettered exhibits all evidentiary materials on which the Member relies for its position, including without limitation proof of the nature and amount of any loss, damage, or expense in dispute following the Manager’s decision.
  6. At least four weeks before the Board meeting, the Manager shall submit to the Member or its authorized agent or attorney the Manager’s written opposition to the Member’s appeal (a) stating in a letter or brief of no more than 20 pages, double spaced typed, all the reasons why the Manager’s decision should be affirmed and (b) submitting as numbered exhibits all evidentiary materials on which the Manager relies for its position.
  7. At least two weeks before the Board meeting, the Member or its authorized agent may submit to the Manager a written reply to the Manager’s opposition. Any reply shall be in the form of a letter or brief not exceeding 10 pages, double spaced typed and may include additional exhibits.
  8. Upon receipt of the Member’s reply, if any, the Manager shall promptly deliver the Member’s and Manager’s written submissions (including exhibits) to each Director, with notice of such delivery being sent to the Member or its agent or attorney.
  9. Each Director shall review the Member’s and Manager’s written submissions.
  10. For the purposes of adjudication, the Directors shall proceed in executive session. The Directors, having considered the submissions by the Member and the Manager and having conducted such discussions among themselves as they deem necessary, shall either (a) adjudicate the difference or dispute on the basis of the Member’s and Manager’s written submissions or (b) order the Member and/or the Manager to make further written submissions and/or provide relevant documents and/or information in writing to clarify any issues in dispute within times and page limits set by the Directors. Within times and page limits set by the Directors, the Member and Manager may reply to each other’s additional written submissions. If necessary, the Directors may extend the schedule originally adopted pursuant to paragraphs 4 – 7, above, to allow additional time for these purposes. Failure to comply with any Directors’ orders may be taken into account by the Directors in reaching their decision.
  11. The written submissions including any exhibits shall constitute the record upon which the Directors’ adjudicatory decision shall be based.
  12. As soon as reasonably possible, and no later than six months after receipt of the last written submission, the Directors shall adjudicate the dispute and issue a written opinion stating the reasons for their decision. (See Rule 1.4.48 a.) The decision of a majority of Directors participating in the adjudication shall be the Board's final decision. In the event of a tie vote, the Chairman of the Board shall have a second vote or two votes, in total. Any dissents shall express the reasons therefor in writing, upon which the majority may comment. The Board's final decision and any dissents shall promptly be provided to the Member and the Manager.

Further Appeal

The decision of the Board of Directors is final and binding. (See Rule 1.4.48 d.)

The Member’s attention is invited to the following:

A.  Under the contract of insurance, it is a condition precedent to commencing suit against the Association and/or its agents that the Member first appeal any difference or dispute between it and the Association and/or its agents to the Association’s Board of Directors. (See Rule 1.4.48 c.)

B.  Under the contract of insurance, a Member may appeal the Board’s decision only by suit against the Association in the United States District Court for the Southern District of New York. (See Rule 1.4.48 d.)

C.  Only New York law is applicable. (See Rule 1.4.49.)

D.  Such suit, if any, must be filed within sixty days after the date the Board’s decision is provided to the Member. (See Rule 1.4.48 d.)

E.  As the Board decision is final, it may be modified by a court only upon a finding that the decision was arbitrary and capricious, that is, without reason, an issue on which the Member shall have the burden of proof.

 

 



Appendix B to the Association's Class I Rules

APPENDIX B

PROCEDURES GOVERNING MEMBERS' "OMNIBUS CLAIMS" AND OTHER REQUESTS FOR COVERAGE AVAILABLE ONLY AT THE DISCRETION OF THE BOARD.

Members may incur costs, expenses or liabilities which arise from incidents or circumstances that (1) are neither expressly covered nor excluded by the Association's Rules or (2) which, as provided by the Rules, involve facts and/or circumstances which may only be considered for coverage at the discretion of the Association's Directors.     In such instances, Members may request coverage from the Directors.  In their discretion, the Directors may or may not agree to provide coverage, in whole or in part.  For convenient reference, a list of the Association's Rules which provide for coverage at the Directors' discretion is attached hereto as "Schedule A". 

Members requesting such discretionary coverage from the Directors shall comply with the following procedures:

1. The Board of Directors meets four times each year, usually in the second week of March, June, September and November.

2. At least six weeks before a scheduled Board meeting, the Member or its authorized agent or attorney shall submit to the Directors, through the Managers via e-mail and/or overnight courier: (a) a letter or brief of no more than 10 pages, double spaced typed, stating the Member's request and all the reasons why the Directors should exercise their discretion to grant the request including the specific provision(s) in the Association's Rules upon which the request is premised, and (b) all evidentiary materials on which the Member relies for its request.

3. At least four weeks before the Board meeting referenced in paragraph 2 above, the Managers may submit to the Directors (a) the Managers' position regarding the Member's request in a letter or brief of no more than 10 pages, double spaced typed; and (b) all contractual, statutory and/or evidentiary materials upon which the Managers' position is based. A copy of any such submission by the Managers shall be promptly sent to the Member.

4. At least two weeks before the above Board meeting, the Member or its authorized agent may submit to the Directors a written reply to the Managers' position.  Any reply shall be in the form of a letter or brief not exceeding 5 pages, double spaced typed and may include additional evidentiary materials.

5. In their discretion, the Directors may permit or ask the Member to make an oral presentation at the relevant Board meeting.  Such presentation shall not exceed 15 minutes or such other time as permitted by the Directors.

6. If the Member believes time is of the essence, the Member may ask the Directors for an expedited briefing and decision schedule.  If a majority of Directors agree to such an expedited consideration, the Directors shall set an appropriate briefing and decision schedule.

7. For the purposes of resolving Members' requests, a majority of Directors shall meet in executive session.  Having considered the submissions by the Member and the Managers and having conducted such discussions among themselves as they deem necessary, the Directors shall either (a) resolve the request on the basis of the Member's and Managers' written submissions; or (b) ask questions of the Member and/or Managers; or (c) ask the Member and/or Managers to make further written submissions and/or provide relevant documents and/or information in writing to clarify any issues within times and page limits set by the Directors.  Within times and page limits set by the Directors, the Member and Managers may reply to each other's additional written submissions.  If necessary, the Directors may extend the schedule originally adopted pursuant to paragraphs 2 - 4, above, to allow additional time for these purposes.

8. As soon as reasonably possible, the Directors shall decide the Member's request.  The decision of a majority of Directors present at the meeting shall be the Board's decision.  In the event of a tie vote, the Chairman of the Board shall have a second vote or two votes, in total, and if the Chairman is absent or otherwise unavailable to vote on the Member's request, the Vice Chairman shall have such a second vote, or two votes in total.

9. The Directors shall explain the reasons for their decision in writing.

10. Under the Association's Rules providing for coverage at Directors' discretion, the Directors are granted "sole discretion" in making their decision.  Accordingly, the Directors' decision is final and binding on the Association and the Member and is not appealable to any court, tribunal or any other forum whatsoever.

11. These procedures are separate and distinct from and do not apply to the Rule providing for Board adjudication of differences or disputes between a Member and the Association or the adjudication procedures set forth in Appendix A of the Association's Rules.


SCHEDULE A

LIST OF RULES PROVIDING FOR COVERAGE AT THE DISCRETION OF THE ASSOCIATION'S BOARD OF DIRECTORS

CLASS I – PROTECTION & INDEMNITY INSURANCE

  • Class I, Rule 1, Section 4, Subsection 25 (Compromise of Claims)
  • Class I, Rule 1, Section 4, Subsection 26(a)  (Members' failures regarding claim notification and submission)
  • Class I, Rule 2, Section 8 – (Cargo)
  • Proviso (a) –  (Contract of carriage terms)
  • Proviso (b) –(Deviation)
  • Proviso (c) – (Misdelivery of cargo, post and ante-dated B/Ls, inaccurate B/Ls, etc.)
  • Class I, Rule 2, Section 9 unnumbered subsections (Fines, penalties and vessel confiscation)
  • Class I, Rule 2, Section 13, Subsection 3 (Unrecoverable General Average – inadequate security)
  • Class I, Rule 2, Section 17 (Sue and Labor and Legal Costs)
  • Class I, Rule 2, Section 20 (Omnibus Clause) 

CLASS II – FREIGHT, DEMURRAGE AND DEFENSE INSURANCE

  • Class II, Rule 1, Section 4, Subsections 7 through 9 (FD&D Cover)
  • Class II, Rule 3, Section 4 (Non-recoverability under Class II of risks excluded under Class I (P&I))

CLASS III – CHARTERER'S RISKS

  • Class III, Rule 3, Section A, Subsection 3 (P&I Insurance)
  • Class III, Rule 3, Section B, Subsection 3 (Loss of or damage to an insured vessel (DTH) and for financial loss arising therefrom)
  • Class III, Rule 3, Section C, Subsection 3 (Charterer's FD&D Cover)