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.

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 (as hereinafter defined) 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 (as hereinafter defined) of the Association.

ASSOCIATION:

American Steamship Owners Mutual Protection and Indemnity Association, Inc. and/or its subsidiary American Steamship Owners Marine Insurance Company (Europe) Ltd. as the context or subject matter may require or allow.

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

BY-LAWS:

The By-Laws of American Steamship Owners Mutual Protection & Indemnity Association, Inc. 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. The same definition shall apply to the document issued by Shipowners Claims Bureau (Cyprus) Ltd. on behalf of American Steamship Owners Marine Insurance Company (Europe) Ltd.

CO-ASSURED:

Any person who is insured in accordance with the terms of Rule 1.3.13 to 1.3.18.

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.

CONVENTION LIMIT:

Has the meaning ascribed to it in Rule 4.16.

DIRECTORS:

The Board of Directors of American Steamship Owners Mutual Protection and Indemnity Association, Inc. 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. The same definition shall apply to a document issued by Shipowners Claims Bureau (Cyprus) Ltd. on behalf of American Steamship Owners Marine Insurance Company (Europe) Ltd. evidencing any additions or variations to the contract of insurance as contained in a relevant Certificate of Entry both as further defined in each case herein.

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 and war risks.

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. and/or its subsidiary Shipowners Claims Bureau (Cyprus) Ltd. and/or any of the other subsidiaries of Shipowners Claims Bureau, Inc. as the context or subject matter may require or allow. Provided always that any and all powers, discretions or liberties to agree to any special terms and/or to waive or vary any terms of these Rules and/or any other provisions of a contract of insurance to which the Association and the Member are party, or to agree to, or approve of, any additional insurances in respect thereof, or to determine or approve of any issue as a condition for recovery of a claim, or to extend or restrict cover, or to engage in the adjudication of differences or disputes under Appendix A of these Rules of Class I, which are described in these Rules as vesting in the Managers, shall be vested solely and exclusively in 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 may require or allow, the term Member shall, in these Rules, include a Joint Member, Co-assured and Affiliate. The same definition shall apply to a party named as an Assured/Member on a Certificate of Entry issued by Shipowners Claims Bureau (Cyprus) Ltd. on behalf of American Steamship Owners Marine Insurance Company (Europe) Ltd.

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 4.17.

OVERSPILL CLAIM:

Has the meaning ascribed to in it Rule 4.17.

OVERSPILL CLAIM DATE:

Has the meaning ascribed to in it Rule 4.17.

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.

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 contract of insurance 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, save and insofar as any contract of insurance shall be required to be issued in any other jurisdiction by reason of any local regulations to which the Association or any subsidiary of the Association may be subject. .
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.

6. 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.
7. 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.

8. 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 to $500,000,000.
   
   
   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 $500,000,000. The liability of the Association in respect of such claims shall be limited to that proportion of $500,000,000 that each claim recoverable from the Association bears to the aggregate of the claims recoverable against the Association and such other associations.

9. 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.
10. 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.
11. 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.
12. 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.

13. 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.
14. 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.
15. 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.
16. Any communication by the Association to one Joint Member, Co-assured or Affiliate shall be deemed to be communication to all.
17. 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.
18. 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.

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. who 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.

3. 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.

4. 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.

2. 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.

3. There shall be no recovery from the Association under a contract in respect to passengers on the insured vessel while on an excursion from the insured vessel in circumstances where either that contract has been seperately entered into by the passenger for the excursion whether or not with the Member, or the Member has waived any or all of its 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

2.  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.

2. 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.

3. 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.

4. 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, provided that:

1. such liabilities, costs and expenses shall not be Excluded Losses if the relevant terms of the contract of carriage were of mandatory application;
2. such liabilities, costs and expenses shall be Excluded Losses to the extent that they would not have been incurred or borne by the Insured Owner but for its waiver or limitation of rights of recourse that would otherwise have been available under the contract of carriage in accordance with
   1. the Hague or Hague Visby Rules, and/or
   2. mandatorily applicable law;

2. 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.

3. 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.

4. 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.

5. 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.

6. 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 (other than fines or penalties arising from the smuggling of goods or cargo or any attempt thereat), 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.

All other fines and penalties will be recoverable only where the Member has satisfied the Directors that it took such steps as appear to the Directors reasonable to avoid the event giving rise to such fine or penalty, and only to such extent as the Directors in their sole and absolute direction may determine without having to give any reasons for their decision.

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

• recovery shall be limited to the market value of the insured vessel, free of commitment at the time of confiscation;
• the Member shall have satisfied the Directors that it took such steps as appear to them to be reasonable to avoid the event giving rise to the confiscation;
• no such claim shall be considered by the Directors until such time as the Member has been finally deprived of its full interest in the insured vessel;
• any amount claimed in regard to the confiscation under this Section 9 shall be recoverable only to such extent as the Directors in their sole and absolute discretion may determine without having to give any reasons for their decision.

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.

5. 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 14 in respect of such vessel so long as the Member is not a party to STOPIA 2006 (as amended).
6. 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 14 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.

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. 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,

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

2. 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.

3. 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

4. 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

5. 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.

4. 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

5. 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

6. 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

7. 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, without any recourse whatsoever against the other.
      

Contracts and Indemnities

8. 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

9. Any liabilities, costs and expenses incurred by the Member during the course of performing dredging, mining, blasting, pile-driving, well-intervention, cable or pipe-laying, construction, installation or maintenance work, core sampling, depositing of spoil, power generation 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 the purpose or quality of the Member’s work, products or services; or
3. any loss or damage to the contract work.

Provided always that this exclusion 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 or the threat thereof,

but only to the extent that such liabilities, costs and expenses are covered under Sections 1 through 20 of Rule 2 of these Rules of Class I.

Willful Misconduct

10. 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

11. 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, to the extent that such liabilities, costs or expenses arise out of or during drilling or production operations.

Waste Disposal and Sub-Sea Activities

12. 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

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

Salvage of an Insured Vessel

14. 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

15. 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

16. Liabilities, costs and expenses incurred by a Member in respect of any of the following:
    1. personnel (other than seamen), employed otherwise than by the Member, where the insured vessel is providing accommodation to such personnel in relation to their employment on an oil or gas production or exploration facility, unless a contractual allocation of such risk has been approved by the Association;
       
    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

17. 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

18. 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

19. 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.

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

5. 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.
6. 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).
7. 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

8. 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.
9. 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.
10. 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
 

11. 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.

  Premium and Other Taxes

12. The Member shall on demand pay to the Association or to its order the amount of any premium tax or other tax levied on, or in connection with, the insurance or reinsurance provided by the Association to the Member for which the Managers determine the Association or the Member has, or may, become liable, and the Member shall indemnify and hold harmless the Association and/or the Managers inrespect of any loss, damage, liability, cost or expense which the Association and/or the Managers may incur in respect of such premium tax or other tax.

13. 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

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

 Set-off

15. 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

16. 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.