Amendments to Assuranceforeningen Gard's Rules

Circular No. 5/2003 January 2004

TO THE MEMBERS OF ASSURANCEFORENINGEN GARD - gjensidig -

Dear Sirs,

AMENDMENTS TO ASSURANCEFORENINGEN GARD’S RULES

Assuranceforeningen Gard’s (the “Association”) Rules for the 2004 policy year, which commences at noon GMT on 20 February 2004, contain some alterations to those applying for the 2003 policy year.

The remainder of this Circular discusses these changes in more detail.

Rules for Ships

The changes determined by the Committee in the Rules for Ships for the 2004 policy year reflect recent amendments in the Pooling Agreement being the legal framework for the International Group of P&I Clubs’ claims sharing and collective purchase of market reinsurance.

Rule 8 Classification and certification of the Ship

The International Ships and Port Facility Security Code (the “ISPS Code”) has been incorporated into SOLAS 1974 by reference in Chapter XI-2. Part A contains mandatory provisions while Part B contains advisory provisions. The provisions will come into force for most types of ships as from 1 July 2004 and will then become a statutory requirement for all flag states that are SOLAS 1974 signatories.

It will be a condition for the cover that a ship maintain the validity of, inter alia, such statutory certificates as are issued by or on behalf of the state of the ship’s flag in relation to the ISPS Code. Against this background Rule 8.1 (f) is changed by the addition of the word “security” in order to reflect the new practice.* *

Rule 8.1 (f) shall read (amendment underlined):

1. It shall be a condition of the insurance of the Ship that:

……..

f) the Member shall comply or procure compliance with all statutory requirements of the state of the Ship’s flag relating to the construction, adaptation, condition, fitment, equipment, manning, safe operation, security and management of the Ship and at all times maintain or procure the maintenance of the validity of such statutory certificates as are issued by or on behalf of the state of the Ship’s flag in relation to such compliance

Rule 25 CesserWhen a ship has become a total loss or declared a constructive total loss (“CTL”), the cover will cease. As a starting point, the Club is under no obligation to indemnify a Member with regard to liabilities and losses having been incurred as a result of an “event” or “casualty” having occurred after cessation of the cover. A minor change is, however, made in Rule 25 for the purpose of clarifying that the “event” or “casualty” triggering the Association’s obligation to indemnify a Member in respect of liabilities and costs relating to, for example, pollution and wreck removal liabilities by reason of the Ship having become a total loss or a CTL is the event which resulted in the Ship becoming a total loss or a CTL. Thus, if the event resulting in the Ship becoming a wreck, for example a collision, has occurred during the period of entry in the Association, the Member will be covered for subsequent liabilities flowing from the casualty giving rise to the total loss or the CTL.

The new Rule 25 (5) shall read as follows:5. Notwithstanding the provisions of Rule 25.2. (a), (b), (c) and (d), the Association shall cover subject to these Rules and the terms of entry agreed, liabilities, losses, costs and expenses flowing from the casualty which gave rise to the total loss or constructive total loss of the Ship.

Rule 40 Liability for obstruction and wreck removal - A minor adjustment is made for the purpose of clarifying that the term “Ship” in the context of the wreck removal provision also includes the wreck of the entered ship.

Rule 40 shall read as follows (amendment underlined):

The Association shall cover:

a) costs and expenses relating to the raising, removal, destruction, lighting and marking of the Ship or of the wreck of the Ship or parts thereof or of its cargo lost as a result of a casualty, when such raising, removal, destruction, lighting and marking is compulsory by law or the costs or expenses thereof are legally recoverable from the Member;

b) liability incurred by reason of the Ship or the wreck of the Ship or parts thereof as a result of a casualty causing an obstruction,

provided that:

i) recovery……...

Rule 55   Terms of contractRule 55 gives the Association a wide discretion with regard to the approval of terms of contracts and indemnities governing the services provided by the Ship as well as services supplied to the Ship. The discretion is exercised on the basis of the guidelines and practice from time to time agreed between the parties to the Pooling Agreement. Rule 55 (a) has been changed for the purpose of underlining that the Association and the Member can agree to cover liabilities arising under certain contracts on a case by case basis.

Rule 55 shall read (amendment underlined):The Association shall not cover under a P&I entry liabilities, losses, costs or expenses:

a) which would not have arisen but for the terms of a contract or indemnity entered into by the Member, or by some other person acting on his behalf, unless the terms have previously been approved by the Association, or cover for such liabilities, losses, costs or expenses has been agreed between the Member and the Association, or the Association decides, in its discretion, that the Member should be reimbursed;

Rule 58 War risks

• The CLC certificates covering pollution liabilities from tankers and FMC undertakings in respect of passenger liabilities are exposing the Association for risks which may be excluded under the Rules. The reason is that the “war risks/act of third party” defences in the legislation are narrower than war risk exclusion in the Rules. All the Clubs with in the International Group of P&I Clubs have agreed to rectify the position and to harmonize their Rules.

Rule 58 War risks shall read as follows (amendment underlined);

1) The Association shall not cover under a P&I entry liabilities, losses, costs or expenses (irrespective of whether a contributory cause of the same being incurred was any neglect on the part of the Member or his servants or agents) when the loss, damage injury, illness or death or other accident in respect of which such liabilities arise or such losses, costs or expenses are incurred was caused by;

a) 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 (provided that, in the event of any dispute as to whether or not, for the purpose of this paragraph (a), and act constitutes an act of terrorism, the Association shall in its absolute discretion determine that dispute and the Association’s decision shall be final);

b) capture, seizure, arrest, restraint or detainment, (barratry and piracy excepted), and the consequences thereof or any attempt thereat;

c) mines, torpedoes, bombs, rockets, shells, explosives, or other similar weapons of war (save for liabilities, costs or expenses which arise solely by reason of the transport of any such weapons, whether on board the entered Ship or not), provided always that this exclusion shall not apply to the use of such weapons, whether as a result of government order or with the agreement of the Association, where the reason for such use is the mitigation of liability, cost or expenses which would otherwise fall within the cover given by the Association.

2) The exclusion in Rule 58.1 above shall not apply to liabilities, costs and expenses of a Member insofar only as they are discharged by the Association on behalf of the Member pursuant to a demand made under

(a) a guarantee or other undertaking given by the Association to the Federal Maritime Commission under Section 2 of US Public Law 89-777, or

(b) a certificate issued by the Association in compliance with Article VII of the International Conventions on Civil Liability for Oil Pollution Damage 1992 or any amendments thereof,

*to the extent such liabilities, costs and expenses are not recovered by the Member under any other policy of insurance or any extension to the cover provided by the Association.

Where any such guarantee, undertaking or certificate is provided by the Association on behalf of the Member as guarantor or otherwise, the Member agrees that any payment by the Association thereunder in discharge of the said liabilities, costs and expenses shall, to the extent of any  amount recovered under any other policy of insurance or extension to the cover provided by the Association, be by way of loan and that there shall be assigned to the Association all the rights of the Member under any other insurance and against any third party.

Rules for Mobile Offshore Units Changes have been made similar to those in the Rules for Ships as set out above.

Rule 8 Classification and certification of the VesselWe refer to the explanatory notes to the change to Rule 8.1 (f) in the Rules for Ships above. 

Rule 8.1 (f) shall read (amendment underlined):

1. It shall be a condition of the insurance of the Vessel that:

……..

f) the Member shall comply or procure compliance with all statutory requirements of the state of the Vessel’s flag relating to the construction, adaptation, condition, fitment, equipment, manning, safe operation, security and management of the Vessel and at all times maintain or procure the maintenance of the validity of such statutory certificates as are issued by or on behalf of the state of the Vessel’s flag in relation to such compliance.

Rule 16 Cesser We refer to the explanatory notes to the change to Rule 25 in the Rules for Ships as set out above.

The new Rule 16 (5) shall read as follows:

5. Notwithstanding the provisions of Rule 16.2. (a), (b )and (c) the Association shall cover subject to these Rules and the terms of entry agreed, liabilities, losses, costs and expenses flowing from the casualty which gave rise to the total loss or constructive total loss of the Vessel.

Rule 24 Liability for obstruction and wreck removalA minor adjustment has been made for the purpose of clarifying that the term “Vessel” in the context of the wreck removal provision also includes the wreck of the entered Vessel.

Rule 24 shall read as follows (amendment underlined):

The Association shall cover:

a)   costs and expenses relating to the raising, removal, destruction, lighting and marking of the Vessel or of the wreck of the Vessel or parts thereof or of its equipment lost as a result of a casualty, when such raising, removal, destruction, lighting and marking is compulsory by law or the costs or expenses thereof are legally recoverable from the Member;

b)   liability incurred by reason of the Vessel or the wreck of the Vessel or parts thereof as a result of a casualty causing an obstruction,

provided that:

i) recovery……...

If you have any questions, please contact the legal department in Gard Services AS.

Yours faithfully,

GARD SERVICES AS

As agent only for Assuranceforeningen Gard –gjensidig-

Claes Isacson

Chief Executive Officer