Amendments to Assuranceforeningen Gard's Statutes & Rules (January 2003)

Circular No. 5/2002 January 2003

TO THE MEMBERS OF ASSURANCEFORENINGEN GARD - gjensidig -

Dear Sirs,

AMENDMENTS TO ASSURANCEFORENINGEN GARD’S STATUTES AND RULES

Assuranceforeningen Gard’s (the “Association”) Statutes and Rules for the 2003 policy year, which commences at noon GMT on 20 February 2003, contain some alterations to those applying for the 2002 policy year.

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

STATUTES

The Annual General Meeting held on 16 August 2002 endorsed the Committee’s recommendation to amend Articles 3, 5 and 6 of the Statutes, reflecting the changes in terminology to be used with regard to mutual premiums and calls. The estimated total call premium (often referred to as the “ETC premium” or “Premium Rating”) for an entered Ship assessed at the commencement of the policy year, will now consist of two elements; namely the “Advance Call” and the “Deferred Call”. The term “Supplementary Call” will only be used in the event it is levied premium in excess of the ETC premium in respect of a policy year. The revised wordings of the relevant sections of Articles 3, 5 and 6 are set out below.

Article 3  Membership Article 3.6 shall read as follows (amendments underlined):   In accordance with the Rules of the Association a deficit may be levied on, and surplus Advance Calls, Deferred Calls and Supplementary Calls repaid to the Members in proportion to their net Advance Call for the policy year.     Article 5 The Committee Article 5.2 (d) shall read as follows (amendments underlined):   The Committee shall also: ……… d) on the recommendation of the Executive Committee, decide on the levy of Deferred Calls, Supplementary Calls and Overspill Calls or the repayment of excess Advance Calls, Deferred Calls, Supplementary Calls and Overspill Calls; ……….   Article 6 The Executive Committee Article 6.2 (e) shall read as follows (amendments underlined):   The Executive Committee shall also: ……… e) recommend to the Committee the levy of Deferred Calls, Supplementary Calls and Overspill Calls or the repayment of excess Advance Calls, Deferred Calls, Supplementary Calls and Overspill Calls; ……..

RULES FOR SHIPS – P&I COVER

The changes in Rules 1, 12, 13, 14, 15, 16, 17, 19, 20, 22, 24, 26, and 68 reflect the changes in terminology to be used with regard to mutual premiums and calls as described above. The amendments in Rules 28, 34, 42 and 59 codify the practice within the Pooling Agreement, being the basis for the International Group Clubs’ collective purchase of market reinsurance cover. Finally, minor changes are made in Rule 70 and in Appendix V to the Rules with regard to the Defence cover.

Rule 1 Interpretation

The existing term “Advance Premium” has been replaced with the term “Advance Call” and a definition of the new expression “Deferred Call” has been added. The definition of the term “Supplementary Call” has been slightly amended.   Rule 1.1 shall read as follows (amendments underlined):   In these Rules the following words or expressions shall have the following meanings:   “Advance Call” – the initial premium payable for a Policy Year in respect of an entry (other than fixed premium entry) and calculated in accordance with Rule 12. ……. “Deferred Call” – the proportion of the Premium Rating for a Policy Year in respect of an entry (other than a fixed premium entry) which shall be deferred for payment in later years in accordance with Rule 12. ……… “Premium Rating” – the agreed rating on which the Advance Call is payable to the Association, or the fixed premium payable to the Association on a fixed premium entry, according to the terms of the Ship’s entry …….. “Supplementary Call” – further premium payable for a Policy Year in respect of an entry (other than a fixed premium entry), in addition to the Advance Call and Deferred Call, but excluding any Overspill Call.     Rule 12 Advance Calls and Deferred Calls The new Rule 12.2 gives the Association authority to levy a Deferred Call, being the proportion of the ETC premium (or Premium Rating) for an entered Ship determined at the beginning of a policy year deferred for payment in later years. The decision as to the levy of a Deferred Call will be taken by the Committee on the basis of the recommendation of the Executive Committee.   Rule 12 shall read as follows (amendments underlined): Rule 12 Advance Calls and Deferred Calls   1. Before the commencement of each Policy Year, the Association shall decide what percentage of the Premium Ratings of all Ships entered for that year is to be collected by way of Advance Calls in the Policy Year to which it relates and what proportion shall be deferred for call in later years (the Deferred Call). 2. The Association may at any time after the end of a Policy Year call for the Deferred Call in whole or in part. All Deferred Calls so made shall be calculated pro rata of the Advance Calls in the relevant Policy Year. 3. Notification of Advance Calls and Deferred Calls effective for the following Policy Year shall, if practicable, be given to Members prior to 20th January. 4. A Ship entered in the course of the Policy Year shall pay a daily pro rata proportion of the stipulated Advance Calls and Deferred Calls for the year.     Rule 13 Supplementary Calls The amendment in Rule 13 reflects that only premium in excess of the ETC premium or Premium Rating determined at the commencement of the Policy Year will be described as a “Supplementary Call”.   Rule 13 shall read as follows (amendments underlined):   If the Advance Calls and Deferred Calls for a Policy Year are considered insufficient to cover the claims on, or costs, expenses and outgoings of the Association, including any allocation to reserves the Association may deem appropriate and including the excess, if any, of claims costs, expenses and outgoings of any closed Policy Year over the provisions or reserves made thereof, the Association may at any time during or after the end of the relevant Policy Year, call for one or more Supplementary Calls which shall be levied on each Member in proportion to the net Advance Calls for such year, unless the entry has been accepted on special terms which otherwise provide.     Rule 14 Determination of Supplementary Calls and Deferred Calls etc. The new expressions “Advance Call” and “Deferred Call” have been added.   Rule 14 shall read as follows (amendments underlined): Rule 14 Determination of Supplementary Calls and Deferred Calls etc.   The Association may determine Advance Calls, Deferred Calls and Supplementary Calls and variations in the Premium Rating, either generally for all entries or separately for any entry or category of entries.     Rule 15 Release Calls The new expressions “Advance Call” and “Deferred Call” have been added. Rule 15 shall read as follows (amendments underlined):

When an entry is terminated or shall cease, the Association may, without awaiting the fixing of Deferred Calls and Supplementary Calls, determine an additional premium for each open Policy Year based on, but not limited to, the anticipated rate(s) of Deferred Calls and Supplementary Calls for each year. Upon payment of such Release Calls, the Member shall be released from all liabilities for further Deferred Calls and Supplementary Calls in respect of the said entry and shall under no circumstances be entitled to participate in the distribution of any surplus decided upon thereafter.

Rule 16 Closing of Policy Years The new expression “Deferred Call” has been added. Rule 16.2 shall read as follows (amendments underlined):   No further Deferred Calls and Supplementary Calls, other than Overspill Calls, shall be levied in respect of a closed Policy Year.

Rule 17 Repayment of premium The new expressions “Advance Call” and “Deferred Call” have been added.  Rule 17 shall read as follows (amendments underlined):   If, at the time of the closing of a Policy Year pursuant to Rule 16, the Advance Calls, Deferred Calls and Supplementary Calls in respect of that year shall exceed the claims, costs, expenses and outgoings of the year, the Association may decide that such excess shall be distributed, in whole or in part, to the Members entered in that Policy Year in proportion to their net Advance Calls.     Rule 19 Reserves The new expression “Deferred Call” has been added. Rule 19.1 shall read as follows (amendment underlined):   The Association may establish and maintain such reserves as it may deem appropriate and may decide that any part of such reserves shall be applied to reduce Deferred Calls and Supplementary Calls including Overspill Calls.   Rule 20 Payment The new expressions “Advance Call” and “Deferred Call” have been added.  Rule 20 shall read as follows (amendments underlined):

1. Subject to Rule 20.3, Advance Calls are due in three instalments as follows:

2. Where the Ship is entered in the course of a Policy Year, a pro rata Advance Call for the four-monthly period in which it is entered is due at once, with the remaining instalments, if any, due at the times specified in Rule 20.1.

3. Advance Calls for Defence cover and Advance Calls of less than USD 5,000 (or the equivalent in any other currency, as determined by the Association) per Ship are due in full on 20th March.

4. ……….

5. Deferred Calls and Supplementary Calls, other than Release Calls, are due on the date specified by the Association.

6. ……..

7. ……..

8. Members' Advance Calls, Deferred Calls, Supplementary Calls, Overspill Calls, other premiums and other sums which cannot be collected shall be deemed to be an expense of the Association

Rule 22 Laid-up returns The new expression “Advance Call” has been added. Rule 22.1 shall read as follows (amendment underlined):   Subject to any special terms which may have been agreed, if the Ship has been laid up with no cargo on board in a safe port or other approved lay-up location for a period of at least 30 consecutive days, excluding the day of arrival at and the day of departure from the lay-up location, such proportion as the Association may decide of the Advance Call or of the fixed premium payable, pro rata for the period of the lay-up, shall be returned to the Member.   Rule 24 Termination by the Association The new terms “Advance Call” and “Deferred Call” have been added. Rule 24. 2 (b) shall read as follows (amendments underlined):

1. The Association may also terminate the insurance of any or all of the Ships entered by a Member

   1. ……..

   2. on three days’ notice, where the Member has failed to pay when due and demanded any Advance Call, Deferred Call, Supplementary Call or other amount due from him to the Association;

   3. …….

Rule 26 Effect of cesser or termination The new expressions “Advance Call” and “Deferred Call” have been added.  Rule 26.1 shall read as follows (amendments underlined):   Where the insurance ceases or is terminated, the Member shall remain liable for all Advance Calls, Deferred Calls, Supplementary Calls, Overspill Calls and other premiums in respect of the then current Policy Year pro rata for the period up to the date of cesser or termination, and for all Deferred Calls, Supplementary Calls, Overspill Calls and premiums in respect of prior Policy Years**.   Rule 28 Liability in respect of passengers In order to codify the practice within the International Group of P&I Clubs, the wording of Rule 28 (b) dealing with the carrier’s liability to pay damages or compensation to passengers on board the entered Ship with regard to claims not relating to the injury to, or illness or death of, a loss of or damage to the effect of passengers, has been slightly amended. Claims falling within Rule 28 (b), including liability to return passengers to their port of departure or to forward them to the port of destination, will only be covered if such liabilities have arisen out of a casualty, meaning in this context a so-called “shipping incident”, i.e. collision, stranding, explosion, fire or other cause rendering the ship incapable of safe navigation to its intended destination.   Rule 28 (b) and proviso (iv) shall read as follows (amendments underlined):   The Association shall cover:

1. ….

2. liability to pay damages or compensation to passengers on board the ship where such liability arises in consequence of a casualty, including any liability to return passengers to their port of departure or to forward them to their port of destination and to pay for their maintenance provided that:

3. ……

4. for the purpose of Rule 28 (b) above a casualty shall be defined as an incident involving either collision, stranding, explosion, fire or other cause rendering the Ship incapable of safe navigation to its intended destination or a threat to the life, health or safety of passengers.

Rule 34 Cargo liability Rule 34 1 (ii) is amended to codify the existing practice within the International Group of P&I Clubs that liabilities arising out of terms of carriage less favourable to the carrier than those laid down in the Hague/Hague-Visby Rules will be covered if the relevant terms are of mandatory application.   Rule 34. 1 (ii) shall read as follows (amendments underlined):

The Association shall cover the following liabilities when and to the extent they relate to cargo intended to be or being or having been carried on the Ship provided that unless and to the extent that the Association in its discretion shall otherwise decide, the cover under this Rule 34.1 does not include:

1. ……..

2. liabilities, costs and expenses which would not have been incurred by the Member if the cargo had been carried on terms no less favourable to the Member than those laid down in the Hague or Hague-Visby Rules, save where the contract of carriage is on terms less favourable to the Member than those laid down in the Hague or Hague-Visby Rules solely because of the relevant terms of carriage being of mandatory application.

3. …..

Rule 42 Salvage A reference to Lloyd’s Open Form of Salvage Agreement 2000 (LOF 2000) has been added in Rule 42 (b).

Rule 42 shall read as follows (amendment underlined):

The Association shall cover liability for special compensation awarded to a salvor

1. …..

2. pursuant to Article 14 of the International Convention on Salvage 1989, as incorporated into Lloyd’s Open Form of Salvage Agreement (1980, 1990, 1995 or 2000), or into any other salvage contract approved by the Association.

3. …..

Rule 59 Specialist operation In order to add clarity a proviso has been added to the end of the existing Rule for the purpose of emphasising that liabilities or losses only will be covered if they fall within the relevant terms of entry agreed for the Ship involved.   Rule 59 shall read as follows (amendments underlined): ……….. provided that this exclusion shall not apply to liabilities, losses, costs and expenses incurred by the Member in respect of:

1. loss of life, injury or illness of crew and other personnel on board the Ship;

2. the wreck removal of the Ship; or

3. oil pollution from the Ship but only to the extent that such liabilities, costs and expenses are within the cover available under any other Rule or the terms of entry agreed.

RULES FOR SHIPS – DEFENCE COVER

Rule 68 Disputes with the Association and other Members – unpaid sums The terms “Advance Call” and “Deferred Call” have been added in Rule 68.3.   Rule 68.3 shall read as follows (amendments underlined)   No Member shall be entitled to cover under the Defence entry so long as Advance Calls, Deferred Calls or Supplementary Calls or other unpaid sums of whatsoever nature owed to the Association, whether in respect of Defence or P&I cover or otherwise, remains unpaid.

Rule 70 Limitation Pursuant to Rule 70.1 the Defence cover is limited to USD 10 million per event. The Association shall determine in its absolute discretion whether legal and other costs for the purpose of this Rule 70 have arisen out of one or several events. For the purpose of the Defence cover an event may involve two or more Ships entered on behalf of the same Member for Defence risk. An example may be a dispute under a contract of affreightment involving several Ships entered on behalf of the same Member. In order to clarify the practice a new proviso has been added to Rule 70.2.   Rule 70.2 shall read as follows (amendments underlined):   The Association shall determine in its absolute discretion whether legal and other costs for the purpose of this Rule 70 have arisen out of one or several events, irrespective of whether one or several Ships are involved.     Appendix V, Deductibles, section 3 (b) – Defence entries Reference is made to the explanatory notes to the amendment to Rule 70.2 above. A similar change is made in section 3 (b) of Appendix V in order to clarify that an event for the purpose of this section may involve more than one Ship entered on behalf of the same Member.   Section 3 (b) shall read as follows (amendments underlined):   The Association shall determine in its absolute discretion in respect of the Defence cover whether legal and other costs and expenses have arisen out of one or several events, irrespective of whether one or several Ships are involved.     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