Rule changes (January 1999)

Circular No. 13/98

January 1999

TO THE MEMBERS

Dear Sirs,

RULE CHANGES

The Association's Rules for the 1999 policy year contain some alterations to those applying for the 1998 policy year. The amendments have been determined by the Committee or by the Executive Committee on the basis of delegated authority from the Committee. The amended Rules will enter into effect at noon GMT on 20 February 1999.

In the following, all amendments have been underlined.

RULES FOR SHIPS

P&I cover for Ships

Rule 1 ? Interpretation.

The definition of Pooling Agreement has been amended to reflect that the agreement dated 17 November 1992 has been replaced with a new agreement. The amended definition shall read:

"Pooling Agreement ? an Agreement, to which the Association is a party, between certain protection and indemnity associations dated 20 February 1998 and any addendum to, or variation or replacement of such agreement."

Rule 27 ? Liabilities in respect of crew.

Rule 27.2(c) has been amended to also include costs and expenses in sending a substitute to replace a crew member who has been deported. The amended Rule shall read:

"2. The Association shall cover

a) ?

b) ?

c) costs and expenses incurred as a direct consequence of complying with an order for deportation of a member of the crew and in sending a substitute to replace him which would not have been incurred had no such order been made ?"

Rule 53 ? Oil Pollution Liabilities.

Pursuant to Rule 53.2 cover for liabilities in respect of oil pollution, or threat thereof, arising out of an incident to which the US Oil Pollution Act of 1990 ("OPA-90") is applicable, are excluded unless the owner has agreed to pay the special US oil pollution premium in accordance with the terms and conditions set out in Appendix III, section 4, to the Rules for Ships. Oil pollution cover for charterers has never been subject to an additional premium. In order to reflect this the term "P&I entry" in Rule 53.2 has been replaced with "Owner's Entry". The amended Rule 53.2 shall read:

"Where the Ship, being capable of carrying oil in bulk as cargo, is on a voyage involving loading or discharging oil as cargo at any port or place in the United States of America or within the exclusive economic zone as defined in the US Oil Pollution Act of 1990 ("OPA 90") and any amendments thereto, the Association shall not cover under an Owner's Entry any liability, costs or expenses (including fines) in respect of oil pollution, or threat thereof, arising out of an incident to which OPA 90 is applicable, unless an agreement has been entered into with the Association on the terms and conditions set out in Appendix III."

Rule 59 ? Specialist Operations.

The exclusion in Rule 59 regarding specialist operations mirrors the exclusion in the Pooling Agreement. A minor amendment has been made in the relevant provision in the Pooling Agreement and a similar adjustment has now been made to Rule 59. The amendment consists of professional tank cleaning on other vessels being named as an example of a specialist operation. The amended Rule 59 shall read:

"The Association shall not cover under a P&I entry liabilities, losses, costs and expenses incurred by the Member during the course of performing specialist operations including but not limited to dredging, blasting, pile-driving, well stimulation, cable or pipelaying, construction, installation or maintenance work, core sampling, depositing of spoil, professional oil spill response or professional oil spill response training and tank cleaning (otherwise than on the Ship), (but excluding fire-fighting), to the extent that such liabilities, losses, costs and expenses arise as a consequence of:

???"

Rule 60 ? Drilling, production and accommodation vessels, barges and heavy lift vessels

A new Rule 60.2 has been introduced in respect of heavy lift vessels in order to adhere to the agreed International Group practice. It has been made a condition of cover for semi-submersible heavy lift vessels and other vessels designed exclusively for the carriage of heavy lift cargoes that the carriage is undertaken on contractual terms approved by the Association. The Heavycon charter or similar terms will automatically be approved. The new Rule 60.2 shall read:

"2. For semi-submersible heavy lift vessels and any other vessels designed exclusively for the carriage of heavy lift cargo, the Association shall not cover under a P&I entry liability for loss of or damage to or wreck removal of cargo, save insofar as the carriage is undertaken on contractual terms approved by the Association."

Note: The HEAVYCON charter is approved provided it is not materially amended.

Rule 63 ? Excluded losses ? York Antwerp Rules 1994.

Circular No. 8/98 contains further details about this amendment. The new Rule 63.1(i) shall read:

"The Association shall not cover under a P&I entry, except where and to the extent that they form a part of a claim for expenses under Rule 46 (measures to avert or minimise loss):

??

i) liabilities, losses, costs or expenses which would have been recoverable in General Average if the York Antwerp Rules 1994 had been incorporated into the charterparty or the contract of carriage."

Rule 72 ? Conduct of Member ? Y2K compliance.

A new millennium specific "prudent uninsured" rule is included as a new sub-paragraph 2 to Rule 72 in order to adhere to the agreed International Group practice. For further details we refer to Circulars No. 2/98 and 6/98. The new Rule 72.2 shall read:

"A Member must at all times (whether before, at the time of, during, or after any casualty, event or matter liable to give rise to a claim upon the Association) take such steps to protect his interests in relation to Date Compliance as the Association in its discretion would expect an uninsured person acting reasonably in similar circumstances to take. For the purpose of this Rule 72.2 "Date Compliance" shall mean that, in relation to computers and other equipment or systems for processing, storing or retrieving data, hardware, software, firmware and microprocessors and any equipment which contains or relies upon microprocessors, neither performance nor functionality is adversely affected by dates prior to, during and after the year 2000.

Rule 73 ? Nuclear perils.

The wording in the Pooling Agreement excluding certain nuclear risks has been amended. The old wording of Rule 73 has been replaced with a wording which corresponds to the exclusion in the Pooling Agreement in order to ensure that the Association is fully protected by its reinsurers. The amended Rule 73 shall read:

"The Association shall not cover any liabilities, losses, costs or expenses directly or indirectly caused by or contributed to by or arising from:

a) onising radiations from, or the radioactive, toxic, explosive or other hazardous or contaminating properties of:

(i) any nuclear fuel or any nuclear waste or the combustion of nuclear fuel, or

(ii) any nuclear installation, reactor or other nuclear assembly or nuclear component thereof; or

b) any weapon of war employing atomic or nuclear fission and/or fusion

or other like reaction or radioactive force or matter,

other than liabilities, costs and expenses arising out of carriage of "excepted matter" (as defined in the Nuclear Installations Act 1965 of the United Kingdom or any regulations made thereunder) as cargo on the Ship."

Appendix III ? Oil Pollution, Section 3 ? Limit of insurance for Charterers' Entries.

Section 3 has been slightly amended to correct some inaccuracies and to improve clarity. The new section 3 shall read:

"a The cover afforded for oil pollution for Charterer's Entries is limited pursuant to Rule 53.1 in accordance with this paragraph 3.

b The limit of insurance for any and all claims in respect of oil pollution is whichever is the lesser of the limitation sum and USD 100 million each incident or occurrence each Charterer's Entry subject to any lower limit which may apply in the circumstances described in paragraphs 3(c) and 3(d) below.

c Where the Ship provides salvage or other assistance to another ship following a casualty, a claim by the Member in respect of oil pollution arising out of the salvage, the assistance or the casualty shall be aggregated with any claim or claims for liabilities, losses, costs or expenses incurred in respect of oil pollution by any other ships similarly engaged in connection with the same casualty when such other ships are either:

i insured by the Association in respect of oil pollution under Charterer's Entries; or

ii covered for those risks under Charterer's Entries with any other association which participates in the Pooling Agreement.

In such circumstances the limit of the liability of the Association shall be such proportion of the sum set out in paragraph 3(d) below as the claim by the Member bears to the aggregate of all the said claims.

d Where a Ship is separately insured under more than three Charterer's Entries with the Association or with the Association and any other association(s) which participate(s) in the Pooling Agreement, the aggregate of all claims for oil pollution brought against the Association and/or such other association(s) following an incident or occurrence shall be limited to USD 300 million. The liability of the Association in respect of each such claim shall be limited to that proportion of USD 300 million that that claim bears to the aggregate of the claims against the Association or the Association and such other association(s), if any."

Defence cover for Ships

Rule 65(g) ? Alterations to the Ship.

The existing wording in Rule 65(g) comprises, inter alia, disputes regarding alterations to the Ship. The term alterations has now been deleted and the cover under this Rule will be restricted to disputes relating to repairs and deliveries to the ship, whilst cover for disputes regarding alterations or conversion contracts will only be available under the new Rule 66(c) (see below). The amended Rule 65(g) shall read:

"The Association shall cover legal and other costs necessarily incurred in establishing or resisting claims concerning the following:

??

g) repairs or deliveries to the Ship."

Rule 66 ? Conversion and alterations.

Rule 66 (c) has been amended to the effect that contracts regarding alterations to or conversion of the Ship as far as Defence cover is concerned are treated as a special risk. This means that cover will only be available if a separate agreement, pursuant to which the Association agrees to provide cover, has been entered into at the latest on the signing of the relevant contract. The reason for this special clause is that a major conversion in reality has similar inherent risks to ship building. Consequently cover should only be available if the Association has had a chance to consider the risk and determine the terms on which the Association may be prepared to provide Defence cover prior to the contract being signed. The new Rule 66(c) shall read:

"The Association shall cover legal and other costs necessarily incurred in establishing or resisting claims in connection with:

a) ??

b) ??

c) conversion of or alterations to the Ship, provided always that a separate agreement, pursuant to which the Association agrees to provide Defence cover for such legal and other costs has been entered into with the Association at the latest on the signing of the relevant contract for the conversion of or the alterations to the Ship."

Rule 67.1(b) ? Excluded costs - reasonable relation between the merits of the claim and the costs which are likely to be incurred.

Rule 67.1(b) has been amended to include a reference to the prospects of succeeding in establishing a claim. The Association will be given the right to decline to cover the Member's costs in whole or in part if there is no reasonable relation between the prospects of succeeding in establishing a claim and the costs which are likely to be incurred. The amended Rule 67.1(b) shall read:

"The Association may decline to cover under a Defence entry all or part of the Member's costs, where it is of the opinion that:

a) ??

b) there is no reasonable relation between the prospects of succeeding in establishing a claim or of having the claim enforced or the liability averted and the costs which are likely to be incurred.

c) ??"

Rule 67.2(b) ? Excluded costs ? The Association's right to appoint external lawyers, experts and advisers.

According to Rule 82.3 the Association has the right to control and direct the conduct of claims or legal proceedings relating to matters in respect of which the Member is insured. To emphasise the importance of this principle in relation to Defence cases a new Rule 67.2(b) has been adopted to make it clear that the Association shall not be liable to reimburse the Member's costs unless the appointment of external lawyers, advisers and experts has been approved by the Association. The new Rule 67.2(b) shall read:

"The Association shall be under no liability to reimburse a Member for costs incurred:

a) before the Association has been notified of a claim under the Defence cover;

b) by the employment of lawyers, experts and other advisers appointed by the Member without the Association's approval."

RULES FOR MOBILE OFFSHORE UNITS

Rule 38 - Conduct of Member - Y2K compliance.

We refer to the explanatory notes concerning Rule 72.2 in the Rules for Ships. The new millennium specific "prudent uninsured" rule has also been included as a new sub-paragraph 2 to Rule 38 in the Rules for Mobile Offshore Units. The new Rule 38.2 shall read:

"A Member must at all times (whether before, at the time of, during, or after any casualty, event or matter liable to give rise to a claim upon the Association) take such steps to protect his interests in relation to Date Compliance as the Association in its discretion would expect an uninsured person acting reasonably in similar circumstances to take. For the purpose of this Rule 38 "Date Compliance" shall mean that, in relation to computers and other equipment or systems for processing, storing or retrieving data, hardware, software, firmware and microprocessors and any equipment which contains or relies upon microprocessors, neither performance nor functionality is adversely affected by dates prior to, during and after the year 2000.

Yours faithfully,

ASSURANCEFORENINGEN GARD

-gjensidig-

John G. Bernander

Managing Director