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Rule 20 Payment

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

a for the period 20 February – 20 June, on 20 March;

b for the period 20 June – 20 October, on 5 July;

c for the period 20 October – 20 February, on 5 November.

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 20 March.

4 Fixed premiums are due on inception of cover.

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

6 Any other sums debited by the Association to a Member, including Release Calls, Overspill Calls, reimbursement of deductibles, interest, costs or expenses, are due on demand.

7 If any sums due to the Association from the Member are not paid on or before the due date interest is chargeable on such unpaid sums at such rate as the Association may from time to time determine.

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.  

Guidance

(A) …Advance Calls are due in three instalments… (Rule 20.1)
Advance Calls constitute part of the Premium Rating1 that is collected in the Policy Year to which it relates and the Association requires payment of the Advance Calls to be made in three instalments in order to minimise cash flow difficulties for Members. Each instalment must be paid before or at the due date. Whilst a Member is permitted to pay any instalment before the relevant due date for the instalment, he is not entitled to receive any discount for doing so. 

The payment requirements of Rule 20.1 are ‘subject to Rule 20.3’ which has special provisions relating to the payment of Advanced Calls for Defence cover and Advanced Calls of less than USD 5,000.2 

(B) …Ship…entered in the course of a Policy Year… (Rule 20.2)
Where a Ship is entered during the course of a Policy Year it makes practical sense to collect the pro rata Advance Call relating to the first four-monthly period of the Ship’s entry at the time of entry and any remaining instalments at the dates specified in Rule 20.1. 

(C) …Advance Calls for Defence Cover and…less than USD 5,000… (Rule 20.3)
The Premium Rating per Ship for Defence cover is usually much less than that for P&I cover and it is considered impractical and uneconomical both for the Association and the Member to collect/pay the premium in instalments. Therefore, such Advance Calls are payable in full on the 20 March when such entries take effect from 20 February, but if not, are payable in full at the time of entry. 

For similar reasons the same rule applies to Advance Calls for P&I cover of less than USD 5,000, or the equivalent of USD 5,000 if the premium is payable in another currency.3 

(D) Fixed premiums are due on inception of cover (Rule 20.4)
This provision makes it clear that the full premium for fixed premium entries4 will be due for payment as and when the cover commences regardless of when that is. Fixed premium charterer’s entries take effect from the time that the Member charters the Ship, but the Association may agree to defer the due date for premium payments to a later time. 

(E) Deferred Calls and Supplementary Calls…are due… (Rule 20.5)
Deferred Calls can be levied by the Association ‘at any time after the end of the Policy Year5 while Supplementary Calls can be levied ‘at any time during or after the end of the relevant Policy Year’.6 Since it is not possible to determine in advance whether, or when, such Calls will be levied, the due date for payment of such Calls will be specified by the Association only as and when such Calls are levied. 

(F) Any other sums debited by the Association to a Member…are due on demand. (Rule 20.6)
This provision applies to payment of any sums debited to a Member other than Advance Calls, Deferred Calls or Supplementary Calls; e.g. Release Calls, Overspill Calls, reimbursement of loans, deductibles, interest, costs or expenses. Under Norwegian law ‘due on demand’ means that the amount falls due for payment immediately after the debit note has been submitted to the Member. 

(G) If any sums…are not paid on or before the due date…interest is chargeable… (Rule 20.7)
It is important that the Association receives timely payment of sums that are due to it in order, inter alia, to avoid cash flow constraints, counterparty credit risk and the consequent need to liquidise profitable investments in order to generate cash. Furthermore, it would be unfair to other mutual Members if any individual Member were to receive cash flow and earnings benefits as a result of withholding payments without any form of redress. Accordingly, this Rule gives the Association the right to claim interest on late payments.7 In the case of non-payment, the Association is also entitled to take other measures against the Member, including the exercise of the right of set-off8or the right to terminate cover.9 The Association may also take legal action against the Member and anyone else insured under the same entry10 to recover unpaid sums. 

(H) 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… (Rule 20.8)
Given the predominantly mutual nature of the Association, sums, including fixed premiums, which cannot be collected are deemed to be an expense of the Association which must, ultimately, either be covered by the Association’s reserves, or by the levying of Supplementary Calls.11


1 See the Guidance to Rule 10.1 and Rule 13.1, respectively.
2 See (C) below.
3 The Association can agree to terms of entry for payment of premium in a currency other than US Dollars, e.g. Euros, Pounds Sterling, Norwegian Kroner, Swedish Kroner, Japanese Yen etc. Compensation of liabilities, losses, costs and expenses will in such cases be made in the premium currency. See the Guidance to Rule 86 in this regard.
4 See Rule 10.2.
5 See Rule 12.2.
6 See Rule 13.
7 According to the Norwegian Interest on Overdue Payments Act of 1976 (Forsinkelsesrenteloven 1976), interest is chargeable in the case of payments which are ‘due on demand’ upon the expiry of one month after the debit note has been submitted.
8 See the Guidance to Rule 21.
9 See the Guidance to Rule 24.2.b.
10 See the Guidance to Rule 79.1.
11 See the Guidance to Rule 13.