Rate this article:  

Table of contents

Rule 26 Effect of cesser or termination

1 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.

2 The Association shall be under no liability whatsoever by reason of anything occurring after cessation or termination 

Guidance

(A) ...the Member shall remain liable for all...premiums... (Rule 26.1)
Notwithstanding termination or cesser of cover under Rules 23, 24 or 25, the Member remains liable to pay premiums in accordance with Rule 26. The term ‘premiums’ includes not only Advance Calls,1 Deferred Calls,2 Supplementary Calls3 and Overspill Calls,4 as separately identified in the Rule, but also fixed premiums and other special premiums which are due from time to time, such as premium for additional insurances that have been arranged by the Association for the Member. 

(B) ...in respect of the then current Policy Year pro rata for the period up to...cesser or termination... (Rule 26.1)
If cesser or termination occurs during the course of the Policy Year then, notwithstanding that fact, the Member remains liable to pay on a pro rata basis all premiums that are levied for the Policy Year whether they are levied before or after the date of termination or cesser. This means that the Member is obliged to pay calls that are needed to cover the Association’s overall liabilities which occur in that Policy Year whether before or after the date on which the entry is terminated or ceases. However, the Member is obliged to pay only that proportion of such calls which the period of entry of his Ship(s) in that Policy Year bears to the whole of the Policy Year. For example, if a Member ceases to be insured on 20 August (half way through the Policy Year) and in the second half of the Policy Year an unusual series of incidents gives rise to exceptional claims on the Association, the Member remains liable to pay 50 per cent of any Supplementary Calls which are levied to meet those unexpected claims, even though he was not a Member of the Association, and, therefore, not insured by the Association, when the claims occurred. On the other hand, if the Member’s cover ceases on 21 March, at which time he has paid one third of his Advance Calls,5 he will be entitled to a rebate of approximately three-quarters of the payment made, i.e. for three out of the four months, and his liability for Deferred Calls, Supplementary Calls and Overspill Calls will be for 1/12th of such Calls, commensurate with the one month entry. However, the Member can be released from his liability for Calls, other than Overspill Calls, by the payment of a Release Call pursuant to Rule 15. 

(C) ...premiums in respect of prior Policy Years. (Rule 26.1)
The Member also remains liable following termination or cesser of an entry for all premiums that have been levied before the date of such termination or cesser, or which will be levied thereafter in respect of prior Policy Years during which he was insured with the Association, including Overspill Calls levied in respect of any such year under Rule 18. However, the Member can be released from his liability for such Calls, other than Overspill Calls, by the payment of a Release Call pursuant to Rule 15. 

(D) The Association shall be under no liability... (Rule 26.2)
Rule 26.2 must be read in conjunction with Rule 2.4.c, which provides that cover is available for the Member ‘in respect of liabilities, losses, costs and expenses incurred by him which arise out of events occurring during the period of entry.’ Therefore, the Association has no liability for events which occur after the date of termination or cesser, but the Association continues to make cover available for liabilities arising out of events occurring before the date the entry was terminated or ceased.6 For the purpose of assessing whether cover is available it is the date of the event that causes the liability that is material and not the date on which the consequences of the event became manifest or apparent, nor the date when the Member’s liability was determined. Difficulties may arise in determining which event, or which event out of several possible contributory events, was the cause of the Member’s liability and in determining when that event occurred. These issues are considered elsewhere in this Guidance7 and can be important where, for example, the potential events span several Policy Years and the Member has changed P&I club during that period, or where some events occur before and other events occur after termination or cesser of cover.


 

1 See the Guidance to Rule 12.
2 See the Guidance to Rule 12.
3 See the Guidance to Rule 13.
4 See the Guidance to Rule 18 and Appendix VI to the Rules.
5 For the first four months of the Policy Year, pursuant to Rule 20.1.a.
6 See the Guidance to Rule 25.6.
7 See the Guidance to Rules 2 and 80.