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1 The Association shall not cover under a P&I entry liabilities, losses, costs or expenses arising out of waste incineration or waste disposal operations carried out by the Ship (other than any such operations carried out as an incidental part of other commercial activities).
2 Unless and to the extent that the Association in its discretion shall otherwise decide, the cover under a P&I entry does not include any liability, loss, cost or expense, including, without limitation, liability for the cost of remedial works or clean up operations, arising as a result of the presence in, or the escape or discharge or threat of escape or discharge from, any land based dump, site storage or disposal facility of any substance previously carried on the Ship whether as cargo, stores or waste and whether at any time mixed in whole or in part with any other substance whatsoever.
A) …waste incineration or waste disposal operations carried out by the Ship (other than any such operations carried out as an incidental part of other commercial activities) (Rule 62.1)
Rule 62.1 excludes cover for liabilities, losses, costs and expenses that arise as a result of waste incineration or waste disposal operations that are carried out by Ships that engage in such activities as their primary commercial function. However, cover is not excluded where waste incineration or disposal occurs as a necessary and incidental part of other commercial activities, e.g. the incineration or disposal of the Ship’s own waste. The Ship’s own waste constitutes ‘any other substance’ for the purposes of Rule 38 and, therefore, should the Member incur liability as a result of the accidental discharge or escape of such material from the Ship, cover is available under Rule 38.1 However, if such material is allowed to escape from the Ship as a result of the wilful negligence of the Member then cover is excluded under Rule 72.2 If the Member is a corporation, Rule 72 will apply only if the wilful negligence is that of the person that is considered to be the alter ego of the corporation.3
(B) …the cover under a P&I entry does not include any liability…arising as a result of the presence in, or the escape…from, any land based dump…of any substance previously carried on the Ship… (Rule 62.2)
Rule 62.2 was introduced in order to protect the Association against claims that could be made against the Member as a result of problems that can arise after the removal from the Ship of substances that have previously been carried on the Ship, whether as cargo, stores or waste. Such liabilities can arise, for example, under the provisions of the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) of the United States which gives local authorities or other parties that are affected by the presence of such substances on shore (e.g. by contaminated cargo that has been taken for disposal to a land based dump), the right in some instances to hold the Member responsible for such post-discharge problems on the basis that the original cause of the problem can be traced back to the Member’s Ship. Such liabilities, losses etc., are not considered to arise ‘in direct connection with the operation of the Ship’4 and, consequently, cover is excluded for such liabilities etc., by Rule 62.2.
(C) …any liability, loss, cost or expense, including, without limitation, liability for the cost of remedial works or clean up operations, arising as a result of the presence in, or the escape or discharge or threat of escape or discharge from… (Rule 62.2)
Rule 62.2 is intended to exclude cover for any liabilities, losses, costs or expenses that arise in any way whatsoever as a result of the presence of the relevant substances on, or in, the land based dump, or as a result of the actual or threatened escape or discharge of such substances from such a facility. For example, the owner of the facility or the local authority might hold the Member liable for substantial clean up costs that are incurred by them should toxic substances escape from the site, or for substantial costs that are incurred in order to ensure that this does not happen. Alternatively, very large claims could be made against the Member if those who live or work in the vicinity of the site were forced to evacuate the area as a result of the escape of noxious or harmful gases emanating from substances that had previously been taken from the Ship. Cover is not available in such circumstances, nor in any other circumstances that arise as a result of the fact that such substances are present in such a facility.
(D) …whether as cargo, stores or waste… (Rule 62.2)
So long as the substance that has been taken ashore originated in the Ship it does not matter whether it was previously carried as cargo or as stores or as waste. Cover is excluded in all such circumstances.
(E) …and whether at any time mixed in whole or in part with any other substance whatsoever. (Rule 62.2)
Cover is excluded in the event that any part of the substance that has been taken to the land based dump etc., originated on the Ship. It does not matter that such a substance has been mixed with any other substance, whether in whole or on part, and whether that occurred before or after discharge from the Ship. For example, such admixture could occur when contaminated cargo is mixed with other contaminated cargo from another ship, or with some other substance in a barge after discharge from the Ship and before the mixed commodity is taken to the land based dump.
(F) …Unless and to the extent that the Association in its discretion shall otherwise decide… (Rule 62.2)
However, the Association is given the discretion5 in the circumstances that are described in Rule 62.2 to make cover available either in full or in part and on such terms as it thinks appropriate in the particular circumstances. Such discretion will be exercised on a case by case basis depending on the particular circumstances.
1 See (G) of the Guidance to Rule 38.
2 See the Guidance to Rule 72.
3 See (C) of the Guidance to Rule 72.
4 See the Guidance to Rule 2.4.a.
5 Such discretion can only be exercised by the Board of Directors of the Association. See Article 6.5.b of the Bye-Laws of Gard P. & I. (Bermuda) Ltd. and Article 9.3.b of the Statutes of Assuranceforeningen Gard -gjensidig-.