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Rule 73 Nuclear perils

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

a ionising 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 or device employing atomic or nuclear fisson and/or fusion or other like reaction or radioactive force or matter,

c the radioactive, toxic, explosive or other hazardous or contaminating properties of any radioactive 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.

2 The exclusion in Rule 73.1 above shall not apply to liabilities, costs and expenses of a Member insofar only as they are discharged by the Association on behalf of the Member pursuant to a demand made under:

i a guarantee or other undertaking given by the Association to the Federal Maritime Commission under Section 2 of US Public Law 89-777, or

ii a certificate issued by the Association in compliance with Article VII of the International Conventions on Civil Liability for Oil Pollution Damage 1969 or 1992 or any amendments thereof,

iii  a non-war certificate issued by the Association in compliance with either Article IV bis of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 2002 and Guidelines for its implementation or Regulation (EC) No. 392/2009 of the European Parliament and of the Council which gives effect thereto, or

iv a certificate issued by the Association in compliance with Article 7 of the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001, or

v an undertaking given by the Association to the International Oil Pollution Compensation Fund 1992 in connection with the Small Tanker Oil Pollution Indemnification Agreement as amended (STOPIA), or, except where such liabilities , costs and expenses arise from or are caused by an act of terrorism, the Tanker Oil Pollution Indemnification Agreement as amended (TOPIA), or

vi a certificate issued by an Association in compliance with Article 12 of the Nairobi International Convention on the Removal of Wrecks, 2007

to the extent such liabilities, costs and expenses are not recovered by the Member under any other policy of insurance or any extension to the cover provided by the Association. Where any such guarantee, undertaking or certificate is provided by the Association on behalf of the Member as guarantor or otherwise, the Member agrees that any payment by the Association thereunder in discharge of the said liabilities, costs and expenses shall, to the extent of any amount recovered under any other policy of insurance or extension to the cover provided by the Association, be by way of loan and that there shall be assigned to the Association to the extent and on the terms that it determines in its discretion to be practicable all the rights of the Member under any other insurance and against any third party. 

 

Guidance

The processing, carriage and use of nuclear material involves substantial and special risks and is governed by international conventions such as the Brussels Convention Relating to Civil Liability in the field of Maritime Carriage of Nuclear Material 1971. The nature of such risks is very different from that which is faced on a day-to-day basis by the vast majority of ships. Accordingly, the Association, the other P&I clubs that are members of the International Group and the market reinsurers of the Pool, have concluded that it would be contrary to the principles of mutuality to provide the same breadth of cover in respect of such risks. Therefore, even though the Association may discharge certain liabilities, costs and expenses of the Member on behalf of the Member pursuant to, and subject to, the terms of Rule 73.2, cover is made available only in limited circumstances, i.e. in respect of the carriage of ‘excepted matter’ as defined in (E) below. 

(A) …directly or indirectly caused by or contributed to by or arising from… (Rule 73)
Rule 73 is drafted in the widest terms possible to exclude cover for all liabilities, losses, costs or expenses that are caused, or contributed to, either directly or indirectly, by one or more of the various nuclear perils that are listed therein. The use of the phrases ’either directly or indirectly’ and ’caused by or contributed to or arising from’ emphasise that if the risks that are itemised in Rule 73.1.a have had any material causative impact or influence on the incurring of liabilities, losses etc., cover is not available. 

(B) …ionising 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… (Rule 73.1.a)
The term ‘nuclear fuel’ refers to a substance that is the source of energy in a nuclear reactor. ‘Nuclear waste’ refers to all products of the nuclear industry that have no readily ascertainable value, but need special handling because of their radioactive character. Spent nuclear fuel may be considered to be ‘waste’ if it cannot be re-processed to recover uranium and plutonium. 

Rule 73.1.a is primarily designed to exclude cover for risks that arise as a result of the operation of nuclear-powered ships. However, cover is also excluded if the liability, loss, cost or expense arises generally because of nuclear fuel regardless of how and where it is used, or because of nuclear waste from any source, whether or not on board the entered Ship. 

Cover is excluded not merely for claims that affect the Ship, its cargo or Crew, but also for claims for damage to any other property, or for damage to, or the pollution of, the environment, or for injury to any other person. For example, cover is excluded for claims that arise as a result of a collision between a non-nuclear powered Ship that is entered in the Association and a nuclear powered ship that exposes property, persons and the environment to radiation from the nuclear fuel on the nuclear powered ship. Cover is also excluded for losses that may be suffered by the entered Ship as an innocent bystander that is affected by the fall-out of nuclear fuel or waste in the vicinity of the Ship. 

Finally, Rule 73.1.a excludes cover not only for radiation damage, but also for any other form of damage that is caused by the toxic, explosive or any other inherently characteristic nature of a nuclear installation or reactor regardless of whether such installation or reactor is situated on-shore or on a nuclear powered ship. 

(C) …any nuclear installation, reactor or other nuclear assembly or nuclear component thereof… (Rule 73.1.a.ii)
The phrase ‘nuclear installation, reactor or other nuclear assembly or nuclear component thereof’ encompasses any plant, machinery, equipment or appliance that is designed or adapted for the production or use of atomic energy, or for the storage, processing or disposal of nuclear fuel or nuclear waste. 

(D) …any weapon or device employing atomic or nuclear fission and/or fusion… (Rule 73.1.b)
Rule 73.1.b excludes cover for liabilities, losses, costs and expenses that are caused by any form of atomic weapon. Atomic bombs, i.e. those bombs that employ fission techniques, or hydrogen bombs, i.e. those that use a fusion process, are both considered to be ‘any weapon or device’ for the purposes of Rule 73.1.b, as are any other weapons that use ‘other like reaction or radioactive force or matter’. 

Cover is excluded regardless of whether the weapon is or is not being used for a warlike purpose. Therefore, cover is excluded for claims that arise as a result of an accident that involves a nuclear weapon. 

Although additional war risks insurance may be arranged for the Member by the Association,1 such insurance is also subject to the same exclusion. 

(E) ...the radioactive, toxic, explosive or other hazardous or contaminating properties of any radioactive matter (Rule 73.1.c)
This provision reflects the exclusion that can be found in the Pooling Agreement and is included to ensure that the cover that is available to a Member from the Association in respect of nuclear perils does not extend beyond that which is covered by reinsurance. As stated in section (A) above, Rule 73 is drafted in the widest terms possible to exclude cover for liabilities, losses, costs or expenses whether ”...directly or indirectly caused by or contributed to by or arising from...” the various nuclear perils listed therein. Therefore, Rule 73.1(c) makes it clear that the exclusion applies to virtually any hazardous properties of any radioactive matter and applies regardless of whether the Member knew of the hazardous properties of the radioactive matter or that the substance or ‘matter’ was radioactive. 

However, if the nuclear peril exclusion is to apply, there must be some causal or contributory link between the radioactive, toxic, explosive or other hazardous or contaminating properties of the radioactive matter, and the liabilities, losses, costs or expenses that form the subject-matter of the Member’s claim. Therefore, if a scrap metal cargo were to be loaded in bulk on board the Ship and it was subsequently discovered that the cargo was radioactive, cover is not available for the costs and expenses of unloading and handling the cargo even if the shipper had failed to properly describe it as being radioactive. For similar reasons, cover would not be available under a Defence entry for the legal and other costs that may be incurred in order to seek reimbursement of losses from the shipper or to defend an off hire claim that may be brought under a time charter party. 

(F) ...other than liabilities, costs and expenses arising out of carriage of ‘excepted matter’ (Rule 73 proviso)
Nuclear substances are radioactive or volatile to varying degrees, and certain types of nuclear materials can be, and are, routinely carried safely by ships as cargo. Consequently, there is no reason why cover should not be made available in relation to the risks that are involved in such carriage. Therefore, Rule 73 does not exclude cover for liabilities, losses, costs and expenses that arise as a result of the carriage by an entered Ship of ‘excepted matter’2 as defined in the Nuclear Installations Act 19653 of the United Kingdom or any regulations made thereunder. However, cover is available under Rule 73 only when such permitted cargo is carried4 on the entered Ship. If claims are made in relation to such substances when carried on another ship, or when stored elsewhere, cover is excluded as specified in Rules 73.1.a, b and c. 

The wording of Rule 73 reflects that of the Pooling Agreement and the Group Excess Loss Policies in order to ensure that the Association is fully protected by its reinsurers. Consequently, if an application is made to the Association to confirm cover, the Association may seek the advice of a consultant appointed by the International Group. 

(G) The exclusion in Rule 73.1 above shall not apply to liabilities, costs and expenses of a Member insofar as only...
Rule 73.2 makes it clear that the exclusion in Rule 73.1 does not apply to liabilities, costs and expenses that are incurred by the Association by reason of having issued the certificates, guarantees or undertakings that are specified in Rule 73.2. 

The liability regimes for which such certificates, guarantees or undertakings are issued may not protect the Member against liabilities etc., arising as a result of nuclear risks. However, although the Association and the other P&I clubs that are members of the International Group, do not provide shipowners with primary P&I cover for nuclear perils, the shipowner and the Association may incur liabilities, costs and expenses by virtue of the relevant certificates, guarantees or undertakings that have been issued. Such liability would be excluded from the P&I cover unless an exception was made to the exclusion from cover. Consequently, Rule 73.2 provides such an exception and confirms that cover is available for liabilities, costs and expenses that are incurred in such circumstances and which would have been excluded but for such exception. 

Rule 73.2 has the same application in relation to nuclear risks as Rule 58.2 has in relation to war risks. For further comments, please see the guidance to Rule 58.2.


 

1 See Appendix 1, paragraph 2 and the Guidance to Rule 58.
2 ‘Excepted matter’ is defined in Section 26 of the Nuclear Installations Act as: “any nuclear matter consisting only of one or more of the following, that is to say –
(a) isotopes prepared for use for industrial, commercial, agricultural, medical,scientific or educational purposes;
(b) natural uranium;
(c) any uranium of which isotope 235 forms not more than 0.72 per cent.;
(d) nuclear matter of such other description, if any, in such circumstances as may be prescribed (or, for the purposes of the application of this Act to a relevant foreign operator, as may be excluded from the operation of the relevant international agreement by the relevant foreign law)”.
3 This statute was passed in order to give effect in the United Kingdom to the provisions of the Vienna Convention on Civil Liability for Nuclear Damage 1963 in the United Kingdom..
4 Article IX of the Hague-Visby Rules states that nothing in the Rules will affect the provision of ‘any International Convention or national law governing liability for nuclear damage.’ This is a reference to the Vienna Convention on Civil Liability for Nuclear Damage 1963 which imposes absolute liability on the operators of nuclear installations where damage (other than damage caused by natural disasters of an exceptional character) has been suffered as a result of a nuclear incident involving nuclear material carried from that installation.