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Introduction

Several parties that are, according to the law, separate legal entities may be involved in the operation of a ship and may, therefore, be in need of insurance protection against liabilities, losses, costs and expenses that arise as a result of their activities. The Member may have outsourced operational or commercial functions to third parties such as ship managers, whether technical or commercial, or crew managers, any of whom may incur liability to third parties as a result of the responsibilities, activities or functions which have been delegated to them in relation to the Ship. The Member may also have entered into contracts for the provision of services to or by the Ship and those contractual partners may wish to be protected against claims that are made by third parties as a result of the provision of such services. 

The Member may also be a corporation which is part of a bigger group of companies, one or more of which may in reality be owned by the same beneficial owner, and there is a risk that claims that arise as a result of the operation of the Ship may be made against other companies in the group and/or against the beneficial owner, despite the fact that none of these related companies may have performed any activities in relation to the Ship. The charterer1 and the owner of the Ship may be part of the same group of companies and the charterer may, therefore, wish to have the benefit of any insurance which has been arranged by the owner as Member. 

No party will normally have any right of recovery from the Association under the contract of insurance unless he is a Member, Joint Member or Co-assured. The only exceptions are where a third party obtains such a right as a result of the operation of law,2 or pursuant to a certificate3 or guarantee that has been provided by the Association, or by virtue of a permitted assignment or other transfer of rights under the contract of insurance.4 

Rules 78 and 79 describe the status, rights and responsibilities of the various categories of persons or companies under the contract of insurance and the Rules:

  • Each Member,5 or Joint Member,6 is entitled to the full benefit of the contract of insurance and to membership7 of the Association, including the right to vote at General Meetings. In other words, a Member has the status of an assured and an insurer;
  • A Co-assured8 is a party to the contract of insurance and will be named in that capacity on the Certificate of Entry,9 but does not have any membership rights. In other words, a Co-assured has the status of an assured, but not that of an insurer. A Co-assured is covered in respect of liabilities, losses, costs and expenses only to the extent determined in Rule 78, and will be liable to pay premium and other sums that are due to the Association to the extent determined in Rule 79.
  • An Affiliate10 is not a party to the contract of insurance.11 Therefore, he has no right to recover under the contract of insurance and does not have any liability for any sums that are due to the Association under it. Furthermore, an Affiliate has no membership rights. An Affiliate is a person, whether an individual or a corporation, to whom or to which, the Association12 may, by the exercise of its discretion, extend cover within the boundaries of Rule 78.7. 

It is important to take note of the inter-relationship between the rights and duties of each category of person that is described in Rules 78 and 79. For example, a Co-assured has a right of recovery from the Association which is co-extensive with that of a Member, but is also jointly and severally liable with the Member for all sums that are due to the Association. Furthermore, the act or omission of a Co-assured which causes a breach of the contract of insurance is deemed to be the act or omission of all assureds, including the Member.


 

1 A charterer has the right to effect a separate entry with the Association. See the definition of a
‘Charterer’s Entry’ in the Guidance to Rule 1 and see the Guidance to Rule 3.1.
2 Under Norwegian law, a third party may obtain rights pursuant to Section 7-8 of the Insurance Contract
Act of 1989. See also the Guidance to Rule 87.
3 The Association may be obliged to make payment directly to third parties as a result of the evidence of
insurance for pollution liability that is issued pursuant to CLC 92. See (A) of the Guidande to Rule 38.
4 See the Guidance to Rule 89.
5 For the definition of ‘Member’ see the Guidance to Rule 1. However, please note that the context does
not allow a Co-assured and an Affiliate to be considered to be ‘Member’ for the purposes of Rules 78
and 79.
6 For the definition of ‘Joint Member’ see the Guidance to Rule 1.
7 See the Guidance to Rule 78.2.
8 For the definition of ‘Co-assured’ see the Guidance to Rule 1.
9 For the definition of ‘Certificate of Entry’ see the Guidance to Rules 1 and 5.
10 For the definition of ‘Affiliate’ see the Guidance to Rule 1.
11 Whilst Rule 1.1 defines an ’Affiliate’ as ‘any person who is insured pursuant to Rule 78.1.a’ this is
intended simply to point out the status that an Affiliate is given by virtue of Rule 78.1.a and not to make
an Affiliate a party to the contract of insurance.
12 Such discretion can be exercised by the administrative officers of the Association.