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The legal relationship between the Association and the Member shall be governed by these Rules and Norwegian law, but the provisions of the Insurance Contracts Act of 16 June 1989 shall not apply.
(A) The legal relationship between the Association and the Member… (Rule 90)
The legal relationship that exists between the Association and the Member under the contract of insurance is separate and distinct from the legal relationship that exists between the Member and third parties. The Association provides cover for voyages that are performed by Ships worldwide and the claims that arise out of the operation of such Ships will usually be governed by a variety of laws and regulations. Therefore, in most circumstances, the laws and regulations that apply to claims that are made by third parties against the Member will be different from the law that governs the Member’s rights to claim compensation from the Association.
(B) …shall be governed by these Rules and Norwegian law… (Rule 90)
Rule 90 stipulates firstly that the legal relationship between the Association and the Member is to be governed by the Rules. Therefore, the Rules are incorporated into the contract of insurance and are made an integral part of that contract. All the Rules will be so incorporated unless particular Rules are specifically excluded, limited or otherwise varied pursuant to any special terms of entry that may be agreed between the Association and the individual Member.
Rule 90 also establishes that the legal relationship between the Association and the Member is to be governed by Norwegian law. There are two aspects to this statement. Firstly, the Rules are governed by Norwegian law in the sense that they are to be interpreted in accordance with Norwegian law. Secondly, the contract of insurance between the Association and the Member is governed by Norwegian law unless varied by special terms of entry that provide for the contract of insurance to be governed by the law of some other country.
Rule 90 states that the Insurance Contracts Act of 16 June 1989 (ICA), which is the principal Norwegian legislation that regulates contracts of insurance, does not apply to the contracts of insurance that have been concluded between the Association and its Members except in certain limited circumstances.1 However, all other provisions of Norwegian law, including those that govern contracts generally, will apply to the legal relationship between the Association and each Member.
When considering legal issues that arise under a contract of insurance, Norwegian courts will have regard to all applicable written acts, codes and regulations and the 'travaux preparatoires' to such provisions, previous court and, to some extent, arbitration, decisions, as well as textbooks and treatises on insurance law. Norwegian courts are likely to be guided by the manner in which similar insurance contract issues have been treated in the Nordic Marine Insurance Plan and past versions of the Nordic Marine Insurance Plan and the Commentary to that Plan. This is particularly likely where the Rules use expressions that are defined in the Plan, but which do not have a clearly established meaning under the general law.
(C) …the Insurance Contract Act…shall not apply. (Rule 90)
The Norwegian Insurance Contracts Act 1989 (ICA) regulates both personal and non-life insurance. It was intended, when first enacted, to modernise the Norwegian insurance regulations that then applied and to extend the scope of those regulations. The ICA renders the conditions of insurance policies that are less favourable to the insured than its own provisions null and void.
The ICA allows marine and certain other insurances to be written on conditions that differ from those of the ICA. Therefore, the Association is allowed to exclude most of the provisions of the ICA from the Rules and the contracts of insurance that it concludes with Members. The Association has utilised this liberty to the maximum extent to enable it to align the Rules to the provisions of the Pooling Agreement of the International Group of P&I Clubs which is the regulatory foundation of the reinsurance that the Association requires to protect the interests of the membership. However, it is not possible to exclude Section 7-8 of the ICA which applies compulsorily to the legal relationship between the Member and the Association. Section 7-8 enables a third party to bring a direct action against the insurer when the assured is insolvent. Accordingly, if the Member is not insolvent, or subject to bankruptcy proceedings, or is not seeking protection from his creditors in some other way, then the ’pay to be paid‘ principle2 also applies under Norwegian law.
1 See (C) below.
2 See the Guidance to Rule 87.