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Rule 92 Amendments to the Rules

1 The Rules may be amended at any time with effect from the beginning of the following Policy Year, and the Association shall, where practicable, give notice of amendments to Members before 20 January.

2 If, in the determination of the Association, a substantial alteration of risk occurs, as a result of new legislation or for any other reason, the Association may make such amendments to the Rules as the situation may require, giving (save in the case where the amendment involves only the making available of additional cover to the Member) at least two months' notice of the amendment.

3 When war has broken out or, in the determination of the Association threatens to break out, the Association may decide that amendments shall come into force at shorter notice.

 

Guidance

Because of the mutual nature of the Association an amendment to the Rules is not something that should be done lightly, and it is done only when a Rule change is necessary for the protection of the whole of the membership, or a significant part of the membership, rather than for the benefit of individual Members. Rule 92 gives the Association the power to change its Rules in various circumstances. It deals with three different situations that reflect the different circumstances in which the Rules may be amended, and the time limits that are appropriate for the introduction of any amendments to the Rules in each circumstance.

The Board of Directors of the Association has the primary responsibility for the Association’s Rules and normally exercise such responsibility during the course of their planned periodic meetings.1 However, should it be necessary to make amendments to the Rules in circumstances in which it would be impractical to call and conduct such a meeting, the Board will normally endeavour to do so by correspondence or by delegating authority to the Executive Committee. For example, this may occur when it is necessary to ensure that the Rules are aligned with changes that have been made to the Pooling Agreement prior to the commencement of a new Policy Year.

(A) …may be amended at any time with effect from the beginning of the following Policy Year... (Rule 92.1)
Rule 92.1 gives the Association, whether acting through the Board of Directors or the Executive Committee acting pursuant to authority delegated by the Board, the right to amend the Rules at any time. However, since Members have entered into contracts of insurance with the Association on the assumption that specific rights, duties, terms and conditions will continue to apply to the contract, any amendments that are made pursuant to Rule 92.1 will not take effect until the beginning of the next following Policy Year. This gives Members the opportunity to consider whether they wish to continue to be insured on such terms and conditions. It also means that the Members' cover will not be affected during the currency of the Policy Year.

(B) …the Association shall, where practicable, give notice of amendments to Members before 20 January… (Rule 92.1)
A Policy Year runs from noon GMT on 20 February in any year to immediately prior to noon GMT on the following 20 February. Whenever it is practicable to do so, the Association will give notice of any amendments to the Rules before 20 January in order to give Members at least one month within which to consider the implications of such amendments before the start of the next Policy Year.2 However, if it is impractical to give notice by 20 January, the Association may, nonetheless, proceed to make amendments to the Rules for the following Policy Year.

(C) …in the determination of the Association, a substantial alteration of risks occurs… (Rule 92.2)
Whereas Rule changes are usually planned at the end of a Policy Year, and take effect from the beginning of the next Policy Year, Rule 92.2 gives the Association the authority to make Rule changes that take effect during the course of a Policy Year if there is a substantial, and usually unexpected, alteration of risk that affects all or a substantial category of Members.

A ’substantial‘ risk is not capable of precise quantitative meaning, but it indicates that the alteration of risk must be serious. Rule 92.2 gives the Association the discretion to determine whether an alteration of risk is, or is not, substantial, and to decide how the Rules are to be amended in response to the alteration of risk. For example, the then current cesser/termination provisions of Rules 24 and 25 were amended during the 2010-11 Policy Year as a result of the then current and impending legislation in the USA which sought to impose sanctions on both domestic and foreign entities “underwriting or otherwise providing insurance or reinsurance” for “any activity that could contribute to the enhancement of Iran’s ability to import refined petroleum resources.” Such legislation (which was likely to be adopted quickly by other countries) had the effect of prohibiting the provision of insurance cover for any vessel(s) regardless of country of flag or registry or beneficial ownership that engaged in trading refined products into Iran and imposed severe sanctions against both companies and individuals that sought to provide such insurance. Such legislation would clearly seriously hamper the ability of the Association to maintain the quality and efficiency of the service that it could provide to the membership generally and therefore, it was considered that this was a substantial alteration of risk that was deemed sufficiently serious to justify making an amendment to the Rules to take effect on 23 April 2010 during the 2010-11 Policy Year.

If the Association decides to limit or reduce the level of cover, then the Association is required to give Members at least two months‘notice of the proposed amendment. However, if the Association decides to increase the level of cover, then the Association does not need to give two months' notice of the proposed amendment.

A distinction needs to be drawn between Rule 92.2 and Rule 7. Rule 92.2 will normally apply only where there is an alteration of risk that affects all or a substantial category of Members, and which is caused by events that are outside the power and control of the Association and the Members. However, Rule 7 applies when the alteration of risk affects an individual Member but not the membership at large, and which may entitle the Association, in certain circumstances, to refuse to compensate that Member.3

(D) …as a result of new legislation or for any other reason… (Rule 92.2)
Legislative changes have the potential to substantially alter the risks that the Association has agreed to cover. Reference has already been made in (C) to the impact that the sanctions legislation of different countries has had and earlier historical examples include the US Oil Pollution Act of 1990 (OPA 90) that caused the P&I clubs that are members of the International Group of P&I Clubs to make only contingent cover available for certain oil tankers for oil pollution liabilities that arose under OPA 904 whilst the adoption of the 2002 Protocol to the Athens Convention persuaded such clubs to limit the cover that is available for liability to passengers and seamen.5

However, substantial changes to the insured risks may also be caused by reasons other than changes in legislation, e.g. as a result of natural disasters that make the transit of particular waters more hazardous.

(E) When war has broken out or, in the determination of the Association threatens to break out... (Rule 92.3)
Rule 92.3 enables the Association to take account of any outbreak of hostilities that will substantially affect the risks that are insured by the Association. The Association may amend the Rules, not only when war has actually broken out, but also when the Association considers that there is a threat that war may break out. War is often preceded by a deterioration of relations, during the course of which the participants issue threats of war or engage in hostile acts against each other. In such situations, Rule 92.3 enables the Association to react quickly to protect the interest of the membership. The Rule gives the Association the authority to introduce amendments to the Rules by giving less than two months’ notice if it considers, in its discretion, that there is a danger of war breaking out.


1 See Article 6.2.b. of the Bye-Laws of Gard P&I (Bermuda) Ltd and Article 9.2.a of the Statutes of Assuranceforeningen Gard -gjensidig-.
3 See the Guidance to Rule 7.
4 See Rule 53.2 and Appendix III.
5 The 2002 Protocol to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974. 7 See Rule 53.3 and Appendix IV. However, in that particular instance, the change took effect from 20 February 2007 and not during the course of any Policy  Year