Limitations etc. on Defence cover - Rule 68: Disputes with the Association and other Members – Unpaid sums

1. The Association will not cover under a Defence entry costs of cases against the Association itself, its subsidiaries, other Gard group companies, agents, representatives or servants.

2. No cover shall be available under Defence entries to either party where a dispute arises between Joint Members, Co-assureds, affiliates or associates of the Member or Co-assureds or any combination thereof.

3. No Member shall be entitled to cover under a Defence entry so long as Estimated Total Calls or Supplementary Calls or other sums of whatsoever nature owed to the Association, whether in respect of Defence or P&I cover or otherwise, remain unpaid.

(A) …costs of cases against the Association itself, its subsidiaries, other Gard group companies, agents, representatives or servants… (Rule 68.1) It would be an anomaly and contrary to the best interests of the membership as a whole if Defence cover were to be made available for the costs that are incurred by Members in order to pursue claims against the Association, or to defend claims that are brought against Members by the Association. Consequently, Defence cover is not available for legal and other costs that are incurred by Members in order to pursue claims against, or to defend claims brought by, the Association, its subsidiaries or any other Gard group company, or any person that is acting on behalf of the Association, its subsidiaries or any other Gard group company.¹ 

The exclusion of cover applies whether the claim relates to P&I or Defence cover or to any other insurance. It applies not only to cases between the Member and the Association itself, but also to cases between the Member and any of the Association’s subsidiaries or other Gard group companies. The latter alternative is intended to clarify that, where an insurance is entered with Assuranceforeningen Gard – gjensidig –, cover will not be available for costs of cases against other Gard companies irrespective of whether these are subsidiaries or other companies which are part of the Gard group, e.g. Gard Marine & Energy Limited or Gard Marine & Energy Insurance (Europe) AS. Where the insurance is entered with Gard P. & I. (Bermuda) Ltd., the latter alternative will not have any independent relevance, as all companies in the Gard group are subsidiaries of Gard P. & I. (Bermuda).

The exclusion in Rule 68.1 also applies where the Gard group company is one of several claimants/defendants in a legal dispute with the Member. For instance, Defence cover will be excluded pursuant to Rule 68.1 in a legal dispute between the Member and his hull insurers, if a Gard group company is one of the hull insurers and as such a party in the legal dispute. This exclusion applies irrespective of whether the Gard group company is the claims leader for the hull insurers, or not.

However, the Association may decide, on a case-by-case basis, to provide discretionary cover even if Defence cover is otherwise excluded pursuant to Rule 68.1. This discretion will as a rule not be exercised where the Gard group company is the claims leader. On the other hand, where the Gard group company is not the claims leader, the Association may, after having considered the specific circumstances of the case, decide to exercise discretion to cover costs of pursuing a claim against the hull insurers.

In addition to Defence cover not being available with respect to claims against the Association or other Gard companies, Defence cover will also be excluded with respect to costs of cases against any agents, representatives or servants of the Association or any other company in the Gard group. For example, Defence cover is not available for the costs that are incurred by a Member in bringing a claim against a surveyor appointed by the Association for alleged negligence or malpractice.

(B) …dispute arises between Joint Members, Co-assureds, affiliates or associates of the Member or Co- assureds or any combination thereof. (Rule 68.2) It would also be an anomaly and contrary to the best interests of the membership as a whole if Defence cover were to be made available to finance disputes between parties that are covered under the same contract of insurance. Consequently, Defence cover is not available for legal and other costs that are incurred by Members in relation to disputes between Joint Members, Co-assureds or their Affiliates or associates. 

(C) …sums of whatsoever nature owed to the Association…remain unpaid… (Rule 68.3) A Member is not entitled to Defence cover so long as any money is due from him to the Association, regardless of whether the outstanding amount relates to Defence or P&I cover or to any other sum that is owed to the Association. 

For the purposes of Rule 68 the unpaid sum need not relate to the entry of the particular Ship for which the Member requests Defence cover and need not be due from the Member himself but from Joint Members or Co-assureds.²