Premiums and Calls - Rule 20: Payment

1. Subject to Rule 20.3, Estimated Total Calls are due in three instalments as follows:

   1. for the period 20th February - 20th June, on 15th March;

   2. for the period 20th June - 20th October, on 15th September;

   3. for the period 20th October - 20th February, on 15th November.

2. Where the Ship is entered in the course of a Policy Year, a pro rata proportion of the Estimated Total Calls to be collected during the Policy Year to which it relates for the four-monthly period in which it is entered is due at once, with the remaining instalments, if any, due at the times specified in Rule 20.1.

3. Estimated Total Calls of less than USD 5,000 (or the equivalent in any other currency, as determined by the Association) per Ship are due in full on 15th March.

4. Fixed premiums are due on inception of cover.

5. Supplementary Calls, other than Release Calls, are due on the date specified by the Association.

6. Any other sums debited by the Association to a Member, including Release Calls, Overspill Calls, Insurance Premium Tax for which the Member is liable, reimbursement of deductibles, interest, costs or expenses, are due on demand.

7. If any sums due to the Association from the Member are not paid on or before the due date interest is chargeable on such unpaid sums at such rate as the Association may from time to time determine.

8. Members' Estimated Total Calls, Supplementary Calls, Overspill Calls, other premiums and other sums which cannot be collected shall be deemed to be an expense of the Association.

(A) … Estimated Total Calls are due in three instalments… (Rule 20.1) The Estimated Total Calls shall be paid in three instalments during the Policy Year to which it relates in order to minimise cash flow difficulties for Members. Each instalment must be paid before or at the due date. Whilst a Member is permitted to pay any instalment before the relevant due date for the instalment, he is not entitled to receive any discount for doing so. 

The payment requirements of Rule 20.1 are ‘subject to Rule 20.3’ which has special provisions relating to the payment of premiums (Estimated Total Calls) in general of less than USD 5,000.¹ 

(B) …Ship…entered in the course of a Policy Year… (Rule 20.2) Where a Ship is entered during the course of a Policy Year it makes practical sense to collect the pro rata Estimated Total Call relating to the first four-monthly period of the Ship’s entry at the time of entry and any remaining instalments at the dates specified in Rule 20.1. 

(C) …Estimated Total Calls of less than USD 5,000… (Rule 20.3) When the Estimated Total Call per Ship amounts to less than USD 5,000, or the equivalent to USD 5,000 if the premium is payable in another currency,² it is considered impractical and uneconomical both for the Association and the Member to collect/pay the premium in instalments. In these cases, the proportion of the Estimated Total Call that is to be collected per Ship for the Policy Year to which it relates  is payable in full on the 15 March when such entries take effect from 20 February, but if not, the premiums are payable in full at the time of entry. 

(D) Fixed premiums are due on inception of cover (Rule 20.4) This provision makes it clear that the full premium for fixed premium entries³ will be due for payment as and when the cover commences regardless of when that is. Fixed premium  charterers’ entries take effect from the time that the Member charters the Ship, but the Association may agree to defer the due date for premium payments to a later time. 

(E) Supplementary Calls…are due… (Rule 20.5) Supplementary Calls can be levied ‘at any time during or after the end of the relevant Policy Year’.⁴ Since it is not possible to determine in advance whether, or when, such premiums will be levied, the due date for payment of such premiums will be specified by the Association only as and when such Supplementary Calls are levied. 

(F) Any other sums debited by the Association to a Member…are due on demand. (Rule 20.6) This provision applies to payment of any sums debited to a Member other than Estimated Total Calls or Supplementary Calls; e.g. Release Calls, Overspill Calls, reimbursement of loans, deductibles, interest, costs or expenses. Under Norwegian law ‘due on demand’ means that the amount falls due for payment immediately after the debit note has been submitted to the Member. 

(G) If any sums…are not paid on or before the due date…interest is chargeable… (Rule 20.7) It is important that the Association receives timely payment of sums that are due to it in order, inter alia, to avoid cash flow constraints, counterparty credit risk and the consequent need to liquidize profitable investments in order to generate cash. Furthermore, it would be unfair to other mutual Members if any individual Member were to receive cash flow and earnings benefits as a result of withholding payments without any form of redress. Accordingly, this Rule gives the Association the right to claim interest on late payments.⁵ In the case of non-payment, the Association is also entitled to take other measures against the Member, including the exercise of the right of set-off⁶  or the right to terminate cover.⁷ The Association may also take legal action against the Member and anyone else insured under the same entry⁸ to recover unpaid sums. 

(H) Members’ Estimated Total Calls, Supplementary Calls, Overspill Calls, other premiums and other sums which cannot be collected shall be deemed to be an expense… (Rule 20.8) Given the predominantly mutual nature of the Association, sums, including fixed premiums, which cannot be collected are deemed to be an expense of the Association which must, ultimately, either be covered by the Association’s reserves, or by the levying of Supplementary Calls.⁹