Table of contents
- Gard Guidance to the Rules 2022
- Protection and Indemnity (P&I) cover
- RULES PART I – Availability of cover
- Introductory provisions - Rule 1: Interpretation
- Introductory provisions - Rule 2: The cover
- Entries and duration of cover - Rule 3: Entries
- Entries and duration of cover - Rule 4: Duration of cover
- Entries and duration of cover - Rule 5: Certificate of Entry
- Conditions of cover - Rule 6: The Member’s duty of disclosure
- Conditions of cover - Rule 7: Alteration of risk
- Conditions of cover - Rule 8: Classification and certification of the Ship
- Conditions of cover - Rule 9: Survey
- Premiums and Calls - Rule 10: Setting of Estimated Total Calls
- Premiums and Calls - Rule 11: Variation of Estimated Total Calls
- Premiums and Calls - Rule 12: Estimated Total Calls and Owners' General Discount
- Premiums and Calls - Rule 13: Supplementary Calls
- Premiums and Calls - Rule 14: Determination of Estimated Total Calls, Owners' General Discount and Supplementary Calls etc.
- Premiums and Calls - Rule 15: Release Calls
- Premiums and Calls - Rule 16: Closing of Policy Years
- Premiums and Calls - Rule 17: Repayment of premium
- Premiums and Calls - Rule 18: Overspill Calls
- Premiums and Calls - Rule 19: Reserves
- Premiums and Calls - Rule 20: Payment
- Premiums and Calls - Rule 20A: Insurance Premium Tax
- Premiums and Calls - Rule 21: Set-off
- Premiums and Calls - Rule 22: Laid-up returns
- Termination and cesser - Introduction
- Termination and cesser - Rule 23: Termination by a Member
- Termination and cesser - Rule 24: Termination by the Association
- Termination and cesser - Rule 25: Cesser
- Termination and cesser - Rule 26: Effect of cesser or termination
- RULES PART II – P&I cover
- Risks covered - Introduction
- Risks covered - Rule 27: Liabilities in respect of crew
- Risks covered - Rule 28: Liabilities in respect of passengers
- Risks covered - Rule 29: Liability for other persons carried on board
- Risks covered - Rule 30: Liability for persons not carried on board
- Risks covered - Rule 31: Diversion expenses
- Risks covered - Rule 32: Stowaways, Refugees or Persons saved at Sea
- Risks covered - Rule 33: Life salvage
- Risks covered - Rule 34: Cargo liability
- Risks covered - Rule 35: Extra handling costs
- Risks covered - Rule 36: Collision with other ships
- Risks covered - Rule 37: Damage to fixed or floating objects
- Risks covered - Rule 38: Pollution
- Risks covered - Rule 39: Loss of or damage to property
- Risks covered - Rule 40: Liability for obstruction and wreck removal
- Risks covered - Rule 41: General average
- Risks covered - Rule 42: Salvage
- Risks covered - Rule 43: Towage
- Risks covered - Rule 44: Legal costs
- Risks covered - Rule 45: Enquiry expences
- Risks covered - Rule 46: Measures to avert or minimise loss
- Risks covered - Rule 47: Fines
- Risks covered - Rule 48: Disinfection and quarantine expenses
- Risks covered - Rule 49: Confiscation of the Ship
- Risks covered - Rule 50: Damage to Member’s own property
- Limitations etc. on P&I cover - Introduction
- Limitations etc. on P&I cover - Rule 51: General limitation of liability
- Limitations etc. on P&I cover - Rule 51B: Limitations – Limitation and payment of Overspill Claims
- Limitations etc. on P&I cover - Rule 52: Limitations for charterers and Consortium Vessels
- Limitations etc. on P&I cover - Rule 53: Limitations – oil pollution, passengers and seamen
- Limitations etc. on P&I cover - Rule 54: Amounts saved by the Member
- Limitations etc. on P&I cover - Rule 55: Terms of contract
- Limitations etc. on P&I cover - Rule 56: Non-marine personnel
- Limitations etc. on P&I cover - Rule 57: Liability occurring during through transports
- Limitations etc. on P&I cover - Rule 58: War risks
- Limitations etc. on P&I cover - Rule 59: Specialist operations
- Limitations etc. on P&I cover - Rule 60: Drilling, production vessels, barges and heavy lift vessels
- Limitations etc. on P&I cover - Rule 61: Submarines, diving bells remotely operated underwater vehicles and divers
- Limitations etc. on P&I cover - Rule 62: Waste incineration, disposal operations and landfills
- Limitations etc. on P&I cover - Rule 63: Excluded losses
- RULES PART III – Rules for mobile offshore units
- Rule 64: Terms of cover
- RULES PART IV – Defence cover
- Risks covered - Rule 65: Cases pertaining to the operation of the Ship
- Risks covered - Rule 66: Cases pertaining to acquisition or disposal of the Ship
- Limitations etc. on Defence cover - Rule 67: Excluded costs
- Limitations etc. on Defence cover - Rule 68: Disputes with the Association and other Members – Unpaid sums
- Limitations etc. on Defence cover - Rule 69: The Association’s right to control and direct the handling of a case – withdrawal of cover
- Limitations etc. on Defence cover - Rule 70: Limitation
- RULES PART V – General limitations etc. on P&I and Defence cover
- Rule 71: Other insurance
- Rule 72: Conduct of a Member
- Rule 73: Nuclear perils
- Rule 74: Unlawful trades etc.
- Rule 75: Part Tonnage
- Rule 76: Deductibles
- Rule 77: Administrative costs, insolvency and sanctions etc.
- RULES PART VI – Miscellaneous provisions
- Joint Members, Co-assureds and Affiliates - Rule 78: Cover for Co-assureds and Affiliates
- Joint Members, Co-assureds and Affiliates - Rule 79: Joint Members, Co-assureds, Affiliates and Fleet Entries
- Claims etc. - Rule 80: Time of occurrence
- Claims etc. - Rule 81: Time bar
- Claims etc. - Rule 82: Obligations with respect to claims
- Claims etc. - Rule 83: Exclusion of liability
- Claims etc. - Rule 84: Recoveries from third parties
- Claims etc. - Rule 85: Discharge
- Claims etc. - Rule 86: Currency of payments
- Claims etc. - Rule 87: Payment first by Member
- Claims etc. - Rule 88: Payments and undertakings to third parties
- Assignment, law, arbitration and amendments to Rules - Rule 89: Assignment
- Assignment, law, arbitration and amendments to Rules - Rule 90: Governing law
- Assignment, law, arbitration and amendments to Rules - Rule 91: Arbitration
- Assignment, law, arbitration and amendments to Rules - Rule 92: Amendments to the Rules
- Appendix I Additional insurances
- Appendix II Charterers limits including special limit for Consortium Claims
- Appendix III Oil pollution
- Appendix IV Passengers and seamen
- Appendix V Deductibles
- Appendix VI Rules on Overspill Claims and Overspill Calls and related matters
- Appendix VII Particular clauses
- Additional covers
- Additional covers
Limitations etc. on P&I cover - Rule 58: War risks
Rule 58 War risks
1 The Association shall not cover under a P&I entry liabilities, losses, costs or expenses (irrespective of whether a contributory cause of the same being incurred was any neglect on the part of the Member or his servants or agents) when the loss or damage, injury, illness or death or other accident in respect of which such liabilities arise or such losses, costs or expenses are incurred was caused by:
a war, civil war, revolution, rebellion, insurrection or civil strife arising therefrom, or any hostile act by or against a belligerent power or any act of terrorism (provided that, in the event of any dispute as to whether or not, for the purpose of this paragraph (a), an act constitutes an act of terrorism, the Association shall in its absolute discretion determine that dispute and the Association’s decision shall be final);
b capture, seizure, arrest, restraint or detainment, (barratry and piracy excepted provided always that ransom shall not be recoverable unless and to the extent the Association shall in its absolute discretion determine otherwise), and the consequences thereof or any attempt thereat;
c mines, torpedoes, bombs, rockets, shells, explosives, or other similar weapons of war (save for liabilities, costs or expenses which arise solely by reason of the transport of any such weapons, whether on board the entered Ship or not), provided always that this exclusion shall not apply to the use of such weapons, whether as a result of government order or with the agreement of the Association, where the reason for such use is the mitigation of liability, cost or expenses which would otherwise fall within the cover given by the Association.
2 The exclusion in Rule 58.1 above shall not apply to liabilities, costs and expenses of a Member insofar only as they are discharged by the Association on behalf of the Member pursuant to a demand made under:
i a guarantee or other undertaking given by the Association to the Federal Maritime Commission under Section 2 of US Public Law 89-777, or
ii a certificate issued by the Association in compliance with Article VII of the International Conventions on Civil Liability for Oil Pollution Damage 1969 or 1992 or any amendments thereof,
iii an undertaking given by the Association to the International Oil Pollution Compensation Funds in connection with the Small Tanker Oil Pollution Indemnification Agreement (STOPIA), or except where such liabilities, costs and expenses arise from or are caused by an act of terrorism, the Tanker Oil Pollution Indemnification Agreement as amended (TOPIA) or
iv a certificate issued by the Association in compliance with Article 7 of the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001,
v a certificate issued by the Association in compliance with Article 12 of the Nairobi International Convention on the Removal of Wrecks, 2007, or
to the extent such liabilities, costs and expenses are not or would not be recoverable by the Member under standard P&I war risks policies of insurance had the Member entered into such policies of insurance and complied with all the terms and conditions thereof or any extension to the cover provided by the Association. Where any such guarantee, undertaking or certificate is provided by the Association on behalf of the Member as guarantor or otherwise, the Member agrees that any payment by the Association thereunder in discharge of the said liabilities, costs and expenses shall, to the extent of any amount recovered under any other policy of insurance or extension to the cover provided by the Association, be by way of loan and that there shall be assigned to the Association to the extent and on the terms that it determines in its discretion to be practicable all the rights of the Member under any other insurance and against any third party.
The insurance of marine war risks is a specialised form of insurance that has traditionally been written by specialist marine war risks insurers.1 Therefore, most marine insurance policies will exclude war risks from the scope of cover that they provide on the basis that such risks should be separately insured. Such exclusions are commonplace in hull and machinery, loss of hire and P&I insurance policies.
(A) The Association shall not cover under a P&I entry liabilities, losses, costs or expenses…where such liabilities arise or…was caused by… (Rule 58)
Like other marine insurers, the Association excludes war risks from the P&I cover that it provides to Members except in limited circumstances.2 However, the exclusion does not apply in the case of Defence cover. Therefore, Members that are entered for Defence risks can seek the guidance and support of the Association on matters that are within their Defence cover, even where the problem is caused by, or is related to, a war risk. For example, the Association would be able to advise a Member that is entered for Defence risks on the possible termination of a charterparty in the event of civil unrest at a loading or discharge port, or on the merits of a dispute that the Member might have with his war risk insurers.3
Rule 58 excludes cover only in those circumstances where P&I cover would have been available but for the exclusion in Rule 58. Therefore, it must be emphasised that P&I cover is not automatically available simply because the exclusion does not apply in any particular circumstance. If the Member seeks compensation from the Association he must, nevertheless, substantiate that cover is available for that risk under Part II of the Rules or under any special terms of entry.
The war risks that are excluded by Rules 58.1.a and b are the same as those that are excluded by War Risk Exclusion Clauses 23.1 and 23.2 of the Institute Time Clauses Hulls (1.10.83). They also include risks that can occur during times of peace, e.g. the risk of the Ship striking after the end of a war a mine that had been laid during that war. Different courts may construe the relevant risks differently pursuant to different laws but the meaning that is relevant for the purposes of Rule 58 is the meaning that applies under Norwegian law.4 However, since the wording of Rule 58 closely follows that of the standard English hull policy, the Norwegian courts may be influenced by the interpretation that has been given by the English courts in circumstances where there are no relevant Norwegian legal decisions.
Cover is excluded if the war risk is the proximate cause of the particular liability, loss, cost or expense that has been incurred by the Member. Therefore, if the liability etc., has not been caused by a war risk, but occurs at a time when the Ship is affected by war risks, cover is not excluded. For example, cover is not available in circumstances where a Member has compensated a Crew member that has been injured by a terrorist bomb. However, cover would be available if the Crew member had slipped and had been injured whilst the Ship was discharging cargo at a time when the Ship was in a war zone.
Since cover for war risks is excluded by Rule 58, Members should try, whenever possible, to avoid or minimise their exposure to such risks by including clauses in contracts such as charterparties, Bills of Lading, passenger contracts and Crew contracts that purport to relieve them of liability for war risks to the maximum extent permitted by the applicable law. The Member is also expected to arrange war risks insurances for hull and machinery and P&I risks for such sums and on such terms that will give the Member adequate protection against war risks. In order to assist as much as possible in this regard, the Association and the other clubs that are members of the International Group of P&I Clubs have for many years arranged a special war risks P&I cover for the benefit of their Members.5 The terms of this cover are notified to Members each year in a circular from the Association.6
(B) …(irrespective of whether a contributory cause of the same being incurred was any neglect on the part of the Member or his servants or agents)… (Rule 58.1)
If war or one of the other risks that are specified in Rule 58.1 is the proximate cause of the liability, loss, cost or expense that has been incurred by the Member, cover is excluded even though the negligence of the Member or his servants or agents has also contributed to some extent to the incurring of the liability etc. For example, if the Ship has foundered since the master has deliberately chosen a course through an area that is known to have mines in order to save voyage time, cover is not available for any cargo, Crew or wreck removal liabilities that may arise as a result of the fact that the Ship has struck a mine.
(C) …war… (Rule 58.1.a)
The exclusion is not limited to wars that affect the countries where the Ship is flagged or where her owners live or are domiciled. It applies whenever the Ship encounters, or is affected by, a state of war, no matter where or between whom.
A war is normally defined as a state of armed conflict between countries and it is a question of fact in each case whether there is a war. It is not necessary to demonstrate that there has been a formal declaration of war or some other similar formal act or declaration on the part of any country. However, ‘war’ does not include sporadic or warlike operations on a scale that does not amount to an established or reasonably settled state of armed conflict albeit that such operations are likely in most cases to constitute ‘hostile acts by a belligerent power.’7
(D) …civil war… (Rule 58.1.a)
A civil war has been defined in an English case as ‘a war which has the special characteristics of being civil, i.e. internal rather than external’. In other words, it is not a war between countries, but a war between those that are citizens of, or who live within, a country.
(E) …revolution… (Rule 58.1.a)
A ‘revolution’ occurs when the established government of a country has been overthrown by the people over whom it formerly ruled, and has been successfully replaced by another form of government that then rules over and controls the territory in question and the people who live there. An element of forcible substitution is required, but, provided that there is the actual or implied threat of force, there can be a revolution even if the substitution is achieved without actual force.
(F) …rebellion… (Rule 58.1.a)
A ‘rebellion’ occurs when there is organised resistance to the rulers or the government of a country with the aim of supplanting the existing rulers or government or at least depriving them of authority over part of their territory. A rebellion may develop into a revolution.
(G) …insurrection… (Rule 58.1.a)
An ’insurrection’ is very similar to a rebellion. It differs only in that it may be less organised and less widespread than a rebellion. Therefore, an ‘insurrection’ may be the start of a rebellion and may develop into a rebellion.
(H) …civil strife arising therefrom… (Rule 58.1.a)
‘Civil strife’ means major civil disorder during or following a war, civil war, revolution, rebellion or insurrection, e.g. the widespread rioting and looting that may occur after a war due to the breakdown of internal infrastructures and which may result in substantial distress to the inhabitants of that country.
(I) …or any hostile act by or against a belligerent power… (Rule 58.1.a)
This means an offensive or defensive act of a government or organised rebels in a war or civil war. It may involve co-ordinated military action, but this is not essential.
(J) …or any act of terrorism… (Rule 58.1.a)
This exclusion was introduced as a result of the modification of the reinsurance arrangements of the Pooling Agreement that followed the September 11 2001 terrorist attacks in New York.
A typical act of terrorism is one in which one or more individuals carry out, or threaten to carry out, acts that are intended to exert influence on a government or another political body, or to frighten all, or parts, of the population of a country. The purpose may be to promote a political, religious or ideological cause. The act may affect an enemy’s person or his interests, e.g. when bombs are placed in vehicles or on board ships, when aircraft are set on fire or when oil pipelines are cut. However, an act of terrorism need not necessarily be directed against, or directly affect, an enemy of the terrorists; it may be directed against other parties in order to draw public attention to the cause for which the terrorists are fighting. Acts of terrorism are often characterised by the fact that they endanger the lives of many people, and/or cause extensive material damage.
The question of whether a violent and/or malicious act can be classified as a terrorist act can cause uncertainty and dispute. For example, is a violent act of sabotage that has been committed by environmental activists against a ship carrying nuclear waste a terrorist act? Consequently, the Association is given the right by Rule 58.1.a to determine in its absolute discretion8 whether a particular act is considered to be a terrorist act for the purposes of Rule 58.
(K) …capture… (Rule 58.1.b)
‘Capture’ is the taking of a Ship (with or without its Crew) and/or its cargo by an enemy or belligerent power in wartime with the intention of depriving the owners of the Ship and/or the cargo of their ownership of it. The taking of the property must be accompanied by force or the threat of force.
(L) …seizure… (Rule 58.1.b)
‘Seizure’ is a term that is broader in scope than ‘capture’ and includes ‘every act of taking forcible possession either by lawful authority or by overpowering force’. In contrast to ‘capture’, a seizure can occur whether or not there is a war. A temporary or permanent taking of possession of a Ship may constitute a ‘seizure’. However, it must be accompanied by force or the threat of force. It includes seizure by the passengers9 and can also include a seizure of the Ship as a result of a court or governmental order.
(M) …arrest, restraint or detainment… (Rule 58.1.b)
There is no substantial difference between these three perils that individually or collectively embrace any act by a court or local or national government that prevents the free movement of a Ship and, thereby, its ability to comply with employment orders. However, a distinction must be drawn between, on the one hand, an arrest in respect of a civil claim or a restraint or detainment of the Ship, e.g. after a pollution incident, and, on the other hand, an arrest, restraint or detainment of the Ship, and/or its cargo and/or Crew by government authorities and enforced with the use, or the threat of the use, of armed forces or other military power. The former type of arrest etc., may give rise to liabilities, losses, costs and expenses for which cover is available under the standard P&I insurance whereas cover is not available under Rule 58.1.b for liabilities etc., that arise as a result of the latter type of arrest, restraint or detention.
For example, if a Ship were to carry a cargo of munitions that has been shipped in country A for discharge in country B, and the military intelligence services of country C were to conclude that the munitions have been purchased in violation of a UN embargo, so that the armed naval forces of country C decide to intercept the Ship en route and order it to country C where the cargo is subsequently confiscated by the authorities, cover is not available by virtue of Rule 58.1.b10 for liabilities, losses, costs or expenses that are incurred by the Member as a result of the detention of the Ship and the confiscation of the cargo.
(N) …(barratry and piracy excepted provided always that ransom shall not be recoverable unless and to the extent the Association shall in its absolute discretion determine otherwise)… (Rule 58.1.b)
‘Barratry’ includes every wrongful act that is wilfully committed by the master or Crew against the Ship and the goods without the privity of the shipowner. Mere negligence or recklessness will not suffice; to constitute ‘barratry,’ there must be wilful intent. Barratry occurs most frequently when Crew members take permanent possession and control of the Ship, or sink it deliberately, i.e. scuttle it.
‘Piracy’ is robbery that is committed at sea for personal gain accompanied by the use, or with the threat of the use, of violence. Therefore, piracy is an act of robbery that is committed without political motive or without the authority of any country. Piracy is normally committed by persons from outside the Ship who board the Ship, whether in port, or in coastal waters, or on the high seas, and acts of piracy encompass a wide range of activities such as the hijacking of the Ship and/or its cargo, the taking of money and other valuables from the Ship’s safe and/or from persons on board, or the holding or kidnapping of persons for the purposes of ransom. Therefore, acts of piracy may cause death or injury as well as the loss of, or damage to, property.
Despite the violent nature of such activities, barratry and piracy have traditionally been considered to be marine rather than war risks. Consequently, cover is not excluded under Rule 58 for liabilities etc., that are proximately caused by such activities.
In order to emphasise the distinction between P&I and War Risks cover, and in order to provide clarity that ransom payments for kidnapped crew are not covered as of right under the Rules, Rule 58 excludes cover for such a risk. Members are expected to ensure that they have the appropriate insurance cover that meets their specific needs in this regard. However, if it is proved to the satisfaction of the Association that no such cover is available to the Member, the Association has the absolute discretion to cover the ransom if this is deemed by them to be appropriate.10
(O) …and the consequences thereof or any attempt thereat… (Rule 58.1.b)
These words make it clear that cover is not only excluded under Rule 58.1.b if the capture, seizure, arrest, restraint or detainment is successful. Cover is excluded for liabilities, losses etc., that arise as a result of an attempt to capture, seize, arrest, restrain or detain even if the attempt is unsuccessful.
(P) …mines, torpedoes, bombs, rockets, shells, explosives, or other similar weapons of war… (Rule 58.1.c)
The phrase ‘other similar weapons of war’ is to be construed widely and includes mortars, missiles and all other static or projected explosive devices.
Cover is excluded whether the explosive device is located on or off the Ship and the exclusion applies not only in times of war, but also in times of peace. For example, the exclusion will apply if a bomb, torpedo, shell etc., were to be used as a weapon against the Ship and cause damage even though it did not explode as intended. Similarly, if a Ship, whilst sailing in the open sea, were to strike an old mine that had been laid during the Iran-Iraq war and cause the mine to explode, cover is excluded under Rule 58.1.c for any liabilities, losses etc., that arise as a result of such event. However, it is more questionable whether cover would be excluded if the hull of the Ship were to be breached and thereby cause the Ship to become a wreck as a result of striking a mine that had been disarmed and which had, consequently, ceased to pose a warlike threat.
(Q) …save for liabilities, costs or expenses which arise solely by reason of the transport of any such weapons, whether on board the entered Ship or not… (Rule 58.1.c)
Cover is not excluded under Rule 58.1.c if the liabilities, losses etc., arise solely as a result of the carriage of weapons of war by the Ship as cargo. However, if a Member intends to trade the Ship for the carriage of weapons and munitions, whether as a partial or full cargo, he is required to give notice to the Association pursuant to Rule 6 (The Member’s duty of disclosure) and Rule 7 (Alteration of risk), failing which his right of recovery from the Association may be rejected in full or in part.12 Depending on the particular circumstances, cover may also be excluded under Rule 74 if the Ship is engaged in carrying contraband or blockade running or is employed in, or on, an unlawful, unsafe or unduly hazardous trade or voyage.13
If weapons of war are being transported as cargo the phrase ‘whether on board the Ship or not’ make it clear that the exclusion does not apply even if the cargo is not in fact on board the Ship at the time of the incident that causes the Member to incur liability etc. This may occur when weapons are carried by the Member as carrier pursuant to a ‘through transport’ contract of carriage that has been approved by the Association pursuant to Rule 57.1.c. In such circumstances, cover is available for liabilities that are incurred by the Member as a result of the carriage of such weapons as cargo regardless of the particular through transport stage on which the incident occurred, i.e. regardless of whether the event occurred whilst the cargo is on board the Ship, or on a feeder ship, or whilst stored ashore in between sea carriage, or whilst being transported by road or rail.
Cover is also available for liability that is incurred by the Member as a result of a collision between the Ship and another ship that is transporting weapons, e.g. if munitions carried on board the other ship were to explode and cause death and injury to the Ship’s Crew and damage to property.
(R) …provided always that this exclusion shall not apply to the use of such weapons…where the reason for such use is the mitigation of liability… (Rule 58.1.c)
Cover is not excluded under Rule 58.1.c if weapons of war, and in particular, explosives, are used for the purpose of mitigating, i.e. avoiding or reducing, any liability, loss, cost or expense that would otherwise fall within the scope of the Association’s cover, e.g. where explosives are used to blow up a wreck when such action is the safest and/or the most economic method of wreck removal.
This proviso is applicable only in cases where explosives are used either with the prior agreement of the Association or as a result of a governmental order and even when, in the latter case, the Association has not given its agreement. For the purposes of this Rule a governmental order includes an order that is given by a coast guard or harbour authority or any other council or authority that is empowered to make such orders under national or local legislation or regulations.
(S) …The exclusion in Rule 58.1 above shall not apply to liabilities…insofar as they are discharged by the Association on behalf of the Member pursuant to a demand made under… (Rule 58.2)
Rule 58.2 provides that, notwithstanding the provisions of Rule 58.1, the exclusion will not apply to any obligation that the Association has to third parties pursuant to the guarantees, undertakings and certificates that are itemised in Rule 58.2.
Rule 58.2 differs from Rule 58.1 in that it relates to liabilities etc., that are incurred, not by the Member, but by the Association on behalf of the Member when the Association has committed itself to provide the guarantees or undertakings to third parties that are itemised in Rule 58.2. The Association is obliged to make payment to third parties pursuant to such guarantees or undertakings even if the event that gives rise to the claim is a war risk for which the Association would have had the right under Rule 58.1 to refuse to compensate the Member if payment had been made by the Member.
Sub-paragraphs i-v of Rule 58.2 itemise the guarantees or undertakings that are given by the Association to third parties for which cover is not excluded under Rule 58.2.
(T) …a guarantee or other undertaking given by the Association to the Federal Maritime Commission under Section 2 of US Public Law 89-777… (Rule 58.2.i)
Under the law of the United Sates the owner or charterer of a passenger ship that either is, or may become, engaged in voyages to or from US ports is required to provide a guarantee from an authorised insurer, surety company or other provider, for legal liabilities that he may incur for the death of, or for injury to, passengers or other persons who are carried on board during such voyages. The guarantee is to be provided to the US Federal Maritime Commission (FMC).
Liability under the FMC guarantee will be triggered if the owner or charterer of the relevant passenger ship has not discharged his liability for such death or injury within 21 days of either a final judgment, which is no longer subject to any appeal, or of a compromise settlement that has been approved by the guarantor.
The event that gives rise to such liability may be one for which cover is not available pursuant to Rule 58.1. However, by providing such guarantees in response to the requests that are made from time to time by the owners or charterers of passenger Ships, the Association becomes exposed to direct liability under such guarantees if the Member fails to discharge his liability within the required 21 days.
(U) …a certificate issued by the Association in compliance with Article VII of the International Conventions on Civil Liability for Oil Pollution Damage 1992… (Rule 58.2.ii)
Details of the obligations that the Association has under Article VII of the International Conventions on Civil Liability for Oil Pollution Damage 1992 can be found in the Guidance to Rule 38.14
(V) …undertaking given by the Association to the International Oil Pollution Compensation Funds in connection with the Small Tanker Oil Pollution Indemnification Agreement as amended (STOPIA) or, except where such liabilities, costs and expenses arise from or are caused by an act of terrorism, the Tanker Oil Pollution Indemnifications Agreement as amended (TOPIA)(Rule 58.2.iii)
Details of the relationship that exists between the Association and the International Oil Pollution Compensation Funds in connection with STOPIA and TOPIA and an explanation of the purposes of the guarantees or other undertakings that are given by the Association in such circumstances is explained in the Guidance to Rule 38.15
(W) … a certificate issued by the Association in compliance with Article 7 of the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 (Rule 58.2.iv)
The provisions of the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 (Bunker Convention) that entered into force on 21 November 200816 closely follow the well established liability and insurance provisions that apply to oil tankers under the Civil Liability Convention (CLC) and requires signatory States to issue similar certificates.
To enable signatory States to issue the required certificates, the P&I clubs that are members of the International Group of P&I Clubs have agreed to issue so-called ‘Bunker Blue Cards’ for ships to which the Bunker Convention applies and which are eligible ships under the collective reinsurance arrangements that is offered by the International Group. A ‘Bunker Blue Card’ is a document that is required under Article 7 of the Bunker Convention by virtue of which the issuing Club confirms that the relevant ship is insured by that Club for liabilities that the owner of that ship may incur under the Bunker Convention.17 The relevant P&I clubs have also agreed to pool liabilities that exceed the relevant club retention level that have arisen as a result of a club having issued such a ‘Bunker Blue Card.’
By issuing Bunker Blue Cards the Association may incur direct liability to third parties to pay compensation, costs and expenses for bunker pollution liability that is incurred by the owner of the Ship to the same extent that the owner would have been liable had the claim been made against him under the Bunker Convention. Therefore, by issuing such Bunker Blue Cards, the Association may be exposed to liability for damage, loss etc., arising as a result of an act of terrorism that is partly caused by the owner due to his contributory negligence, but for which cover would not be available under the Rules due to the exclusion of terrorism18 and nuclear19 risks. Consequently, in the absence of Rule 58.2.iv, the issuer of the Bunker Blue Card would be exposed to certain risks that are not normally covered under P&I cover. In order to resolve such an anomaly, Rule 58.2.iv makes it clear that the exclusions that are found in Rule 58 do not apply in relation to the liabilities that the Association may incur as a result of issuing Bunker Blue Cards. Therefore, this provision has the same application in relation to Rule 58 as Rule 73.2 has in relation to nuclear risks.
(X) ...a certificate issued by the Association in compliance with Article 12 of the Nairobi International Convention on the Removal of Wrecks, 2007 (Rule 58.2.v)
The Nairobi International Convention on the Removal of Wrecks 2007 (WRC) is in force as from 14 April 2015.20 The Convention includes compulsory insurance provisions equivalent to those in CLC and the Bunkers Convention and similar forms of certificates (blue cards) need to be issued. Therefore, for the reasons explained in (W) above, Rule 58.2.v makes it clear that the exclusions that are found in Rule 58 do not apply in relation to the liabilities that the Association may incur as a result of issuing WRC certificates.
(Y) ...a certificate under Regulation 4.2, Standard A 4.2.1, paragraph 1 (b) of the Maritime Labour Convention as amended. (Rule 58.2.vi)
Ships that are subject to the Maritime Labour Convention (MLC) are required to display certificates issued by an insurer or other security provider confirming that insurance or other financial security is in place to secure the shipowner’s liability for the outstanding wages and repatriation costs of seafarers under Regulation 2.5.2 of the MLC, and compensation for the death or long-term disability of seafarers under Regulation 4.2 of the MLC. However, the waiver under Rule 58.2 (vi) is restricted to payments that are made by the Association under certificates relating to Regulation 4.2, Standard A 4.2.1, paragraph 1 (b)and does not extend to payments that are made under certificates that relate to liabilities that arise under Regulation 2.5, Standard A2.5.2. The reason for the distinction is because the liabilities that arise under Regulation 4.2, Standard A 4.2.1, paragraph 1 (b) are likely to be liabilities for which cover is made available under Rules 27 (1) and (2) whereas cover is not likely to be available in respect of liabilities that arise under Regulation 2.5, Standard A2.5.2. For further commentary see Guidance to Rules 27.4.
(Z) …to the extent such liabilities, costs and expenses are not ror would not be recoverable recovered by the Member under standard P&I war risks policies of insurance had the Member entered into such policies of insurance and complied with all the terms and conditions thereof or any extension to the cover provided by the Association. Where any such guarantee, undertaking or certificate is provided by the Association on behalf of the Member as guarantor… (Rule 58.2)
As noted in (A) above, Members are expected to arrange primary P&I war risk insurance with other insurers. Therefore, the last paragraph of Rule 58.2 is intended to ensure that when the Member has the right to be recompensed for the relevant liabilities etc., under other insurances, or would have had the right to be indemnified under standard P&I war risks policies of insurance if such policies had been arranged, a payment that is made by the Association to a third party pursuant to the guarantees or undertakings that are itemized in Rule 58.2 is to be treated as a loan until the extent to which the Association is entitled to make recovery from such other insurers has been clarified. The same applies if the event that causes the Association to make payment under the guarantee or undertaking is one that gives the Member a right of recourse against any other third party. In exchange for its agreement to provide a guarantee or undertaking to third parties at the request of the Member, Rule 58.2 gives the Association the right to demand that all rights that the Member has to recover under such other insurance or against any third party should be assigned by the Member to the Association on such terms and to the extent that the Association in its discretion thinks necessary in order to protect the interests of the membership as a whole. The Association will normally require an assignment to be to the greatest extent that is allowed by law and the particular circumstances.
1 For further commentary see Chapter 220.127.116.11 of the Gard Guidance on Maritime Claims and Insurance and section 2.4.5 of Chapter 1 to the Gard Handbook on P&I Insurance, 5th edition.
2 See (S) – (X) below.
3 See the Guidance to Rule 65.j.
4 See the Guidance to Rule 90.
5 See Appendix I, paragraph 2.
6 See list of Member Circulars on www.gard.no for the terms of the special war risk P&I cover for the relevant Policy Year.
7 See (I) below.
8 Such discretion will be exercised by the Board of Directors.
9 A seizure by the crew constitutes barratry. See (N) below.
10 The discretion is exercised by the Board of Directors of the Association.
11 Cover may also be excluded under Rule 74 on the basis that the trade may be ‘unlawful trade’.
12 See the Guidance to Rules 6 and 7.
13 See the Guidance to Rule 74.
14 See (D) in the Guidance to Rule 38. An example of such a certificate can be found on page 892 of the Gard Handbook on the Protection of the Marine Environment, 3rd Edition, 2006.
15 See (J) of the Guidance to Rule 38.
16 For further information concerning the Bunker Convention see Chapter 18.104.22.168.2 of the Gard Guidance on Maritime Claims and Insurance and for further guidance re certification, please see Gard’s P&I Member Circulars Nos. 2, 4, 5, 6 and 7/2008.
17 See (D) of the Guidance to Rule 38, for further commentary on the effect of Blue Cards under the CLC.
18 See Rule 58.1.a.
19 See Rule 73.1.
20 For more detailed commentary see Gard Circular 12/2014 and Chapter 16.2.4 of the Gard Guidance on Maritime Claims and Insurance.