Rules Class I - Protection and Indemnity (36-40)

36 Cessation of Insurance of Individual Vessels

A Member shall cease to be insured by the Club in respect of any ship entered by him upon the happening of any of the following events:

i

If the ownership of such ship be legally transferred save where the beneficial ownership of the transferor and transferee is the same and 14 days prior notification of the transfer has been given to the Managers;

ii

If the ship be mortgaged or otherwise hypothecated without any undertaking or guarantee approved by the Managers being given to pay all contributions due or that may become due in respect of the entered ship, unless the Managers exercise their discretion in any particular case to dispense with such an undertaking or guarantee;

iii

If, without the Club’s prior written consent:

a

the Member parts with or transfers the entire control or possession of the ship by demise charter or otherwise; or

b

the management of the ship is changed;

iv

If a party holding a security interest in respect of the ship takes uncontested possession pursuant to the exercise of the same.

v

If the ship becomes an actual or constructive total loss or is accepted or acknowledged by Hull Underwriters as being a constructive or compromised total loss or is considered or deemed by the Managers to be an actual or constructive or compromised total loss, whichever shall have been the earlier;

vi

Ten days from the date of the ship being last heard of or from her being posted at Lloyd’s as missing, whichever shall be the earlier.

provided that:

a

in the events specified in paragraphs i to iv above of this Rule the Member’s liability for contributions in respect of such ship and the Club’s liability for claims in respect thereof under these Rules shall be as stipulated in the Proviso to Rule 35 and

b

in relation to Rules 36 v and 36 vi, subject to the Managers’ written agreement, and in their absolute discretion, the Member may continue to be covered by the Club in respect of liabilities arising out of any accidents or occurrences occurring after an event referred to in Rule 36 v or 36vi above, for such period, and upon such terms and conditions, and upon payment of such premium as the Managers think fit.

37 Non-payment of Premium

If a Member fails to pay when due and demanded by the Managers any amounts due from him to the Club, the Managers shall be entitled in the exercise of their absolute discretion:

i

by notice in writing, to terminate the entry with the Club of any or all ships entered by or on behalf of such Member in respect of any policy year to which the Member’s default relates with effect from the beginning of that policy year. In such circumstances the Club shall:

a

return to the Member any premium paid for that policy year, after deduction of any sums already paid by the Club and of any sums for which the Club is or thereafter may become liable in respect of the said ships for that year (including but not limited to any claim, reimbursement, reinsurance cost, or fee);

provided always that:

if the total amount of the sums already paid and/or which may become payable by the Club exceeds any premium paid for that policy year, the Member shall be and remain liable for the difference.

b

not be liable for claims in relation to the said ships arising by virtue of events occurring in any policy year to which the termination of entry relates.

ii

by notice in writing, to terminate the entry with the Club of any or all ships entered by or on behalf of the Member in respect of the policy year to which the Member’s default relates, with effect from the date given in such notice which shall be in the Managers’ absolute discretion.

In such circumstances, the Club shall:

a

be entitled, in respect of any or all ships entered at any time during the policy year in respect of which entry has been terminated under this Rule, to that proportion of all Premiums and calls as the actual period of entry in respect of any such ships bears to the policy year;

b

not be liable in respect of claims in relation to the said ships arising by virtue of any event during the Policy Year to which the Member’s default relates occurring after the date of termination.

provided always that in relation to this Rule 37:

If a Member fails to pay when due and demanded by the Managers any amounts due from him to the Club in respect of more than one ship entered in the Club, the Managers shall be entitled, in their absolute discretion, to exercise any of the options set out in this Rule 37 in respect of any such ship, and shall not be bound to exercise their discretion in the same manner in respect of each ship.

Further, and without prejudice to its rights under this rule, the Club shall have a contractual lien over each ship owned by the Member and/or in the same and/or associated ownership, management or control, whether entered in the Club or not, for outstanding premiums and any other sums whatsoever due to the Club in respect of that ship or any other ship entered by the same Member. That lien shall be without prejudice and in addition to any other rights of the Club, howsoever arising, including any maritime lien or right in rem available by statute or other law of any jurisdiction. The Club shall be entitled to enforce its contractual lien hereunder in any jurisdiction in accordance with the local law of such jurisdiction. Such lien shall continue in force notwithstanding that the entry of the ship has terminated until all sums due to the Club have been paid.

38 Directors’ Discretion in Relation to Cessation

Notwithstanding the provisions of Rules 35, 36 and 37, the Directors may in their sole and absolute discretion admit any claims and/or agree cover in respect of any ship or ships entered by a Member whether occurring before or after any specified event resulting in cessation of membership and/or of insurance by the Club.

39 Overspill Claims, Calls and Guarantees

i

a

All Overspill Claims incurred by the Club or by any other party to the Pooling Agreement under the entry of any one ship arising from any one incident or occurrence including any claim in respect of liability for the removal or non-removal of any wreck shall betreated for the purpose of this Rule 39 as if they were one claim.

b

Any reference in this Rule 39 to a claim incurred by the Club or by any other party to the Pooling Agreement shall be deemed to include the costs and expenses associated therewith.

Overspill Claims Limit

ii

a

Without prejudice to any other applicable limit, any Overspill Claim incurred by the Club shall not be recoverable from the Club in excess of the aggregate of:

(i) that part of the Overspill Claim which is eligible for pooling under the Pooling Agreement but which, under the terms of the Pooling Agreement, is to be borne by the Club; and

(ii) the maximum amount that the Club is able to recover from the other parties to the Pooling Agreement as their contributions to the Overspill Claim.

b

The aggregate amount referred to in paragraph ii a shall be reduced to the extent that the Club can evidence:

(i) that costs have been properly incurred by it in collecting or seeking to collect:

     (a) Overspill Calls levied to provide funds to pay that part of the Overspill Claim referred to in sub paragraph a (i) of paragraph ii, or

     (b) the amount referred to in sub paragraph a (ii); or

(ii) that it is unable to collect an amount equal to that part of the Overspill Claim referred to in sub paragraph a (i) of paragraph ii, which it had intended to pay out of the levy of Overspill Calls because any Overspill Calls so levied, or parts thereof, are not economically recoverable, provided that if, due to a change in circumstances, such amounts subsequently become economically recoverable, the aggregate amount referred to in sub paragraph a of paragraph ii shall be reinstated to that extent.

c

In evidencing the matters referred to in sub paragraph b (ii) of paragraph ii the Club shall be required to show that:

(i) it has levied Overspill Calls in respect of the Overspill Claim referred to in sub paragraph a of paragraph ii on all Members entered in the Club on the Overspill Claim Date in accordance with and in the maximum amounts permitted under paragraph v of this Rule 39; and

(ii) it has levied those Overspill Calls in a timely manner, has not released or otherwise waived a Member’s obligation to pay those calls and has taken all reasonable steps to recover those calls.

Payment of Overspill Claims

iii

a

The funds required to pay any Overspill Claim incurred by the Club shall be provided:

(i) from such sums as the Club is able to recover from the other parties to the Pooling Agreement as their contributions to the Overspill Claim; and

(ii) from such sums as the Club is able to recover from any special insurance which may, in the discretion of the Club, have been effected to protect the Club against the risk of payments of Overspill Claims; and

(iii) from such proportion as the Directors in their discretion determine of any sums standing to the credit of such reserves as the Directors may in their discretion have established; and

(iv) by levying one or more Overspill Calls in accordance with paragraph v of this Rule 39, irrespective of whether the Club has sought to recover or has recovered all or any of the sums referred to in sub paragraph (ii) of paragraph iii a but provided that the Club shall first have made a determination in accordance with sub paragraph (iii) of paragraph iii a; and

(v) from any interest accruing to the Club on any funds provided as aforesaid.

b

The funds required to pay such proportion of any Overspill Claim incurred by any other party to the Pooling Agreement which the Club is liable to contribute under the terms of the Pooling Agreement shall be provided in the manner specified in sub paragraph a (i) - (iv) of paragraph iii.

c

To the extent that the Club intends to provide funds required to pay any Overspill Claim incurred by it in the manner specified in sub paragraph a (iv) of paragraph iii, the Club shall only be required to pay such Overspill Claims as and when such funds are received by it, provided that it can show from time to time that, in seeking to collect such funds, it has taken the steps referred to in sub-paragraph c (i) and (ii) of paragraph ii of this Rule 39.

Overspill Claims - Expert Determinations

iv

a

Any issue of whether, for the purpose of applying any of sub-paragraph c of paragraph iii and sub-paragraphs b and c of paragraph ii of this Rule 39 and in relation to any Overspill Claim (the “relevant Overspill Claim”):

(i) costs have been properly incurred in collecting or seeking to collect Overspill Calls; or

(ii) any Overspill Call or part thereof is economically recoverable; or

(iii) in seeking to collect the funds referred to in sub-paragraph c of paragraph iii, the Club has taken the steps referred to in that Rule,

on which the Club and a Member cannot agree shall be referred to a panel (the “Panel”) constituted in accordance with arrangements established in the Pooling Agreement which, acting as a body of experts and not as an arbitration tribunal, shall determine the issue.

b

If the Panel has not been constituted at a time when a Member wishes to refer an issue to it, the Club shall, on request by the Member, give a direction for the constitution of the Panel as required under the Pooling Agreement.

c

The Club may (and, on the direction of the Member, shall) give such direction as is required under the Pooling Agreement for the formal instruction of the Panel to investigate any issue and to give its determination as soon as reasonably practicable.

d

The Panel shall in its discretion decide what information, documents, evidence and submissions it requires in order to determine an issue and how to obtain these, and the Club and the Member shall co-operate fully with the Panel.

e

In determining any issue referred to it hereunder the Panel shall endeavour to follow the same procedures as it follows in determining issues arising in respect of the relevant Overspill Claim which are referred to it under the Pooling Agreement.

f

In determining an issue the members of the Panel:

(i) shall rely on their own knowledge and expertise; and

(ii) may rely on any information, documents, evidence or submission provided to it by the Club or the Member as the Panel sees fit.

g

If the three members of the Panel cannot agree on any matter, the view of the majority shall prevail.

h

The Panel shall not be required to give reasons for any determination.

i

The Panel’s determination shall be final and binding upon the Club and the Member (subject only to paragraph j hereof) and there shall be no right of appeal from such determination.

j

If the Panel makes a determination on an issue referred to in sub­ paragraph a (ii) or (iii) of paragraph iv the Club or the Member may refer the issue back to the Panel, notwithstanding paragraph i hereof, if it considers that the position has materially changed since the Panel made its determination.

k

The costs of the Panel shall be paid by the Club.

l

Costs, indemnities and other sums payable to the Panel by the Club in relation to any Overspill Claim, whether the reference to the Panel has been made under paragraph iv or under the Pooling Agreement, shall be deemed to be costs properly incurred by the Club in respect of that Overspill Claim for the purposes specified in sub-paragraph b i of paragraph ii.

Levying of Overspill Calls

v

a

(i) If the Directors shall at any time determine that funds are or may in future be required to pay part of an Overspill Claim (whether incurred by the Club or by any other party to the Pooling Agreement); and

(ii) If the Directors shall have made a declaration under sub-paragraphs a and b of paragraphs vi of this Rule 39 that a Policy Year shall remain open for the purpose of levying on Overspill Call or Calls in respect of that Overspill Claim, the Directors in their discretion, at any time or times after such declaration has been made, may levy one or more Overspill Calls in respect of that Overspill Claim in accordance with sub paragraph b of paragraph v.

b

The Directors shall levy any such Overspill Call:

(i) on all Members entered in the Club on the Overspill Claim Date in respect of ships entered by them at that time, notwithstanding the fact that, if the Overspill Claim Date shall be in a Policy Year in respect of which the Directors have made a declaration under sub‑paragraph c of paragraph vi, any such ship may not have been entered in the Club at the time the relevant incident or occurrence occurred; and

(ii) at such percentage of the Convention Limit of each such ship as the Directors in their discretion shall decide.

c

An Overspill Call shall not be levied in respect of any ship entered on the Overspill Claim Date with an overall limit of cover equal to or less than the Group Reinsurance Limit.

d

The Directors shall not levy on any Member in respect of the entry of any one ship an Overspill Call or Calls in respect of any one Overspill Claim exceeding in the aggregate two and one half per cent (2 ½ %) of the Convention Limit of that ship.

e

If at any time after the levying of an Overspill Call upon the Members entered in the Club in any Policy Year, it shall appear to the Directors that the whole of such Overspill Call is unlikely to be required to meet the Overspill Claim in respect of which such Overspill Call was levied, the Directors may decide to dispose of any excess which in the opinion of the Directors is not so required in one or both of the following ways:

(i) by transferring the excess or any part thereof to such reserve or reserves as they think proper; or

(ii) by returning the excess or any part thereof to those Members who have paid that Overspill Call in proportion to the payments made by them.

Closing of Policy Years for Overspill Calls

vi

a

If at any time prior to the expiry of a period of thirty-six months from the commencement of a Policy Year (the “relevant Policy Year”), any of the parties to the Pooling Agreement sends a notice (an “Overspill Notice”) in accordance with the Pooling Agreement that an incident or occurrence has occurred in the relevant Policy Year which has given or at any time may give rise to an Overspill Claim, the Directors shall as soon as practicable thereafter declare that the relevant Policy Year shall remain open for the purpose of levying an Overspill Call or Calls in respect of that claim and the relevant Policy Year shall not be closed for the purpose of making an Overspill Call or Calls in respect of that claim such date as the Directors shall determine.

b

If at the expiry of the period of thirty-six months provided for in sub paragraph a of paragraph vi no Overspill Notice as therein provided for has been sent, the relevant Policy Year shall be closed automatically for the purpose of levying Overspill Calls only, whether or not closed for any other purposes, such closure to have effect from the date falling thirty- six months after the commencement of the relevant Policy Year.

c

If at any time after a Policy Year has been closed in accordance with the provisions of sub-paragraphs a and b of paragraph vi, it appears to the Directors that an incident or occurrence which occurred during such closed Policy Year may then or at any time in the future give rise to an Overspill Claim, the Directors shall as soon as practicable declare that the earliest subsequent open Policy Year (not being a Policy Year in respect of which the Club has already made a declaration in accordance with sub-paragraphs a or b of paragraph vi) shall remain open for the purpose of levying an Overspill Call or Calls in respect of that claim and such open Policy Year shall not be closed for the purpose of making an Overspill Call or Calls in respect of that claim until such date as the Directors shall determine.

d

A Policy Year shall not be closed for the purpose of levying Overspill Calls save in accordance with this paragraph vi of this Rule 39.

Security for Overspill Calls upon Cesser of Insurance

vii

a

If the Club makes a declaration in accordance with sub-paragraphs a or c of paragraph vi of this Rule 39 that a Policy Year shall remain open for the purpose of levying an Overspill Call or Calls; and

b

 if a Member who is liable to pay any such Overspill Call or Calls as may be levied by the Directors in accordance with paragraph v ceases or has or has ceased or has ceased to be insured by the Club in respect of any ship entered by it for any reason, or the Managers determine that the insurance of any such Member shall cease,

the Club may require such Member to provide to the Club by such date as the Club may determine (the “due date”) a guarantee or other security in respect of the Member’s estimated future liability for such Overspill Call or Calls, such guarantee or other security to be in such form and amount (the “guarantee amount”) and upon such terms as the Club in its discretion may deem to be appropriate in the circumstances.

Unless and until such guarantee or other security as is required by the Managers has been provided by the Member, the Member shall not be entitled to recovery from the Club of any claims whatsoever and whensoever arising in respect of any and all vessels entered in the Club by him or on his behalf.

If such guarantee or other security is not provided by the Member to the Club by the due date, a sum equal to the guarantee amount shall be due and payable by the Member to the Club on the due date, and shall be retained by the Club as a security deposit on such terms as the Managers in their discretion may deem to be appropriate in the circumstances.

The provision of a guarantee or other security as required by the Managers, including a payment in accordance with the above paragraph, shall in no way restrict or limit the Member’s liability to pay such Overspill Call or Calls as may be levied by the Club in accordance with paragraphs v and vii of this Rule 39.

40 Deduction and Set Off

i

The Club will have the right to deduct from any monies whatsoever that are due from, or credited to, it for the account of the Member, any premiums, deductibles, or liabilities whatsoever and howsoever arising due from such Member to the Club, including any liability, cost or expense which the Club may incur in respect of any premium tax or other tax levied on or in connection with the insurance or re-insurance provided by the Club to the Member. Further in their absolute discretion the Managers may deduct from any such monies, such amounts as they estimate will become due from that Member in respect of instalments of, or deferred, premium or announced calls. Save that where the Member has provided a guarantee acceptable to the Managers in respect of release calls pursuant to Rule 15 i the Club’s right to deduct pursuant to this Rule shall be limited to the amount by which any sums which are due, or which it is estimated will become due, to the Club exceed the amount of that guarantee.

ii

For the purpose of this Rule the claims and recoveries in any one Class shall be deemed to be available for the purpose of satisfying premiums, deductibles or other sums or liabilities due to the Club in respect of that or any other classes.

iii

For the purpose of this Rule, the Club shall have the right to exercise its right of set off against claims or recoveries due to any Member in respect of the debts or liabilities of any other Member of the Club where the Members are jointly entered and/or the ships are entered by them as a Fleet Entry.

iv

A Member shall not be entitled to set off claims or other amounts due from the Club or recoveries from third parties against any premiums, release calls, or any other sums, due from it to the Club.

v

Without prejudice to the rights and remedies of the Club under these Rules, if any premium and calls or any part thereof or any sum of whatsoever nature due from any Member to the Club is not paid by such Member on or before the date specified for payment thereof, such Member shall pay interest on the amount not so paid from and including the date so specified down to the date of payment at such rate as the Directors may from time to time determine, but the Directors may waive payment of such interest in whole or in part.