GARD: Amendments to the Rules for the 2019 Policy Year

 

• Changes in terminology and structure  as to calculation of calls and clarification of the term ‘casualty’.
• Rule 56 regarding non-marine personnel has been slightly changed.
• Contractual liabilities incurred by the Member in respect of passengers excluded.
• Clarification of activities under specialist operations.
• The reference to accommodation units has been deleted.
• The full name of the Rules for MOUs has been changed  ‘Rules for P&I and Defence cover for Mobile Offshore Units’.
• Sub-section 2 included under insurance, sub-section 3 is added to codify the standard Defence deductible for MOUs.

Gard issued a circular with Amendments to the Rules for the 2019 policy year to its members which will be into force at noon GMT on 20 February 2019.

This Circular outlines the amendments to the Rules for Ships and the Rules for Mobile Offshore Units of both Assuranceforeningen Gard – gjensidig – and Gard P.& I. (Bermuda) Ltd (collectively the “Associations” and individually the “Association”), which will enter into force at noon GMT on 20 February 2019.

Rules for ships

Part I, Chapter 4 – ‘Premiums and Calls’ changes in terminology and structure as to calculation of calls

The following changes in structure and terminology as to premiums and calls in the Rules for Ships are made:

• The term ‘Premium Rating’ is replaced with the new expression ‘Estimated Total Call’.
• The expression ‘Deferred Call’ is replaced with the expression ‘Last Instalment’. This term comprises the proportion of the Estimated Total Call the Board can decide to defer for payment, in whole or in part, after the expiry of the relevant policy year depending on the performance of that year.
• The new term ‘Last Instalment’ shall be calculated as a percentage of the Estimated Total Call for the relevant entered ship. This is the most important structural change. Earlier the Deferred Call was calculated as a percentage of the Advance Call.
• The term ‘Supplementary Call’, meaning in this context premium to be levied in addition to the Estimated Total Call for the relevant entered ship for the relevant policy year, to be retained. However, the Supplementary Call shall hereafter be calculated as a percentage of the Estimated Total Call for the relevant ship in the relevant policy year.
• The existing expression ‘Advance Call’ is no longer needed and has been deleted

The changes involve; Rule 1 (Definitions) and the provisions in Part I, chapter 4 (Premiums and calls) in the Rules for Ships. Some minor adjustments have also been made in Rules 6, 7, 24, 26 and 68.

The Rule changes made due to changes in terminology and structure as to premiums and calls are set out in a separate attachment marked Appendix I.

Other Rule changes made, not related to changes in terminology and structure as to premiums and calls, are summarized below.

Rule 28 Liabilities in respect of passengers

It has been clarified that the term ‘casualty’ referred to in Rule 28 (1) must have resulted from an incident or condition on board the entered ship or other cause affecting the physical condition of that ship or the life or safety of passengers on board the entered ship.

The amended Rule 28 (1) shall read as follows (amendment underlined):

1 The Association shall cover

a) liability for injury to, or illness or death of, or loss of or damage to the effects of passengers and hospital, medical or funeral expenses incurred in relation to such injury, illness or death;

b) liability to pay damages or compensation to passengers on board the Ship where such liability arises in consequence of a casualty, including any liability to return passengers to their port of departure or to forward them to their port of destination and to pay for their maintenance ashore;

c) liability pursuant to mandatory rules of law for loss caused by delay in the carriage of passengers and their effects;

d) costs and expenses incurred as a direct consequence of complying with an order for the deportation of a passenger which would not have been incurred had no such order been made,

provided that:

i) the Association’s liability under paragraphs (a) and (b) above shall not exceed what it would have been had the passage contract relieved the Member of liability to the maximum extent permitted by applicable law;

ii) the Association’s liability under paragraph (d) above shall be subject to the provisos to Rule 27.2; and

iii) the cover shall be subject to proviso (iii) to Rule 27.1; and

iv) for the purpose of paragraph (b) above a casualty shall be defined as an incident or condition on board involving either collision, stranding, explosion, fire or any other cause  affecting the physical condition of the Ship so as to render it incapable of safe navigation to its intended destination or a threat to the life, health or safety of passengers.

Rule 42 – Salvage

Instead of referring to separate historical versions of Lloyd’s Open Form, the wording has been simplified. The reference to Lloyd’s Open Form in general is now used consistently in each paragraph.

Rule 42, sub-paragraph (b), shall be amended to read as follows (amendment underlined):

“The Association shall cover liability for special compensation awarded to the salvor:

(a) ……

(b) Pursuant to Article 14 of the International Convention on Salvage 1989, as incorporated into Lloyd’s Open Form of Salvage Agreement or into any other salvage contract approved by the Association; or

(c) ……………………..”

Rule 56 Non-marine personnel

The exclusion in Rule 56 regarding non-marine personnel has been slightly changed. Besides a contractual allocation of risk approved by the Association, cover is also dependent on the ship (being an accommodation vessel) being moored or anchored more than 500 meters from any oil or gas exploration facility.

The amended Rule 56 shall read as follows (amendment underlined):

Rule 56 Non-marine personnel

The Association shall not cover under a P&I entry liabilities, losses, costs or expenses incurred by the Member in respect of any of the following:

a) personnel (other than marine crew) on board the Ship (being an accommodation vessel) employed otherwise than by the Member unless

(i)  such Ship is moored or anchored more than 500 meters from any oil or gas production or exploration facility

and

(ii)  there has been a contractual allocation of risks as between the Member and the employer of the personnel which has been approved by the Association;

b) hotel and restaurant guests and other visitors and catering crew of the Ship when the Ship is moored (otherwise than on a temporary basis) and is open to the public as a hotel restaurant, bar or other place of entertainment.

Rule 57 – Liability occurring during through transports

Rule 57 (a) and (b) intends merely to exclude contractual liabilities incurred by the Member in respect of passengers while on shore excursions where a separate contract has been made for that excursion, including with the Member, or where the Member has waived rights of recourse against a sub-contractor. However, the Member shall still have cover for passenger claims in tort based on negligent performance of the passenger ticket contract.

To clarify this narrow interpretation of the exclusion, Rule 57 (b) is amended to read as follows (amendment underlined):

“The Association shall not cover under a P&I entry:

a) ……………..

b) liabilities, losses, costs and expenses incurred by the Member under a contract in  respect of passengers on the Ship while on an excursion from the Ship where either:

(i) that contract has been separately entered into by the passenger for the excursion whether or not with the Member, or

(ii) the Member has waived any or all of his rights of recourse against any sub-contractor or third party in respect of the excursion;”

Rule 59 Specialist operations

Instead of having general reference to excluded ‘specialist’ operations, creating some uncertainty as to whether an activity is excluded or not, the Rules lists now expressly activities that are not covered.

The amended Rule 59 shall read as follows (updated list of excluded activities underlined):

Rule 59 Specialist operations

The Association shall not cover under a P&I entry liabilities, losses, costs and expenses incurred by the Member during the course of performing dredging, blasting, pile-driving, well intervention, cable or pipelaying, construction, installation or maintenance work, core sampling, depositing of spoil and power generation to the extent that such liabilities, losses, costs and expenses arise as a consequence of:

a) claims brought by any party for whose benefit the work has been performed, or by any third party (whether connected with any party for whose benefit the work has been performed or not), in respect of the specialist nature of the operations; or

b) the failure to perform such specialist operations by the Member or the fitness for purpose and quality of the Member’s work, products or services, including any defect in the Member’s work, products or services; or

c) any loss of or damage to the contract work,

provided that this exclusion shall not apply to liabilities, losses, costs and expenses incurred by the Member in respect of:

i) loss of life, injury or illness of crew and other personnel on board the Ship;

ii) the wreck removal of the Ship; or

iii) oil pollution from the Ship.

but only to the extent that such liabilities, costs and expenses are within the cover available under any other Rule or the terms of entry agreed.

Rule 60 Drilling, production and accommodation vessels, barges and heavy lift vessels

The reference to accommodation units has been deleted. Rule 60 has been harmonized with the amended Rule 56 (see above). The latter contains the special terms for accommodation units. The adjustments are made because of changes in the Pooling Agreement.

The amended Rule 60 shall read as follows (deleted words crossed out):

Rule 60 Drilling, production and accommodation vessels, barges and heavy lift vessels

1 For drilling vessels, barges and any other vessels or barges employed to carry out drilling or production operations in connection with oil or gas exploration or production, including accommodation units moored or positioned on site as an integral part of any such operations, the Association shall not cover under a P&I entry any liabilities, losses, costs or expenses arising out of or during drilling or production operations, provided that for the purpose of this Rule 60.1

(a)  the Ship shall be deemed to be carrying out production operations if, inter alia, it is a storage tanker or other vessel engaged in the storage of oil, and either:

i) the oil is transferred directly from a producing well to the storage vessel; or

ii) the storage vessel has oil and gas separation equipment on board and gas is being separated from oil whilst on board the storage vessel other than by natural venting; and

(b) in respect of any Ship employed to carry out production operations in connection with oil or gas production, the exclusion in this Rule 60.1 shall apply from the time that a connection, whether directly or indirectly, has been established between the Ship and the well pursuant to a contract under which the Ship is employed, until such time that the Ship is finally disconnected from the well in accordance with that contract

2 For semi-submersible heavy lift vessels and any other vessels designed exclusively for the carriage of heavy lift cargo, the Association shall not cover under a P&I entry liability for loss of or damage to or wreck removal of cargo, save insofar as the carriage is undertaken on contractual terms approved by the Association.

Appendix I, section 3

Appendix I, section 3, contains a reference to other additional insurances that may be agreed between the Association and the individual member on a case by case basis with a view to cover individual needs. The text in section 3 is amended to include a reference to the ‘Terms and Conditions for Additional Covers’ as published on www.gard.no. ‘Terms and Conditions for Additional Covers’ contains a catalogue of various insurance products designed to supplement the standard P&I cover as set out in the Rules for Ships.

Appendix I, section 3, shall be amended to read as follows (amendment underlined):

“The Association may on terms and conditions expressly agreed between the Member and the Association provide or assist in arranging other insurances for a number of liabilities or risks not covered under the Rules. Terms and Conditions for Additional Covers 2019 contains a catalogue of various additional insurance products designed  to supplement the standard P&I cover with a view to meet special needs. Further information about the additional covers is available on www.gard.no or from the Association’s underwriting department.”

Rules for MOUs

Terms and conditions for Defence cover in respect of MOUs have now been incorporated in the Rules for MOUs in the same way it is done in the Rules for Ships. The full name of the Rules for MOUs has been changed to ‘Rules for P&I and Defence cover for Mobile Offshore Units’.

The inclusion of the terms and conditions for the Defence cover has necessitated some editorial changes. Like the Rules for Ships, the Rules for MOUs have now been divided into five Parts and each Part consists of one or more chapters.

In addition to the editorial changes, some minor amendments are made in the Rules for MOUs to enhance clarity as to the scope of cover or to meet market needs. There are no substantial material changes.

All changes are listed in chronological order below. References are based on the new numbering in the amended Rules for MOUs.

Part I

Rule 1 – Definitions

Definitions of terms ‘Defence cover and Defence entry’ and ‘P&I cover and P&I entry’ are included to distinguish between the two types of covers throughout the Rules as required.

Rule 1.1 shall read as follows (amendment underlined):

“1. In these Rules the following words or expressions shall mean:

……………………….

‘Defence Cover and Defence Entry – insurance by the Association for risks specified in   Part III, chapter 1 of the Rules and the entry of a Vessel for such cover.

………………………

‘P&I cover and P&I entry’ – insurance by the Association for risks specified in Part II,  chapter 1, of the Rules and the entry of a Vessel for such cover.”

Part II – P&I cover, chapter 1

The former chapter 6 will now become Part II, chapter 1, and will list all categories of liabilities and losses falling within the scope of the standard P&I cover for MOUs as today. This will include Rules 19 to 33.

Rule 28 – Salvage

Instead of referring to separate historical versions of Lloyd’s Open Form, the wording has been simplified. The reference to Lloyd’s Open Form in general is now used consistently in each paragraph (see proposed change to Rule 42 in the Rules for Ships above).

Rule 28 sub-paragraph (b), shall be amended to read as follows (amendment underlined):

“The Association shall cover liability for special compensation awarded to the salvor:

(a) ……

(b) Pursuant to Article 14 of the International Convention on Salvage 1989, as incorporated into Lloyd’s Open Form of Salvage Agreement or into any other salvage contract approved by the Association; or

(c) ……………………..”

Part II – P&I cover, chapter 2 Limitations etc on P&I cover

The former chapter 7 will become Part II, chapter 2 and renamed to ‘Limitations etc. on P&I cover’. This chapter will contain the limitations and exclusions that are specific to the P&I insurance, i.e. categories of liabilities and losses that are expressly excluded. This will include exclusions and restrictions relating to the following:

Limitation of liability and other restrictions in the right of recovery;

Pollution from well and damage to property caused by blowout etc;

Production operation;

Loss of hole, well and reservoir;

Excluded removal and clean-up costs;

Construction operation;

Other excluded losses;

Amount save by member;

Terms of contract the Association shall not cover; and

US owned, operated or managed Vessels.

Part III – Defence cover

A new Part III, chapter 1, setting out the categories of legal costs and expenses falling within the scope of the Defence cover, has be added. The terms and conditions in the new Part III, chapter 1, mirror the terms in the existing Part IV, chapter 1, in the Rules for Ships. The explanatory notes in the Guidance to the Rules in relation to the Defence cover are also relevant for the Defence cover for MOUs.

The numbering of the Rules is changed. The new Part III, chapter 1, listing the categories of legal costs and expenses falling within the scope of the Defence cover, starts with Rule 44.

Further, a new Part III, chapter 2, setting out the specific exclusions in the Defence cover, is added. The terms and conditions in the new Part III, chapter 2, of the Rules for MOUs mirror the terms in the existing Part IV, chapter 2, in the Rules for Ships. The explanatory notes in the Guidance to the Rules in relation to the Defence cover are also relevant for the Defence cover for MOUs.

The numbering of the Rules is changed. The new Part III, chapter 2, listing the specific limitations in the Defence cover, starts with Rule 46.

The new Rule 50 deals especially with the issue as to when an insurance ‘event’ shall be deemed to have arisen for the purpose of the Defence cover. The new Rule 50 in the Rules for MOUs corresponds to the existing Rule 80 (3) in the Rules for Ships. The explanatory notes in the Guidance to the Rules in relation to the Defence cover are also relevant for the Defence cover for MOUs.

Part IV -General limitations and exclusions both P&I and Defence cover

The new Part IV contains general limitations and exclusions applicable for both the P&I and Defence covers. This will include the following:

Unlawful trade and sanctions (amended as set out below);

Other insurances (amended as set out below);

Conduct of the Member;

War risk;

Nuclear perils;

Part tonnage; and

Deductibles.

As indicated above, some further clarifications are made as highlighted below:

Rule 51 – Unlawful trade and sanctions.

The existing provisions relating to sanctions are included in a general provision dealing with unlawful trade. Rule 51 (1) is new and based on the existing Rule 74 in the Rules for Ships. Rule 51 (2) and (3) is based on the sanction clauses. There is no material amendment.

Rule 51 shall read as follows (amendment underlined):

1. The Association shall not cover liabilities, losses, costs or expenses arising out of or consequent upon the Vessel carrying contraband, blockade running or being employed in or on an unlawful, unsafe or unduly hazardous trade, activity or voyage.  
2. ………
3. ……….

Rule 52 – Other insurances

New sub-section 2 is included (amendment underlined):

1. The Association shall not cover:

a) …………

b) …………

c) ………….

2. The Association shall not cover under a Defence entry costs which are or can be be covered under a P&I entry.

Rule 57 – Deductibles

A new sub-section 3 is added to codify the standard Defence deductible for MOUs.

The new Rule 57 (3) shall read as follows (amendment underlined):

1. ………
2. ………
3. The standard deductible for all legal and other costs covered under Rules 44 and 45 and incurred by all the Assureds under any one Defence entry and arising out of any one event shall be 25 per cent of the legal and other costs incurred, subject to a minimum deductible of USD 5,000 and a maximum deductible of USD 50,000. The Association shall determine in its absolute discretion in respect of Defence cover, whether any costs and expenses have arisen out of one or several events.

Part V – Miscellaneous provisions

New Part V, chapter 1, deals with Joint Members, Co-assureds and Affiliates. The Rules are renumbered. This chapter starts with Rule 58 and ends with Rule 60. No other changes.

New Part V, chapter 2, deals with the Member’s obligations with respect to claims. The Rules are renumbered. The chapter starts with Rule 61 and ends with Rule 68.

New sub-sections are added to Rule 64 dealing with recoveries in Defence cases. The new provision is identical to the corresponding provision in the Rules for Ships.

The new Rule 64.2 (c) shall read (amendment underlined):

1.  ……………
2. Where the Association has made a payment in respect of any liability, loss, cost or expense to or on behalf of a Member, the whole of any recovery from a third party in respect of that liability, loss, cost or expense shall be credited and paid to the Association up to an amount corresponding to the sum paid by the Association together with any interest element on that sum comprised in the recovery, provided however, that

a) …….. and

b) …….; and

c) in respect of a Defence Entry, any recovery from a third party in respect of legal and other costs or expenses (the “Recovery”) shall be applied as follows and in the following order:   

(i) first, if and to the extent a maximum deductible is agreed, the Recovery shall be credited and paid to the Association up to an amount corresponding to the sum of legal and other costs or expenses paid by the Association, in excess of the Member’s maximum deductible, together with any interest element on that sum comprised in the Recovery;

(ii) secondly, if and to the extent the Association only has agreed to cover a percentage of legal and other costs or expenses incurred by the Member, the Association shall be credited and paid a proportion of the Recovery corresponding to the percentage of legal and other costs and   expenses the Association has agreed to cover pursuant to these Rules and the terms of entry agreed;

(iii) Finally, when the requirements in (i) and (ii) above have been satisfied the Recovery shall be applied against the Member’s minimum deductible.   

3. Subject to Rule 64.2, all monies recovered for a Member with Defence cover shall be paid over to the Member, except that the Association may deduct from such  monies and retain any amount due to the Association from the Member.
4. Where a Member settles or compromises a claim within its Defence cover for a lump sum which includes costs or without making provision as to costs, the Association shall determine what part of that lump sum shall be deemed attributable to costs.

New Part V, chapter 3, deals with, inter alia, governing law and arbitration. The legal relationship between the Member and the Association shall be governed by Norwegian law and any disputes shall be referred to arbitration. The chapter starts with Rule 69 and ends with Rule 72.

A copy of the Rules for P&I and Defence cover for Mobile Offshore Units (Rules for MOUs) as amended is available on request.

Did you subscribe for our daily newsletter?

It’s Free! Click here to Subscribe!

Source: Gard