Rule 4  FREIGHT, DEMURRAGE & DEFENCE RISKS COVERED

Unless otherwise agreed between a Member and the Managers, the Association shall be liable under this Rule 4 for:

A. costs and expenses reasonably incurred in connection with any claims, disputes and proceedings which arise out of the matters or events as set out in paragraphs 1 to 10 inclusive hereinbelow.

B. costs and expenses reasonably incurred in obtaining advice in connection with the claims, disputes and proceedings referred to above or the possibility thereof from lawyers, surveyors and other persons (other than employees of the Member or of the Association or of the Managers):

PROVIDED ALWAYS that

No costs or expenses shall be recoverable from the Association unless:

a. they have been incurred by the Member with the prior agreement in writing of the Managers; or

b. they have been incurred by the Association on behalf of the Members in accordance with Section 11 of Rule 8; or

c. the Directors shall determine that they were reasonably incurred and the Member should recover from the Association, and

d. they are not excluded by any proviso, warranty, condition, exclusions, limitation, deductible or other term contained in these Rules or in the terms of entry.

1. Freight, dead freight, demurrage, detention, dispatch money, passage money and hire or any other matter arising out of a charter party, bill of lading or other contract of affreightment or the carriage of goods in or the trading of the entered ship generally;

2. Damages for detention of any entered ship in any collision action;

3. Salvage, towage, general average contributions and charges (except where the entered ship is a professional salvage ship/tug or other craft specially designed, converted or maintained for use in salvage operations and the claim arises as a result of or during any salvage operations or attempted salvage operations; but the Managers in their absolute discretion may allow claims of this type to be covered);

4. A policy of insurance, other than with this Association;

5. Damages sustained by the entered ship;

6. Representation at official inquiries and protection against any interference by a public body, authority, company or corporation in matters connected with the business of ship owning;

7. Any contract for the building, purchase, sale, conversion or repair of the entered ship (including any guarantee in connection with such contract) only if the contract was made at the beginning of or during the period of insurance  or  the Managers agree in writing that claims, disputes or proceedings arising from the particular contract will be covered;

8. Any Mortgage of the entered ship or contract for such mortgage;

9. Any other contract in relation to the entered ship, except where the disputes arise under a management contract, unless the Managers otherwise determined;

10. Any other matter which the Directors determine falls within the scope of this Rule 4.

APPENDIXES TO RULE 4   

A. Bail or Security Fees and Costs

No costs, expenses or charges incurred by a Member in connection with the provision of bail or other security, whether by the Association or not, to obtain the release of or prevent the arrest or attachment of an entered ship or any other property or assets  whatsoever of  that Member shall be recoverable from the Association.

B. Limitation

Cover under this Rule 4 is limited to US$1 million per dispute.

C. Deductibles

Cover under this Rule 4 is always subject to a deductible of US$ 5,000 per dispute.

D. Where the costs of a dispute are only partly covered, the Association shall decide in its absolute discretion, on the apportionment of costs. 

E. For the purpose of this Rule 4, “dispute” as referred to in this Appendixes [B], [C] and [D] above shall be defined by the Directors case by case which merits.

F. Notwithstanding anything to the contrary contained in this Rule 4, the Directors may determine, without having to give any reason for their decision, that the Association shall pay a Member any amount, whether or  not  the  full  amount claimed, in respect of losses,  liabilities, costs or expenses incidental to the business of owning, operating or managing ships, which in the opinion of the Directors fall within the scope of the Association’s business.

G. So far as any risk covered under this Rule 4 is concerned, the Managers shall, in any event, be entitled to determine whether a particular case or claim or dispute which a Member seeks to be covered by the Association merits the support of the Association, and in exercising the powers vested in them hereby, the Managers, in their sole discretion, shall take into account any matters which may appear to them relevant, including but not limited to:

i. the merits of the claims, disputes or proceedings in relation to which the Member seeks to be covered by the Association;

ii. the interests of the Membership as a whole in addition to the interests of the individual Member;

iii. the reasonableness of the Member’s conduct;

iv. the financial consequences of their decision for the Association;

v. the cost-effectiveness of the steps proposed by or on behalf of the Member.

H. The Managers may at any and all times impose such terms as a condition of supporting a Member in any particular case as they think fit.

The Managers may at any time withdraw the Association’s support from a Member in any particular case if they consider that such case ought to be settled or discontinued, and the Association shall not be liable for any costs and expenses incurred in connection with such case after the time of such withdrawal of support.

I. The Member shall not be entitled to recover costs and expenses under Rule 4 that would have been recoverable under Rule 3 had the ship been so insured.