PART V: LIMITATIONS AND EXCLUSIONS

RULE 15: RULES SUBJECT TO MARINE INSURANCE ACT

These Rules and all contracts of insurance made by the Association shall be subject to and incorporate the provisions of the Marine Insurance Act, 1906 and any statutory modification or re-enactment thereof.

RULE 16: PAYMENT FIRST BY THE MEMBER

Unless the Committee in its discretion otherwise decides, it is a condition precedent of a Member's right to recover from the funds of the Association in respect of any liabilities, costs or expenses that he shall first have discharged or paid the same.

RULE 17: NO LIABILITY UNTIL CALLS PAID

Without prejudice to anything elsewhere contained in these Rules it shall be a condition precedent of a Member's right to recover from the funds of the Association in respect of any liabilities, costs or expenses that all such calls and other amounts whatsoever as shall have become due from the Member to the Association shall have been paid in full without any set-off or discount.

RULE 18: INTEREST

A Member shall have no right to recovery of interest on any claim he may have against the Association.

RULE 19: SET-OFF

Without prejudice to anything elsewhere contained in these Rules the Association shall be entitled to set-off any amount due from a Member against any amount due to such Member from the Association.

RULE 20: DEDUCTIBLES

The Member's right of recovery from the Association in respect of any claim shall be subject to such deductible as may be agreed by the Managers in writing.

RULE 21A: LIMIT OF THE ASSOCIATION'S LIABILITY FOR OIL POLLUTION

1 The Association's liability for claims in connection with oil pollution shall be limited to US$500 million each accident or occurrence.

2 The limit of US$500 million shall apply irrespective of whether the accident or occurrence involves the escape of oil from one vessel or more than one vessel and to all claims brought by the Member or joint Members in relation to an insured vessel in respect of such accident or occurrence whether under one section of Rule 2 or more than one section. If the aggregate of such claims exceeds US$500 million, the liability of the Association for each claim shall be such proportion of US$500 million as such claim bears to the aggregate of all such claims. If and to the extent that a Member has, in relation to any claim in connection with oil pollution, other insurance not being solely in respect of the excess of US$500 million, then the limit of US$500 million shall be reduced by the amount of the stated limit of such other insurance and there shall be no right of recovery in respect of any such claim to the extent that it does not exceed the stated limit of such other insurance.

3 When the insured vessel provides salvage or other assistance to another vessel following a casualty, a claim by the Member in relation to the insured vessel in respect of oil pollution arising out of the salvage, that assistance or the casualty shall be aggregated with any liabilities or expenses incurred in respect of oil pollution with the same casualty when such other vessels are either
i covered by the Association in respect of oil pollution, or
ii covered for those risks by any other Association which participates in the Pooling Agreement and the Group excess reinsurance policy.

In these circumstances the limit of the liability of the Association shall be such proportion of US$500 million as the claim by the Member in relation to the insured vessel bears to the aggregate of all the said claims.

4 In relation to vessels insured by or on behalf of a Member who is a charterer, other than a bareboat charterer, the Association's liability to such Member in respect of claims for oil pollution shall be limited to US$100 million each accident or occurrence. In the event that more than one charterer, other than a bareboat charterer, is insured in respect of the same vessel by the Association or by any other Association which participates in the Pooling Agreement and the Group excess reinsurance policy, the aggregate recovery in respect of all claims brought by all such charterers in respect of oil pollution arising out of any one accident or occurrence shall not exceed the sum of US$300 million, and the liability of the Association to each charterer covered by the Association shall be limited to such proportion of US$300 million as the claim of such charterer bears to the aggregate of all such claims recoverable from the Association and any other such Association.

RULE 21B: LIMIT OF THE ASSOCIATION'S LIABILITY FOR OVERSPILL CLAIMS

Without prejudice to any other applicable limit, there shall be no right of recovery of any overspill claim except in accordance with Rule 52.

RULE 22: OTHER LIMITATIONS OF THE ASSOCIATION'S LIABILITY

1 GENERAL LIMITATION
Subject to these Rules the Association insures the liability of a Member in respect of an insured vessel as his liability may ultimately be determined and fixed by law, including laws pertaining to limitation of vessel owners' liability. The Association shall in no circumstances be liable for any sum in excess of such legal liability. If less than the full gross tonnage of a vessel is entered in the Association, the Member concerned shall be entitled only to recover such proportion of his claim as the entered tonnage bears to the full gross tonnage.

2 LIMITATIONS FOR PERSONS OTHER THAN SHIPOWNERS
If a Member has entered a vessel in the Association, and he is not the registered owner, demise charterer, manager or operator of that vessel or an insurer of protection and indemnity risks of such description of persons then unless otherwise agreed by the Managers in writing the liability of the Association in respect of any claim brought by the Member relating to that vessel shall not exceed the amount to which he could have limited his liability for the claim if he had been the registered owner and had not been denied the right to limit.

RULE 23: DOUBLE INSURANCE

1 Unless the Committee otherwise determines, there shall be no right of recovery from the Association of any claim in respect of liabilities or expenses which are recoverable under any other insurance or which would have been so recoverable:

A apart from any terms in such other insurance excluding or limiting liability on the ground of double insurance; and

B if the insured vessel had not been entered in the Association with cover against the risks set out in these Rules.

2 In no case shall the Association be liable for any franchise, deductible or deduction of a similar nature borne by a Member under such other insurance.

RULE 24: EXCLUSION OF SUMS INSURABLE UNDER HULL POLICIES

Unless otherwise agreed by the Managers in writing or the Committee otherwise determines, the Association shall not be liable for any liabilities or expenses in connection with an insured vessel:

1 against which a Member would be insured if the insured vessel were, at the date of the incident giving rise to such liabilities or expenses, fully insured under hull policies on terms not less wide than those of the Lloyd's Marine Policy with the Institute Time Clauses (Hulls) 1/10/83 attached;

2 which would not be recoverable under such policies by reason of some franchise, deductible or deduction of a similar nature in such policies.

"Fully insured" in paragraph 1 of this Rule means insured at such insured value as in the discretion of the Committee represents the full market value of the insured vessel, disregarding any charter or other engagement to which she may be committed.

RULE 25: LIABILITY EXCLUDED FOR WAR RISKS

There shall be no right of recovery from the Association in respect of any liabilities or expenses, whether or not a contributory cause of their being incurred was any neglect on the part of the Member or the Member's servant or agents, when the incident giving rise to the liability or expenses was caused by the following:

1 War, civil war, revolution, rebellion, insurrection or civil strife arising therefrom, or any hostile act by or against a belligerent power.

2 Capture, seizure, arrest, restraint or detainment (barratry or piracy excepted) and the consequences thereof or any attempt thereat.

3 Mines, torpedoes, bombs, rockets, shells, explosives or similar weapons of war (save for those liabilities or expenses which arise solely by reason of the transport of such weapons whether on board the insured vessel or not), provided that this exclusion shall not apply to the use of such weapons, either as a result of government order or through compliance with a written direction given by the Managers or the Committee, where the reason for such use is the avoidance or mitigation of liabilities, costs or expenses which would otherwise fall within the cover given by the Association.

PROVIDED THAT The Committee may resolve that special cover be provided to the Members against any or all of the risks set out in Rule 2, notwithstanding that those liabilities, costs or expenses would otherwise be excluded by this Rule and that such special cover should be limited to such sum or sums and be subject to such terms and conditions as the Committee may from time to time determine.

RULE 26: LIABILITY EXCLUDED FOR CERTAIN NUCLEAR RISKS

There shall be no right of recovery from the Association in respect of any liabilities, costs and expenses directly or indirectly caused by or contributed to, by or arising from:

A ionising radiations from, or the radioactive, toxic, explosive or other hazardous or contaminating properties of:
i any nuclear fuel or any nuclear waste or the combustion of nuclear fuel, or
ii any nuclear installation, reactor or other nuclear assembly or nuclear component thereof; or

B any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter,

other than liabilities, costs and expenses arising out of carriage of "excepted matter" (as defined in the Nuclear Installations Act 1965 of the United Kingdom or any regulations made thereunder) as cargo in an insured vessel.

RULE 27: MISCELLANEOUS EXCLUSIONS

There shall be no right of recovery from the Association in respect of the following:

1 Loss of or damage to an insured vessel or any part thereof.

2 The cost of repairs to an insured vessel or any charges or expenses in connection therewith.

3 Loss of freight or hire or any proportion thereof, unless such loss forms part of a claim recoverable from the Member for loss in respect of cargo or is, with the agreement of the Managers in writing, included in the settlement of such a claim.

4 Salvage of an insured vessel or services in the nature of salvage provided to an insured vessel and any costs and expenses in connection therewith.

5 Loss arising out of cancellation of a charter or other engagement of an insured vessel.

6 Loss arising out of unrecoverable debts or out of the insolvency of any person, including insolvency of agents.

7 Claims relating to demurrage on or detention of an insured vessel unless such demurrage or detention forms part of a claim recoverable from the Member for loss in respect of cargo or is, with the agreement of the Managers in writing, included in the settlement of such a claim.

PROVIDED THAT
The foregoing exclusions of liability shall not prevent recovery of claims under the following Sections of Rule 2:
Section 4: Diversion expenses
Section 6: Liabilities for life salvage
Section 10: Towage
Section 11: Liability arising under certain indemnities and contracts
Section 15: Unrecoverable general average contributions
Section 16: Ship's proportion of general average
Section 18: Special compensation to salvors
Section 21: Liabilities and expenses incurred by direction of the Managers
Section 22: Sue and labour and legal costs

RULE 28: LIABILITIES EXCLUDED IN RESPECT OF SALVAGE VESSELS, DRILLING VESSELS, DREDGERS AND OTHER SPECIALIST OPERATIONS

Unless special cover shall have been agreed by the Managers in writing pursuant to Rules 3 and 4, there shall be no right of recovery from the Association of any claim relating to liabilities and expenses incurred by a Member in respect of the following:

1 An insured vessel which is a salvage tug or other vessel used or intended to be used for salvage operations, when the claim arises as a result of or during any salvage operations or attempted salvage operations.

2 An insured vessel being a drilling vessel or barge or any other vessel or barge employed to carry out drilling or production operations in connection with oil or gas exploration or production, including any accommodation unit moored or positioned on site as an integral part of any such operations, to the extent that such liabilities and expenses arise out of or during drilling or production operations.

A vessel 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:

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

B the storage vessel has oil and gas separation equipment on board and gas is being separated from oil while on board the storage vessel other than by natural venting.

3 The performance of specialist operations including, but not limited to, dredging, blasting, pile driving, well-stimulation, cable or pipe laying, construction, installation or maintenance work, core sampling, depositing of spoil, professional oil spill response or professional oil spill response training (but excluding fire-fighting), to the extent that such liabilities 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 works.

Provided that this exclusion shall not apply to liabilities and expenses incurred by a Member in respect of:

i loss of life, injury or illness of crew and other personnel on board the insured vessel, and,
ii the wreck removal of the insured vessel, and,
iii oil pollution emanating from the insured vessel,

but only to the extent that such liabilities and expenses are otherwise covered by the Association in accordance with the Rules.

4 The activities of professional or commercial divers, when the Member is responsible for such activities (other than activities arising out of salvage operations being conducted by an insured vessel where the divers form part of the crew of that insured vessel [or of diving bells or other similar equipment or craft operating from the insured vessel] and where the Member is responsible for the activities of such divers).

5 Waste incineration or disposal operations carried out by the insured vessel (other than any such operations carried out as an incidental part of other commercial activities).

6 The operations of submarines, mini-submarines or diving bells.

RULE 29: LIABILITIES EXCLUDED IN RESPECT OF NON-MARINE PERSONNEL

There shall be no right of recovery from the Association in respect of any liabilities or expenses incurred in respect of any of the following:

1 Personnel, other than seamen, on board the insured vessel, being an accommodation vessel, employed otherwise than by the Member, where there has not been a contractual allocation of risks as between the Member and the employer of the personnel which has been agreed by the Managers in writing;

2 Hotel and restaurant guests and other visitors and catering crew of the insured vessel when the insured vessel 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 30: LIABILITIES EXCLUDED IN RESPECT OF LIVE ANIMALS

There shall be no right of recovery from the Association in respect of the carriage of live animals, unless the Managers otherwise agree in writing.

RULE 31: LIABILITY EXCLUDED IF ADVENTURE ILLEGAL, HAZARDOUS OR IMPROPER

There shall be no right of recovery of any claim from the Association if it arises out of or is consequent upon an insured vessel carrying contraband, blockade running or being employed in an unlawful trade, or if the Committee having regard to all the circumstances shall be of the opinion that the carriage, trade, voyage or any other activity on board or in connection with the insured vessel, was imprudent, unsafe, unduly hazardous or improper.

RULE 32: CLASSIFICATION AND STATUTORY CERTIFICATION OF VESSEL

Unless otherwise agreed by the Managers in writing the following conditions are terms of the insurance of every insured vessel.

1 The insured vessel must be and remain throughout the period of entry classed with a classification society approved by the Managers.

2 The Member concerned must promptly call to the attention of that classification society or the society's surveyors any incident or condition which has given or might give rise to damage in respect of which the classification society might make recommendations as to repairs or other action to be taken by the Member.

3 The Member must comply with all the Rules, recommendations and requirements of that classification society relating to the insured vessel within the time or times specified by the society.

4 The Member must immediately inform the Managers if, at any time during the period of entry, the classification society with which that vessel is classed is changed, and advise the Managers of all outstanding recommendations, requirements or restrictions specified by any classification society relating to that vessel as at the date of such change.

5 The Member authorises the Managers to inspect any documents and obtain any information relating to the maintenance of class of the insured vessel in the possession of any classification society with which the vessel is, or at any time has been, classed and will where necessary authorise such classification society to disclose and make available such documents and information to the Managers upon request by the Managers and for whatever purposes the Managers may consider necessary.

6 The Member must comply with all statutory requirements of the flag state relating to the construction, adaptation, condition, fitment and equipment of the insured vessel and must at all times maintain the validity of such statutory certificates as are issued by or on behalf of the flag state in relation to such requirements.

7 The Member must comply with all statutory requirements of the flag state relating to manning the vessel.

8 The Member must comply with all statutory requirements of the flag state relating to safety management and must at all times maintain the validity of ISM certificates issued by or on behalf of the flag state in relation to such requirements.

Unless and to the extent that the Committee in its discretion otherwise decides, a Member shall not be entitled to a right of recovery from the Association in respect of any claim whatsoever arising during such period that he has not fulfilled these conditions.

RULE 33: SURVEY OF VESSELS

The Managers may at any time in their discretion appoint a surveyor or such other person as they may think fit, to inspect an insured vessel on behalf of the Association. The Member shall:

A afford all facilities as may be required for such inspection; and

B comply with all recommendations as the Managers may make following such inspection.

Unless and to the extent that the Committee in its discretion otherwise decides, a Member who commits any breach of his obligations under paragraphs A and B above shall not be entitled to a right of recovery from the Association in respect of any claim whatsoever arising after such breach is committed until such time as the Member has complied with these obligations.

In no case shall a Member be entitled to recover any liabilities or expenses arising out of any defect or matter concerning the vessel which was revealed in the course of such inspection.

RULE 34: SURVEY OF VESSELS AFTER LAY-UP

1 If an insured vessel has been laid-up for a period of six months or more, whether the vessel has been entered in the Association for all or part of the period of lay-up and whether or not laid-up returns have been claimed or paid in accordance with Rule 55 the Member shall give the Managers notice that the vessel is to be recommissioned not less than seven days before the vessel leaves the place of lay-up.

2 Upon receipt of such notice the Managers in their discretion may appoint a surveyor or such person as they may think fit to inspect the vessel on behalf of the Association, and the Member shall afford such facilities as may be required for such inspection.

3 The Member shall comply with such recommendations as the Managers may make following such inspection.

Unless and to the extent that the Committee in its discretion otherwise decides, a Member who commits any breach of his obligations under paragraphs 1 to 3 above shall not be entitled to a right of recovery from the Association in respect of any claim whatsoever arising after such breach is committed until such time as the Member has complied with these obligations.

In no case shall a Member be entitled to recover any liabilities or expenses arising out of any defect or matter concerning the vessel which was revealed in the course of such inspection.