Commentary: Rule 32 Affiliated companies

32.1 General

For a variety of reasons, a claimant may choose to target a party other than the insured Member. See the comments under 30.1. A Member may wish, accordingly, to protect certain corporations closely related to it, so-called affiliated companies, to be covered by the same insurance as Joint Members, co-assureds, affiliated Charterers or contractors under Rule 30.

The definition of an affiliated company is either that the companies have the same parent, or one of the companies is the parent of the other. A parent company is a company which owns at least 50% of the shares in and voting rights of another or owns a minority of the shares in the other but has the ability to procure that it is managed and operated in accordance with its wishes pursuant to Appendix I category 4 (D) of Pooling Agreement.

32.2 What constitutes an affiliated company?

Pursuant to the Pooling Agreement Appendix I Category (D) the Club can agree to extend cover to companies affiliated to the Member, so-called “affiliated “companies”. An affiliated company is not named in the Member’s policy. Its rights and obligations follow from the terms agreed between the Member and the Club and from the restrictions and limitations contained in this Rule. It is important to note that the affiliated company must be affiliated to the Member. It will thus not suffice for the affiliated company to be affiliated with any other party named on the policy.

32.2.1 Extent of cover

An affiliated company is not named in the policy of insurance. The cover that can be afforded to an affiliated company is the same as for co-assureds, meaning so-called “misdirected arrow” cover” and shall not exceed the limitation under the fifth paragraph of Rule 2 had the registered Owner of the entered ship been the sole Member. See the comments under 30.3.3.

It is important to note that whether or not cover is to be extended to an affiliated company, is at the Association’s discretion. The intention with the possibility for the Association to extend cover to a company affiliated to the Member is to provide cover under circumstances where an affiliated company within the Member’s group is targeted for a liability, cost or expense that should rightfully rest with the Member. A claimant may, by way of example, target an affiliated company in a favourable jurisdiction rather than go against the Member directly. Under such circumstances, the Association may agree to extend cover to the affiliated company, as the Association finds appropriate.

This Rule is thus designed to address after the event requests to extend cover to an affiliated company. If the Member has affiliated companies that are e.g. interested in the operation, management or manning of the entered ship then those ought to be named on the policy from the outset, under one of the categories of assureds available under Rule 30 instead.

The words “on such terms as may be agreed” imply that the Club may impose special conditions for the cover of an affiliated company including a limitation of cover.

32.3 Payments from the Club

The Club may, if it so decides, following a request by the Member, discharge its obligations under these Rules by payment to the affiliated company or to any party insured on the same policy in respect of that loss or damage.