Cesser of Insurance and its Effects
A. An Owner shall forthwith cease to be insured by the Association in respect of any and all ships entered by him or on his behalf upon the happening of any of the following events:
i. Where the Owner is an individual,
a) upon his death,
b) if a receiving order is made against him,
c) if he becomes bankrupt,
d) if he makes any composition or arrangement with his creditors generally,
e) if he becomes incapable by reason of mental disorder of managing or administering his property and affairs;
ii. Where the Owner is a corporation,
a) upon the passing of any resolution for its voluntary winding up (other than voluntary winding up for the purposes of company or group reorganisation),
b) upon an order being made for its compulsory winding up,
c) upon its dissolution,
d) upon a receiver or manager being appointed of all or part of its business or undertaking,
e) upon its commencing proceedings under any bankruptcy or insolvency laws to seek protection from its creditors or to reorganise its affairs.
B. Unless otherwise agreed in writing by the Managers, an Owner shall forthwith cease to be insured by the Association in respect of any ship entered by him or on his behalf upon the happening of any of the following events in relation to such ship:
i. upon the Owner parting with or assigning the whole or any part of his interest in the ship whether by bill of sale or other formal document or agreement or in any other way whatsoever;
ii. upon the mortgaging or hypothecation of the ship or of any part of the Owner’s interest in that ship;
iii. upon the managers of the ship being changed by the appointment of new managers;
iv. upon undisputed possession being taken of the ship by or on behalf of a secured party.
v. upon the Owner, as at noon GMT on 20th February in any policy year, failing to pay in respect of the ship any amounts due from him to the Association.
vi. upon the Owner, as at noon GMT on 20th February in any policy year, being in breach of, or otherwise failing to fulfil, his obligations in respect of the ship under Rules 5 (K), 5 (Q) or 5 (R).
C. Unless otherwise agreed in writing by the Managers, an Owner shall forthwith cease to be insured by the Association in respect of any ship entered by him or on his behalf upon the happening of whichever shall be the earliest of the following events:
i. upon the ship being missing for ten days from the date when she was last heard of;
ii. upon the ship being posted at Lloyd’s as missing;
iii. upon the ship becoming an actual total loss;
iv. upon acceptance by hull underwriters (whether of marine or war risks) that the ship is a constructive total loss;
v. upon agreement by hull underwriters (whether of marine or war risks) to pay to the Owner of the ship an unrepaired damage claim which exceeds the market value of the ship without commitment immediately prior to the casualty which gave rise to such claim;
vi. upon a compromise or settlement with hull underwriters (whether of marine or war risks) on the basis of which the ship is considered or deemed to be an actual or constructive total loss;
vii. upon a decision by the Managers that the ship is to be considered or deemed to be an actual or constructive total loss or otherwise commercially lost
PROVIDED ALWAYS that:
a) Notwithstanding the cesser of the insurance under Rule 29 (C) the Association shall, subject always to the Rules and to the terms and conditions of the entry of the ship in the Association, remain liable as regards liabilities flowing directly from the casualty which has given rise to the actual or constructive loss of the ship.
b) If the Managers agree that the insurance of the ship shall continue after the happening of any of the events listed in paragraph (B) and (C) of this Rule they may in their discretion impose such terms and conditions as they think fit for the continuation of the insurance.
D. On the occurrence of any of the events specified in paragraphs (A) to (C) inclusive of this Rule in respect of an entered ship, the Owner shall give notice in writing of such event to the Managers within one month after the date thereof.
E. Upon an Owner ceasing to be insured by virtue of paragraph (A) of this Rule, and upon an Owner ceasing to be insured in respect of any ship by virtue of paragraphs (B) or (C) of this Rule, and without prejudice to the effects of cancellation of insurance pursuant to Rule 31 (A) then:
i. Unless and to the extent that in the case of Call Entries the Owner’s liability may have been agreed or assessed under Rule 30 (Release Calls upon Cesser), such Owner and his successors shall be and remain liable in relation to any Overspill Calls for the whole amount payable by him in accordance with Rule 22, and in relation to all other contributions, premiums and other sums payable:
a. in respect of the policy year in which such cessation occurs, on a pro rata basis, namely for the proportion of such sums applicable to the period beginning at the commencement of that policy year (or, in the case of a ship entered during that policy year, the date of entry) and ending at noon on the date of such cessation; provided that, if the Owner fails to give notice of the event in accordance with paragraph (D) of this Rule, such period shall end at noon GMT on such later date as the Managers in their discretion shall decide, and
b. in respect of previous policy years, for the whole of those policy years, and
ii. Subject to the other provisions of these Rules and to the terms of entry the Association shall remain liable in respect of any ship entered by such Owner or in respect of such entered ship (as the case may be) for all claims under these Rules arising by reason of any event which had occurred prior to the date of such cessation, but shall not otherwise be under any liability whatsoever by reason of anything occurring after that date.