The Vessel Pollution Insurance Application: Why Does My Underwriter Ask Me That?

By: Lars Perkins

36 Mill Plain Road, Suite 410Danbury, CT 06811Phone: (203) 730-8833Fax: (203) 730-8863

Significance Of Hull and P&IOPA Removal Obligations Are Defined Broadly

Enough To Require Raising A Vessel

Hull Underwriters collect premiums to provide sue & labor and salvage coverage

P&I Underwriters collect premiums to provide coverage for removal of wreck obligations

Pollution Underwriters do not wish to duplicate coverage for raising a vessel but cannot raise policy defenses as a COFR guarantor

Five Year Loss History

Five Year Loss History

Past Results Are Not A Guarantee Of Future Performance

Minimize Impact On Pricing By Explaining What Has Been Done To Prevent Similar Spills In The Future

Vessel Type

Vessel Type

Self-Propelled VesselsFuel & Oil Aboard To OperateCan Spill ThemselvesCan Cause Third Party Spills

Non-Self-Propelled VesselsRisks Defined More By Pollutants AboardSubrogation Rights May Exist Against Tug

Gross Tonnage

Gross Tonnage

GT Is A Volumetric Measurement

Defines Liability Under Both OPA and CERLCA

Regulatory Tonnage Lower Than ITC Tonnage

33 CFR Part 138.30 – Using Regulatory versus ITC

Application For Simplified Measurementhttp://www.uscg.mil/hq/cg5/msc/interactive_tonnage.asp

https://npfc.uscg.mil/cofr/default.aspx

COFRs

Certificate Of Financial Responsibility

33 USC § 2716 – The responsible party for

1) any vessel over 300 GRT (except a non-self-propelled vessel that does not carry oil as cargo or fuel)

2) any vessel using the waters of the EEZ to transship or lighter oil

shall establish and maintain evidence of financial responsibility

Financial Responsibility Amounts - OPA

The Oil Pollution Act of 1990 limits of liability for vessels are

Single-Hull Tank Vessels Over 3,000 GT

Greater Of $23,496,000 or $3,200 Per Gross Ton

Less Than Or Equal To 3,000 GTGreater Of $6,408,000 or $3,200 Per Gross Ton

Double-Hull Tank Vessels Over 3,000 GRT

Greater Of $17,088,000 or $2,000 Per Gross Ton

Less Than Or Equal To 3,000 GT Greater Of $4,272,000 or $2,000 Per Gross Ton

Any Vessel Other Than A Tank VesselGreater Of $854,400 or $1,000 Per Gross Ton

Source: 33 CFR § 138.230 – Effective July 31, 2009

Financial Responsibility Amounts - CERCLA

CERCLA – Hazardous Substance Liability

Comprehensive Environmental Response Compensation And Liability Act

CERCLA liability limits for vessels are the greater of$500,000 or $300 per gross ton for vessels not moving hazardous substances as cargo

$5,000,000 or $300 per gross ton for vessels moving hazardous substance as cargo

List Of CERCLA Substances – 40 CFR § 302.4

Trading Area/Navigation Limits

Policy Specifically Addresses U.S. Liabilities

Foreign Waters Endorsement Is Available

Lower Liability Outside US May Be Offset By Higher Response Costs

Liquid Cargos

Liquid Cargos

Self-Propelled versus Non-Self-Propelled

Cargo1) Oil (Persistent/Non-Persistent)2) Hazardous Substances – MSDS3) Non-OPA/Non-CERCLA Substances

Construction – Single versus Double Hull

GT

Self-Propelled Vessels

Self-Propelled Vessels

TugsGross TonnageTowing Oil/Chemical Barges

Fishing VesselsGross TonnageDescription Of Type Of Fishing Vessel

Offshore Supply VesselsGross TonnageCERCLA Substances As Cargo?

Other Vessels – Crewboats, Passenger Vessels, Pleasure Yachts

Gross Tonnage

Non-Self-Propelled Vessels

Non-Self-Propelled Vessels

BargesType/DescriptionGross TonnageHazardous Substances As Cargo?Amount Of Fuel/Oil Aboard

a) <5 Gallons – COFR not requiredb) <10,000 Gallonsc) >10,000 Gallons

Other Issues

Other Issues

Special EquipmentSpudsLegsLiftsJack-ups

Description Of OperationsDredgingSalvageDrillingTankerman Duties Aboard Unscheduled

Vessels

Conclusion

Conclusion

Pollution Liabilities Are Here To Stay & Will Continue To Become More Onerous

Cargo Owner Shipping Oil In Single Hull Vessel Is Responsible Party After 12/31/10

Fully Describe Risk Profile To Underwriter To Adequately Insure

Review Adequacy Of Limits Annually

Next Change To Vessel Limits Due In 2012

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