Liability


How well do you understand pollution liabilities confronting vessel owners and operators today?

In response to the Exxon Valdez spilling eleven million gallons of crude oil into Prince William Sound, Congress passed the Oil Pollution Act of 1990 (OPA). The law imposes liability upon vessel owners for oil spills, actual or threatened, irrespective of fault. The law also imposed new requirements upon owners and operators of certain vessels to evidence their financial ability to respond in the event of a pollution incident.

EPG Oil Spills

With the passage of OPA, the United States Coast Guard has become much more willing to assume control of any clean up response it deems inadequate and pass the costs it incurred back to the owner or operator of the vessel. Even where the vessel owner is permitted to conduct his own clean-up, liability exists for:

  • Removal Costs & Expenses - Section 1002 of OPA, 33 U.S.C. § 2702;
  • Damages To:
    • Natural Resources;
    • Real or Personal Property;
    • Subsistence Use;
    • Revenues;
    • Profits & Earning Capacity; and
    • Public Services.
    Section 1002 of OPA, 33 U.S.C. § 2702;
  • Interest On Legal Judgments - Section 1005 of OPA, 33 U.S.C. § 2705;
  • Contribution Actions - Section 1009 of OPA, 33 U.S.C. § 2709; and
  • Advertising Expenses - Section 1014 of OPA, 33 U.S.C. § 2714;

While all vessels with hydraulic oil, fuel and/or lubricating oil(s) aboard face potential liability under OPA, vessel owners carrying hazardous substances aboard also face liability under the Comprehensive Environmental Response and Compensation Liability Act (CERCLA).

In the event of a release or threatened release of a hazardous substance as defined by CERCLA, vessel owners are liable for:

  • all costs of removal or remedial action incurred by the United States Government or a State or an Indian Tribe not inconsistent with the national contingency plan;
  • any other necessary costs of response incurred by any other person consistent with the national contingency plan;
  • damage for injury to, destruction of, or loss of natural resources, including the reasonable costs of assessing such injury, resulting from such a release; and
  • the costs of any health assessment or heath effects study carried out under section 9604(i) of this title.
42 U.S.C. § 9607(a)(1).

Vessel owners and operators also face liability to third parties for contribution under 42 U.S.C. § 9613(f) in the event their vessel causes a third party to release a hazardous substance.

For a listing of what substances are considered hazardous and in what quantities, please refer to the table at 40 CFR Part 302.4.

Without examining the pollution statutes of all fifty states, one can categorize state liabilities for spills of oil or hazardous substances as being either broader or narrower than that arising under federal statutes. While the London US Vessel Pollution Insurance Policy covers state liabilities co-extensive with OPA and CERCLA, it cannot be ignored that the federal statutes explicitly preserve the rights of states to pass their own laws governing liabilities for oil and hazardous substance spills.

As some state liabilities may be broader in kind and scope than that imposed under federal law, the availability of an endorsement extending coverage for state liabilities broader than OPA and CERCLA may be an important consideration for some assureds.

EPG Oil Spills


While spills involving oil or hazardous substances invariably garner a response from the authorities, vessel owners cannot ignore laws imposing liability upon vessel owners for spills involving other substances. On the federal level, liabilities are generally defined by the Federal Water Pollution Control Act. It cannot be ignored, however, that liabilities may also arise under state law.

To legally operate certain vessels in US waters, the operator must evidence financial ability to respond in the event of a pollution incident. To do so, the operator applies for a Certificate Of Financial Responsibility or COFR from the National Pollution Funds Center, a division of the USCG. While merely an electronic record these days, the existence of a COFR signifies the operator of the vessel has proven to the federal government that they can financially respond in the event of a spill up to statutorily defined dollar amounts.

Under the Oil Pollution Act, the operator of any vessel over 300 tons (except a public vessel) which has fuel or oil aboard is required to evidence financial responsibility to respond to an oil spill, actual or threatened, in an amount currently no less than the greater of $854,000 or $1,000 per gross ton. In addition, the operator of any vessel transshipping or lightering oil, regardless of the vessel’s size, is required to obtain a COFR. Not surprisingly, tank vessel liabilities are substantially higher than non-tank-vessels under the statute and depend on both tonnage and single versus double hull construction.

The liability amounts under OPA are to be updated by the USCG for changes in the CPI every three years. The next scheduled adjustment should take place in 2012. To see the current liability amounts for both tank vessels and non-tank vessels under OPA, please check the Useful Link on the Contact page of this site.

Under CERCLA, operators of vessels over 300 tons must evidence financial responsibility in an amount no less than the greater of $500,000 or $300 per ton to cover liabilities for a release, actual or threatened, of substances defined as hazardous. If a vessel is moving hazardous substances as cargo, the financial responsibility requirements increase to the greater of $5,000,000 or $300 per ton. For a listing of what substances are considered hazardous and in what quantities, please refer to the table at 40 CFR Part 302.4.

The specific methods by which one can evidence financial responsibility to the NPFC are listed in 33 USC §2716, but purchasing insurance from a company like EPG is by far the most common method of compliance. As long as satisfactory evidence of financial responsibility is maintained with the Coast Guard, the COFR is good for three years from its date of issuance before the operator needs to update its application information by reapplying.

To obtain an application or to find out more about COFRs, we suggest that you visit the National Pollution Funds Center website at https://www.uscg.mil/Mariners/National-Pollution-Funds-Center/COFRs/