International Oil Spill Conference
While a number of factors play a significant role in an oil spill response, of critical interest to every participant is money: how much and who pays! A responsible party clearly cares about the ultimate cost figure for a response; its insurer is very interested in that figure but may have quite a different view on its obligations. Contractors and subcontractors want to be paid fully and promptly, as do third parties who may suffer damages. The Federal On-Scene Coordinator ("FOSC"), the Oil Spill Liability Trust Fund ("OSLTF" or the "Fund"), and insurers become key players after the event in cost recovery and payment for damages.
Despite these sometimes conflicting interests, every response participant can benefit from understanding the standards applied by payors. Based on the standards and procedures for making claims, the participant can create a system that helps in collecting costs or damages. This paper briefly describes the sources of funding, and the standards and process for submitting claims for response costs and damages related to spills in U.S. waters. It then offers suggestions and tools for documenting decisions and costs in a way that enhances the ability to get paid.
INTRODUCTION
Financial interests underlie almost every aspect of a spill response. However, unlike many other factors that clamor for immediate attention, the full magnitude and nature of the costs associated with a spill may only be recognized long after oil hits the water. Inevitably a large incident will not only generate large costs, but also disputes over such costs.
While different players in a response situation have clearly different roles and interests, each player has an interest in getting reimbursed for costs or paid for damages. A responsible party or potentially responsible party wants to keep its total response costs reasonable, preserve any rights to a limitation of or defense to liability, and recover what costs it can. An insurer or guarantor of financial responsibility also has a strong interest in the total costs, but may disagree as to the portion it is obligated to pay. Contractors and subcontractors want to be paid fully and promptly. Third parties who may have suffered damage also desire prompt and full payment. The government (federal, state, and/or local) may itself seek reimbursement for the costs expended in the response. The federal government also has a role as trustee of money in the Oil Spill Liability Trust Fund ("OSLTF" or "Fund"), and some state governments have a similar role with respect to state funds.
Despite the sometimes conflicting interests of the various participants, each can benefit from understanding the sources of funding, limitations on such sources, and the standards under which claims are judged. With such understanding, the participant can then create a system that will enhance its ability to recover costs or damages connected with the spill event.
This paper identifies various sources of funds, describes two major sources (Protection & Indemnity Club cover and the Oil Spill Liability Trust Fund), outlines procedures for making claims primarily for response cost reimbursement, and describes some of the factors that determine payment. It then offers suggestions and tools for documenting decisions and costs in a way that enhances a participant.s ability to get paid.
I. FUNDING SOURCES
Responsible Party. The responsible party typically serves as the initial source of funding for the response (at least until its relevant insurance or liability limits are reached). Therefore, it is the primary entity to whom contractors, subcontractors, third-party claimants, and the government all look for payment.
Each responsible party will have its own system for determining the validity of claims for paying contractors, tracking and reimbursing response costs, and evaluating or paying damage claims. To some degree, its system may be partially dictated by the nature and amount of insurance coverage available to it for reimbursement or the direct payment of claims. Most responsible parties or their insurers set up a claims screening procedure so that clear-cut and minor claims can be paid out relatively quickly, thus forestalling more lengthy and expensive litigation.
Federal Government/OSLTF. Where a responsible party cannot or will not accept the responsibility to fund response to a spill, the federal government can step in and fund the process. This includes paying contractors or other response participants who are entitled to reimbursement. For example, in the January 1994 spill in Puerto Rico where approximately 750,000 gallons of blended No. 6 oil was spilled from the Morris J. Berman barge after its tow line broke, the government began funding the spill when the Water Quality Insurance Syndicate ("WQIS") coverage limit on the barge was exhausted.
The OSLTF is an immediate source of funding for the expenses of the federal government (its own or contractual obligations), and any state governments involved if the state has proceeded to obtain direct Fund access. It can also provide reimbursement funding to contractors or third-party claimants who are not reimbursed by responsible parties after proper presentation of a claim.
State Government. A number of states have imposed taxes on the import or transfer of petroleum, thus generating a fund similar to the federal fund. Each state has its own limits on the rules governing the use of such funds.
Protection &Indemnity Club ("P&I Club" or the "Club") Cover/Insurance. Insurance is probably the most common source of funding for both response costs and damages. However, there is not typically a single type of insurance that applies to a spill event. For example, vessel damage would normally be covered by hull insurance, whereas damages from the oil itself may be covered by a pollution rider under a party.s comprehensive general liability coverage. For vessel spills, response costs typically fall under P&I Club cover, which is a system of membership and mutualized risk among members, rather than insurance, and which excludes reimbursement for certain costs and damages. For spills from a facility, several types of insurance may cover various risks . each policy will have its own restrictions and limits.
II. Protection &Indemnity Club and other insurance
This section outlines the basic procedures for making claims against a P&I Club. Because individual insurance companies and policies may vary more widely in their procedures, they are not addressed here. However, certain common elements (such as formal notice of the claim and mechanisms for cost verification) will be relevant to any claim for reimbursement of response costs or payment for damages.
A. Procedures
Unlike traditional insurance, P&I Club coverage is a mutual indemnification program (backed up by reinsurance, usually through Lloyd.s of London). Rather than a policy, the Club issues a "Certificate of Entry" between the Club and the member. Norman J. Ronneberg, "An Introduction to the Protection and Indemnity Clubs and the Marine Insurance They Provide," 3 U.S.F. Mar. L.J. 1, 7 (1990) (hereafter Ronneberg) (citing Psarianos v. Standard Marine, Ltd., Inc., 728 F. Supp. 438, 441 (E.D. Tex. 1989)). For a shipowner to obtain coverage, he must become and remain a member of the Club. Ahmed v. American S.S. Owners Mut. Protection, 444 F. Supp. 569, 571 (N.D. Cal. 1978), aff.d as modified, 640 F.2d 993 (1981). Because the industry favors commercial uniformity, all Clubs. rules and coverage are substantially identical.
Preliminary Actions. Coverage is conditioned on receiving formal and timely notice concerning any pending claim or situation that is likely to trigger coverage. For significant incidents or where a P&I Club may have particular concerns about the ability of a member to manage a response and the costs associated therewith, the Club may insist on having an on-site representative. The Club may also take over the investigation and handling of certain types of claims, often by hiring a company to do claims management and/or monitoring (e.g., Crawford & Company, Atlanta, Georgia, who has provided cost monitoring and claims management services at a number of U.S. spills).
Indemnification Basis. A Club.s obligation is on an indemnification basis: a member must have paid the obligation in question before the Club.s liability is triggered. Weeks v. Beryl Shipping, Inc., 845 F.2d 304, 306 (11th Cir. 1988); Ronneberg, 3 U.S.F. Mar. L.J. 5, 14-15 (referencing Steamship Mutual Club Rule Book "pay to be paid" clause). The assured must also be liable in its "capacity" as owner of an entered vessel: losses must be "incurred by the member . . . in his capacity as owner or charterer of the entered vessel and [it must provide proof] that the loss was incurred in direct connection with the operation of the vessel.. E.g., Assuranceforeningen SKULD Rulebook (hereafter SKULD Rulebook).
Categories of Claims/Losses. Insurance coverage or P&I Club certificates typically limit the types of claims or damages that will be reimbursed. Certain types of claims are generally excluded: punitive damages, fines and penalties, salvage efforts (although potentially covered by hull insurance), and actions deemed excessive or unnecessary to the response.
Clubs cover members. liability for seven major types of claims:
(1) cargo (e.g., claims for short delivery, loss or damage to cargo),
(2) crew (e.g., medical expenses, repatriation, compensation claims for death or injury),
(3) collision (to the extent such claims are not covered under hull policies; usually only one-quarter of the collision damage amount),
(4) fixed and floating objects (e.g., damage to docks),
(5) third-party injury and death claims (e.g., stevedores, passengers)
(6) oil pollution, and
(7) miscellaneous (which may include fines, wreck removal and various other types of claims not included in the other major categories).
(Description from The Steamship Mutual Underwriting Association (Bermuda) Limited.) For specific coverage limitations (including significant limitations such as prior written approvals for contractual indemnification), see the Club Rules, which are available on the Internet via hypertext from http://www.ssmua.com/SSM_Bermuda (all later citations herein are to this version of the rules). The foreign Clubs rely primarily on their rule books for the scope of coverage; American P&I Clubs rely more on individual policies. Hayden and Balick, "Admiralty Law Institute Symposium: Marine Insurance: Varieties, Combinations, and Coverages," 66 Tul. L. Rev. 311, 328 (1991) (hereafter Hayden & Balick). A Club.s rule book sets forth the scope of the coverage, exclusions, limitations and the Club and Member.s respective obligations. The rule book thus defines the Club.s liabilities and defenses. It also covers such things as reserves, premiums (calls), meetings, and dispute resolution. Ronneberg, 3 U.S.F. Mar. L.J. 6; Hayden and Balick, 66 Tul. L. Rev. 311, 326 (1991) (citing Mark Tilley, "Protection and Indemnity Club Rules and Direct Actions by Third Parties," 17 Mar. L. & Com. 427, 428-29 (1986)); Cooney, "The Stormy Seas of Oil Pollution Liability: Will Protection and Indemnity Clubs Survive?" 16 Hous. J. Int.l Law 343, 350 (1993).
Sample Limitations on the Ability to Make Claims. P&I Club pollution cover has specific limitations. To reimburse claims for liabilities, costs or expenses arising out of the escape or discharge or threatened escape or discharge of any substance from the vessel, the member.s cover must have been "specifically extended to include such liabilities, and the member has undertaken to pay such additional calls or contributions as may be required by the Managers.. Rule 25, Pollution, XVI. Also, claims are limited to the excess of deductibles that are stipulated between the Club and the member as part of the terms and conditions upon which the entry of the ship is either accepted or continued. Rule 25, Deductibles, XLI. Although some Clubs establish standard deductibles for various risks, an individual member can negotiate its own deductibles based on the risks covered and premium levels.
Rule 16 (Oil Pollution Limit) also imposes limitations on the amount paid out as reimbursement to a member. The money limit approved by the directors to apply to Rule 16ii claims (from February 20, 1990) is $500 million for each vessel for any one accident or occurrence (the Club is responsible for the first $1.2 million; the balance goes to a "Pool" made up of the 16 P&I Clubs in the International Group for up to $12 million, and the reinsurance market covers the remainder). E.g., "P&I Clubs Cover 3 U.S. Oil Spills", Business Insurance (July 3, 1989) (describing general scheme); Cooney, 16 Hous. J. Int.l L. 343, 351 (noting Lloyd.s is primary source for reinsurance); Rule 16, ii Note (noting increase to $500 million each vessel any one accident or occurrence). If the aggregate of claims exceeds the limit of cover, the liability of the Club for each claim shall be proportional: the member shall get the same percentage recovery on the individual claim as the stated limit bears to the aggregated total of all claims made. Further, if multiple entered vessels provide salvage or other assistance in a single incident, all of those claims are aggregated for purposes of determining whether a limit is reached. If a bareboat charterer and owner are separately insured with the same Club or any other P&I Association which participates in the International Group of P&I Clubs for reinsurance purposes, then their claims are also aggregated for purposes of determining the limit of payment for that incident.
Excluded Risks. The following risks are traditionally excluded from P&I Club coverage: hull and war risks, damage to the owner/member.s own property and the owner.s own financial losses, and risks subject to double insurance. E.g., Hayden & Balick, 66 Tul. L. Rev. 311, 328 (referencing exclusion for hull insurance, repairs, loss of freight and charter hire, and consequences of blockade running).
Comprehensive General Liability ("CGL") Insurance. Although not necessarily designed for marine coverage, the broad activities of many corporate insureds have brought a number of maritime exposures within its scope. The massive amount of litigation concerning this type of coverage (in many different contexts) almost exclusively focuses on the "triggers" for coverage, and the "exclusions" to coverage. Before an obligation for payment arises, an "occurrence" must result in "property damage," which was neither intended nor expected from the standpoint of the insured. See Pruett, "Environmental Cleanup Costs and Insurance: Seeking a Solution," 24 Ga. L. Rev. 705, 711 (1990) (describing controversy surrounding interpretation of "damages", "property damage" and "occurrence"). Whether an oil pollution incident is a covered "occurrence" and what limitations may apply to a claim under CGL insurance turns on the language of an individual policy interpreted by the insurer or by the courts. Parties that have CGL or other insurance should understand the limitations and exclusions in their policies: for example, policies in some states cover damages but not "response costs.. A variety of insurance products are available to fill gaps in CGL or other general policies, although pollution riders or excess coverage can be expensive.
B. Standards for Payment
No specific set of standards governs whether a particular claim will be reimbursed. However, in general, a Club will make the following threshold determinations.
-- Is the claim of a type that falls under P&I Club cover (for example, as compared to hull or other types of insurance)?
-- Does a cap or limit apply (because of the aggregate amount claimed for the incident or because there is a limitation of liability for the vessel)?
Author.s discussions with P&I Club representatives. More importantly, Clubs have considerable discretion on reimbursing claims under the "Omnibus Rule", which appears in each of International Group P&I Club Rules. The Omnibus Rule allows (but does not compel) the Club.s directors to extend coverage to an incident or event which might not otherwise be within the usual parameters of P&I Club coverage. Hayden & Balick, 66 Tul. L. Rev. 311, 327; Cooney, 16 Hous. J. Int.l Law 343, 351 (citing Swedish Club Rule Book, Rule 19). While the Omnibus Rule can work to a member.s advantage, it amply illustrates the latitude of Club directors.
One standard often cited for reimbursement (but not explicitly captured in the Club Rules) is whether response costs were "reasonable" and "necessary.. Author.s discussions with P&I Club representatives. For example, for salvage claims, Lloyd.s Standard Form of Salvage Agreement (1980) refers to "reasonably incurred" expenses. See Semco Salvage & Marine PTE Ltd. v. Lancer Navigation Co. Ltd (The "Nagasaki Spirit"), 2 Lloyd.s Rep 44 (Queen.s Bench Division (Commercial Court) 1995) (quoting Standard Form). Pollution loss coverage has also been described as including "the costs of any reasonable measures taken to avoid or minimize pollution and any liability for losses or damages to property resulting from those measures" and the "costs of, or resulting from, liabilities from complying with an order or direction from any government or authority to prevent or reduce pollution.. "P&I Clubs Cover 3 U.S. Oil Spills", Business Insurance (July 3, 1989).
The P&I Club attitude has been described as viewing many United States response costs as excessive or unnecessary (particularly those related to public relations efforts or activities not directly flowing out of oil recovery or minimizing further damage). Thus, P&I Clubs may tend to resist reimbursing such costs. However, having a good record in support of the need for certain expenses can go a long way toward getting reimbursed. P&I Clubs or insurance carriers may also have schedules that set a presumed cost for particular items; documentation can help overcome that presumption if costs exceed the scheduled amount.
III. OIL SPILL LIABILITY TRUST FUND
This section outlines the basic procedures for making claims against the Fund. These procedures share certain similarities with P&I Club approach (for example, formal notice of a claim and mechanisms for cost verification), but are much more specific and do not expressly recognize the same range of discretion in reimbursement.
A. Procedures
Categories of Claims/Losses. The OSLTF allows compensation for the following types of costs/damages under Sections 1012 and 1013 of the Oil Pollution Act ("OPA"):
-- removal costs,
-- real or personal property damage,
-- loss of profits or earning capacity,
-- loss of subsistence use,
-- loss of government revenues,
-- cost of increased public services, and
-- damages to natural resources.
Two Avenues for Making Claims Against the Fund. Submission of claims to the OSLTF can occur in one of two ways. The claimant initially submits a claim to the source of the spill designated under OPA Section 1014 or its guarantor pursuant to the designee.s advertisement, and the designee either denies the claim or fails to settle it within 90 days. The claimant then may submit its claim to the National Pollution Funds Center ("NPFC"). Certain claimants can submit a claim directly because the source of the spill cannot be designated and the NPFC itself advertises for claims, or because the status of the claimant (responsible party, a state that has Fund access, or a United States. claimant) allows initial presentation to the Fund.
Limitations on the Ability to Make Claims. OPA Section 1012 prescribes certain time periods within which a claim must be tendered: within 6 years for any claim for removal costs, and within 3 years for a damages claim (from the time the injury and its connection with the incident were reasonably discoverable). For natural resource damages, the claim must be made within three years from date of completion of a natural resource damage assessment under OPA Section 1006(e). Unless the claimant is in a special category allowing it to make a claim initially against the Fund, all claims must be presented first to the responsible party or the guarantor of the designated spill source. Otherwise, the claim will automatically be denied by the Fund. See OPA ' 1013(a) and (b) and case law interpreting those provisions. Finally, if a claimant has sought compensation from the responsible party or its guarantor and the claim is not settled by payment within 90 days, the claimant may elect to commence an action in court. However, that choice will preclude a claim against the Fund. 33 C.F.R. ' 136.109.
Acceptance of payment or an offer of settlement by the Fund is final and conclusive and constitutes a release of the Fund for the claim. Such settlement also precludes the claimant from filing any subsequent action against any person to recover the same costs or damages. Acceptance constitutes an agreement to assign to the Fund any rights or causes of action the claimant has with respect to the claims for which compensation was paid and to cooperate with the Fund in its cost recovery efforts. Such cooperation includes reimbursing the Fund for any compensation received from another source and providing documentation, evidence, testimony and other support as may be necessary for the Fund to seek recovery. 33 C.F.R. ' 136.115.
Finally, there is a per-incident cap on claims paid from the OSLTF. Expenditures for any one oil pollution incident are limited to $1 billion, and natural resources damage assessments/ claims in connection with any single incident are limited to $500 million.
Information in Claim Submission. There is no specific format for the submission of claims to the Fund although the NPFC does provide a standard Claim Form. See The NPFC User Reference Guide (the current edition was unavailable at the time this paper was printed; a new guide was anticipated to be available by the end of 1998). Claims must be submitted in accordance with the rules for making claims found at 33 C.F.R. ' 136.105 through 136.113. The claimant bears the burden of providing all evidence, information, and documentation to support its claim. The rules require that claims:
-- are in writing,
-- indicate the type and amount of damages being claimed for each type of claim (each type must be separately listed with a sum certain attributable to each type and category listed),
-- be signed in ink by the claimant and the claimant.s legal representative (if it has one),
-- certify to the best of the claimant.s knowledge and belief that the claim accurately reflects all material facts,
-- provide a narrative description of the damage and how it was caused by the incident,
-- give the full name, street and mailing addresses of residence and business, taxpayer ID number, and telephone number of each claimant,
-- indicate the date, time and geographic location of the incident giving rise to the claim,
-- when known, identify the vessel, facility, or entity causing or suspected of having caused the removal costs or damages claimed and the basis for such identity or belief,
-- give a general description of the nature and extent of removal costs or damages claimed by category as allowed under OPA,
-- for property damage, give the full name, street and mailing address, taxpayer ID number and telephone number of the property owner, if different from the claimant,
-- explain how and when the removal costs or damages were caused by or resulted from an incident,
-- describe the actions taken by the claimant to avoid or minimize the removal costs or damages claimed,
-- provide the reasonable costs incurred in assessing the damages claimed (includes reasonable costs of estimates, but not attorney.s fees or other administrative costs associated with preparing the claim),
-- provide the full name, street and mailing address, and telephone number of each witness to the incident, removal costs or damages claimed, along with a brief description of that person.s knowledge, to the extent each is known or identifiable (that person should be able to provide useful information directly relevant to documenting the claim), and
-- provide a copy of all written communications and the substance of verbal communications, if any, between the claimant and the responsible party or guarantor of the designated source and a statement indicating that the claim was presented to the responsible party or guarantor, the date presented, and that it was denied or remains unsettled.
The NPFC User Guide, Claims Section, p. 8. The claimant must also provide certain information concerning any insurance which may cover the removal costs or damages for which compensation is claimed, or other sources of compensation received, applied for, or potentially available as a consequence of the incident. 33 C.F.R. ' 36.111.
B. Standards for Payment
A claimant seeking reimbursement for removal costs from the Fund must establish (1) "that the actions taken were necessary to prevent, minimize, or mitigate the effects of the incident;" (2) "that the removal costs were incurred as a result of these actions;" and (3) "that the actions taken were determined by the Federal On-Scene Coordinator ("FOSC") to be consistent with the National Contingency Plan or were directed by the FOSC.. 33 C.F.R. ' 136.203. Such removal costs must also have been "reasonable" as well as meeting the three tests described. 33 C.F.R. ' 136.205.
The claims processing regulations describe the specific types of proof or documentation to be submitted under various categories of damage claims. These standards should be referred to prior to filing a claim:
Natural resource damages 33 C.F.R. ' 136.209
Real or personal property damage 33 C.F.R. ' 136.215
Subsistence use 33 C.F.R. ' 136.221
Loss of government revenues 33 C.F.R. ' 136.227
Lost profits and earning capacity 33 C.F.R. ' 136.233
Government public services 33 C.F.R. ' 136.239
A presumption concerning costs similar to that used by P&I Clubs may apply to some items since the Coast Guard has established standard rates to be used in computing reimbursable charges. See Commandant Instruction 7310.1E (July 13, 1991), reprinted in The NPFC User Reference Guide.
IV. Documentation
It is an advantage for any legitimate claimant to be able to show the nature and amount of its response costs or damages. It is also critical for the payor (whether government or private) to have appropriate documentation to guard against excessive payment or fraudulent claims.
Why Documentation is Important. Documentation of critical events, actions, and costs is vital for the following reasons.
(1) For a responsible party, documentation can support a showing that removal actions were consistent with the National Contingency Plan ("NCP") or taken at government direction.
(2) Documentation assists in showing that removal actions were "reasonable and necessary" or comport with whatever substantive standard applies to insurance recovery.
(3) Documentation assists claimants seeking reimbursement from the Fund or from the responsible party (whether through direct presentation or suit).
(4) The process of documenting decisions or instructions can clarify the actual decision and may bring unclear issues forward for resolution.
Types of Documentation. Although many think of documentation as merely pieces of paper or log entries, documentation can include anything that will serve as evidence or proof underlying a claim. See the table of documentation examples below.
Category
Paper Documentation
Examples Formal notifications (e.g., RP to government, RP to insurer, claimants to RP)
Government Approvals, Instructions, Waivers, Consent Orders
Plans (e.g., daily operations plan, waste management, NRDA assessment plan)
Applications (e.g., for dispersant use approval)
Correspondence
Meeting notes/minutes
Personnel and equipment logs
Contracts
Deeds or Leases
Invoices, purchase orders, receipts
Hearing records or transcripts (e.g., NTSB investigatory hearing)
News Articles
Witness statements
Reports after the event (e.g., appraisal reports)
Category Media/Tapes/Pictures
Examples Cassette tapes (used by individuals for recording certain events . Caution: permission may need to be obtained)
Videotapes (e.g., press conferences, overflights)
Aerial photographs
Category Computer-Generated Records
Photographs of damages
Computer data from technical support services (e.g., remote sensing)
Category
Physical Materials
Photographs of damages Oil samples (chain-of-custody is important)
Damaged items
Physical samples and analysis (e.g., NRDA samples)
Key Factors . Response Costs. Any spill response will generate multiple requests for reimbursement from various parties to various sources. The following issues are common to almost any type of claim for response costs:
(1) Capture approval or direction from the government. Although the Fund is the only source that expressly requires removal actions to be consistent with the NCP or as otherwise directed by the FOSC, government direction and sign-off will also become significant for other payors determining the legitimacy of the expenses incurred. While there is no single right way to document government orders, approvals or directions, the following methods have been used successfully in spill events:
a. Obtain government signature on action plans, whether done daily, weekly, or on some other periodic basis (usually get the signature of the FOSC or government official designated in charge of actual operations).
b. If not incorporated into a signed or approved plan, create a document that summarizes key activities or resources and get a written signature (for example, an operations sheet, list of major equipment resources). This may also be useful to do for goals and objectives, because a written statement can later be used as a standard to judge whether the actions taken were necessary to achieve the listed goals or objectives.
c. Make it easy for the FOSC to understand and agree to what he is signing: hit the highlights only (make it short) and don.t inject unresolved issues.
d. Use whatever tools help: attach copies if needed, use preformed stamps where only the signature and date need to be inserted.
e. Capture decisions for government sign-off rather than general discussion or unresolved issues (be forewarned that this procedure of capturing decisions may reveal unresolved or unanticipated issues). Examples of key decisions include: Unified Command decisions such as protection priorities, decisions to release resources, decisions concerning "how clean is clean".
f. Take meeting minutes (and get sign-off by the government if possible) . you may not wish to rely on the junior Coast Guard representative for this function because their training may focus on issues that are not important to you or relevant to reimbursement.
g. Keep government correspondence.
(2) Discuss government costs up front. Since the government will be monitoring any significant spill response, and has been very successful in recovering monitoring costs from responsible parties, it is helpful for a responsible party to discuss government costs up front and agree upon them if possible. If the responsible party objects to certain items or the cost of such items, it should document its objection. Such documentation may be helpful in later convincing an insurance company or a court to allow these costs.
(3) Maintain and have accessible key materials related to contractor and subcontractor claims. Since contractors flock to spill events, it is important for both the contractor/subcontractor and responsible party to be able to ascertain and track costs to avoid lengthy and costly disputes later. Critical items to have on hand immediately following a spill include:
-- vessel or facility contingency plan (if applicable)
-- the basic contract or agreement governing the contractor or activity,
-- a log or other description of personnel (by name) and time worked,
-- a list of equipment and its status (operating, broken, not yet on site) by date and time,
-- some baseline information about major equipment (for example, take pictures or have an inspector review the condition of a fishing boat prior to hire so as to screen out for damage claims unrelated to the response), and
-- instructions from the responsible party, contractor (if you are a subcontractor), or government.
(4) Collect and preserve physical evidence with appropriate chain-of-custody. Physical evidence plays a key role in several contexts, particularly where issues exist concerning the extent of damage, pre-spill conditions, or the nature of the product spilled (type or oil or whether oil was mixed with any hazardous substance). The government and all potentially responsible parties should each take care to collect and preserve samples of oil (split samples are recommended), any physical samples obtained for Natural Resource Damage Assessment ("NRDA") purposes (baseline or assessment phases), and pictures, videotape, or computer records related to the effects of an incident. For proof purposes, a chain-of-custody must be maintained.
(5) Maintain all documentation required by law. Remember to maintain and secure Occupational Safety and Health Administration ("OSHA") required logs, documents proving spill notification, etc.
(6) It is equally important not to document some things as it is to document them. Capturing speculation or opinions in a written record can make the situation worse in later litigation or claims disputes (e.g., avoid discussing the cause of an incident and the quality of performance unless pursuant to a formal after-incident report). Similarly, unverified hearsay or third-party reports should not be given credence by repetition in writing. Finally, capturing discussions of issues (as compared to decisions) can undermine cost recovery by calling into question whether a particular action was necessary.
(7) Have a qualified person document key events. The person creating or compiling documentation should (a) have a strong awareness of what needs to be documented; (b) be accurate; and (c) have the ability to perform this function (i.e., is not subject to so many competing demands as to be unable to document). However, also be aware that each person has responsibility for documenting his or her own actions. This should be exercised in a sensible manner in light of the urgencies of the response. For many people, documentation means noting their hours, what they did, and the location. For decisionmakers and those with cost oversight or accounting responsibilities, more time and effort should be spent. Experienced personnel have developed easy tools for capturing this information: pocket notepad, mini-cassette recorder, computer log sheet, preprinted forms, etc.
(8) Document solutions as well as problems. Just recording problems can make the situation look worse, and may prevent a company from showing that remedial actions mitigated the effects of a spill. Noting only problems without solutions may also hinder a responsible party from convincing a government agency (EPA or the Coast Guard) that potential or assessed penalties or fines should be lower.
(9) Have a system for collecting relevant documentation and maintaining chain-of-custody for key items (documents, physical evidence, pictures, videotapes, etc.). It is easier to do it shortly after or during a spill response than years later when a subpoena may arrive or your insurance carrier is seeking arbitration.
(10) Finally . keep in mind that effort at the front-end may save time, hassle, and costs later on! It is difficult to recreate the facts at a later date or argue about response actions/damages without documentation prepared at the time of the incident.
CONCLUSION
A response participant or person claiming costs or damages from an oil spill can increase its chances of reimbursement by understanding the sources of funding, the limitations on such sources, and the procedures and standards governing decisions about payment. One key to being successful in seeking response cost reimbursement or payment for damages is a system for carefully documenting critical actions and resources (response costs) and/or spill effects (damages). While no one wants the response to slow down because of paperwork, preparing for a response by having instructions and a system in place for documentation can materially increase the likelihood of getting immediate funding or later reimbursement.
REFERENCES
1. "P&I Clubs Cover 3 U.S. Oil Spills," Business Insurance, July 3, 1989.
2. Claims Handling Guide, The Steamship Mutual Underwriting Association (Bermuda) Limited, available at http://www.ssmua.com/SSM_Bermuda/Publications.
3. Cooney, Melissa Kness, 1993. The Stormy Seas of Oil Pollution Liability: Will Protection and Indemnity Clubs Survive? 16 Hous. J. Int.l Law 343, 350.
4. Hayden, Raymond P. and Balick, Sanford E., 1991. Admiralty Law Institute Symposium: Marine Insurance: Varieties, Combinations, and Coverages, 66 Tul. L. Rev. 311, p. 328.
5. Lloyd.s of London, 1980. Lloyd.s Standard Form of Salvage Agreement.
6. National Pollution Fund Center, The NPFC User Reference Guide (contains TOPs listed below, copy of claims processing rules, forms for government and others. use, and other information). The current edition is unavailable; a new guide was anticipated to be available by the end of 1998. TOPs available from the NPFC include Initiation of NRDA Technical Operating Procedures, Removal Cost Technical Operating Procedures, Resource Documentation Technical Operating Procedures, and State Access Technical Operating Procedures.
7. Pruett, Michael C., 1990. Environmental Cleanup Costs and Insurance: Seeking a Solution. 24 Ga. L. Rev. 705, 711.
8. Ronneberg, Norman J., 1990. An Introduction to the Protection and Indemnity Clubs and the Marine Insurance They Provide. 3 U.S.F. Mar. L.J. 1, 7.
9. Steamship Mutual Club Rule Book (Assuranceforeningen SKULD Rulebook).
10. Tilley, Mark, 1986. "Protection and Indemnity Club Rules and Direct Actions by Third Parties," 17 Mar. L. & Com. 427, 428-9.
BIBLIOGRAPHY
1. Claimant.s Information Guide, U.S. Coast Guard National Pollution Funds Center (NPFC), 4200 Wilson Blvd., Suite 1000, Arlington, VA 22203-1804, (703) 235-4764, (800) 280-7118.
3. National Pollution Funds Center Fiscal Year Annual Reports (multiple), available directly from the NPFC.
4. Pollution from the Carriage of Oil by Sea: Liability and Compensation, Dr. Wu Chao, available from Kluwer Law International, PO Box 85889, 2508 CN The Hague, The Netherlands. Tel: +31 (0) 70 308 1560. Fax: +31 (0) 70 308 1555.
The author gratefully acknowledges the contributions of Jeff Mitchell and Karen Goldstein, associates at Nixon Peabody LLP in the preparation of this paper.
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