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Limit of Liability FAQs


 

Insurance & COFRs

Concerns of Responsible Parties (RPs)


Insurance & COFRs

The potential costs from an oil spill can be astronomical; how can I possibly be expected to finance all cleanup costs and claims?

The Oil Pollution Act (OPA) limits a responsible party's (RP's) liability for removal costs and damages caused by an oil spill. If an RP pays or incurs removal costs or damages in excess of an applicable liability limit, the RP may present a claim to the NPFC for compensation of the excess amount.

33 U.S.C. § 2704 discusses these limitations as well as their exceptions.

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What is the limit of liability for my vessel/facility?

See Limits of Liability for a summary of the limits for different types of vessels and facilities.

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Won't my insurance cover these costs?

Insurance coverage can vary from plan to plan; you should ensure that the insurance for your vessels or facilities cover the liability requirements.

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How are COFRs related to limits of liability?

Certain vessels must carry a Certificate of Financial Responsibility (COFR), which shows that the vessel operator and/or owner has the ability to pay for cleanup and damage costs up to the liability limits required by OPA, before they can operate in the United States navigable waters:

  • Vessels greater than 300 gross tons and
  • Vessels of any size that are lightering or transshipping oil in the Exclusive Economic Zone (EEZ) of the United States.

Read More...

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Concerns of Responsible Parties (RPs)

I'm considered the RP, but I didn't cause the spill; am I still liable?

If you are the responsible party in a spill (generally meaning that you own the vessel or facility that was the source of the spill), you are liable for the removal costs and damages up to your limit of liability unless you can prove that the discharge was caused solely by:

  • An act of God,
  • An act of war,
  • Negligence on the part of the United States Government, and/or
  • An act or omission of a third party.

Not only must you prove one of the causes listed above, but you must also show that you took all reasonable precautionary steps to prevent a spill should such an accident occur. 33 U.S.C. 1321(f) lists these exceptions.

However, if you accidentally spill oil while aiding in the cleanup of an oil incident, the responsible party (RP) is generally also responsible for those related removal costs; this situation is explained in 33 U.S.C. 1321(c)(4).

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Are there situations when I can't claim a limit to liability?

Yes; the Oil Pollution Act (OPA) lists several exceptions--if you, as the responsible party:

  • Caused the incident by gross negligence or willful misconduct,
  • Caused the incident as the result of violation of an applicable Federal regulation,
  • Didn't report the incident as required by law (assuming you knew about the incident)
  • Didn't cooperate with the Federal On-Scence Coordinator (FOSC) in charge of the spill cleanup, or
  • Didn't comply with government orders related to the spill cleanup.

In addition, if the incident involved a spill or threat of discharge from an Outer Continental Shelf facility or a vessel carrying oil as cargo from such a facility, you are responsible for all removal costs from federal, state, and local government agencies, regardless of the liability limits.

Similarly, the limits do not apply if you operate a tank vessel whose only oil carried as cargo is an animal fat or vegetable oil or if you operate a tank vessel that is designated as an oil spill response vessel. Are there separate limits for these?

33 USC. 2704(c) discusses these exceptions in more detail.

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I have exceeded my limit of liability; what do I do now?

To receive compensation for all costs above your liability limit, you must submit a claim to the NPFC.

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OPA limits on liability do not apply if a responsible party fails or refuses to provide all reasonable cooperation and assistance requested by a responsible official in connection with removal activities. If a responsible party determines to stop paying for removal after it has paid or incurred OPA removal costs and damages up to the OPA liability limit amount, will that be considered a failure or refusal to provide all reasonable cooperation and assistance?

A responsible party determination to stop paying for removal, in good faith reliance on its having paid or incurred removal costs and damages in the amount of its liability limit, is not in itself a failure or refusal to provide all reasonable cooperation and assistance requested by a responsible official. The adequacy of cooperation will be determined on a case-by-case basis in light of all the relevant circumstances. For example, a responsible party that determines to stop paying for removal should fully coordinate its exit from the response with the Federal or other responsible official and pay all amounts owed to its response contractors to avoid any disruption of the continuing response effort.

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Last Modified 10/22/2013