Pollution Insurance Terms

Safe Harbor Updates

19 Pollution Insurance Terms You Should Know

Posted: Feb 3, 2021 11:52:49 AM

Some of the most common terms and phrases used in the industrial pollution industry, and those specific to the insurance niche in the industry, can be confusing. Some are mysterious acronyms and others seem straightforward, but might have hidden complexities. 

Below is a quick reference guide to the top pollution industry and insurance terms. Understanding exactly what they mean not only helps you keep lines of communication clear during your day to day, but also ensures you have the right type of coverage for your business.

Blue Card: When requested, marine insurers provide ship owners with evidence of their coverage in the form of a Blue Card. Ship owners then submit their Blue Cards to the appropriate flag state authorities, signifying that the necessary coverage is in place for them to operate under existing regulations. Blue cards date back to 1975, when certificates of insurance were first issued to ships per the Civil Liability Convention 1969 (CLC 69). 

Bunker Blue Card: The Bunker Convention Blue Card is proof that a shipowner has insurance coverage that will fully meet the liability claims set out in the Bunker Convention. This 2008 Convention* assigns liability to the shipowner for pollution damage from a ship’s bunkers. Any ship docking at a port in one of the participating countries must have a Bunker Blue Card from their marine insurer.

*International Convention on Civil Liability for Bunker Oil Pollution Damage is an International treaty listed and administered by the International Maritime Organization, signed in London on 23 March 2001 and in force generally on 21 November 2008.

Certificate of Financial Responsibility (COFR): Required by the Oil Pollution Act of 1990 (OPA 90) and CERCLA, a COFR provides evidence of a vessel operator/owner’s ability to pay for damages caused by an oil spill or water pollution. COFRs are issued by the National Pollution Fund Centre of the United States Coast Guard (USCG) and are required for any vessel over 300 gross tons.

Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA): Also known as Superfund, CERCLA was passed in 1980 in response to the damage caused by the hazardous waste dumped in a Love Canal, NY landfill. This law created a tax on the chemical and petroleum industries and established a federal trust to fund pollution clean-up efforts. It also empowered federal authorities to respond directly to releases or threatened releases of hazardous substances that may endanger public health or the environment, which includes managing both short- and long-term responses.

Damage Mitigation: Managing or attempting to reduce damage is called mitigation. Specific to the pollution industry, damage mitigation will be an important element of ship owners’ and operators’ insurance coverage. Failing to mitigate, or prevent, additional damage may reduce or eliminate insurance coverage and put owners and operators at risk of fines and other regulatory consequences. 

Gross Tonnage (GT): GT is a common measurement of the total volume of all enclosed spaces of a ship (holds, tanks, stores, bridge, etc.), calculated in cubic meters. The measurement is used in assessing harbor and canal transit dues. Note: This should not be confused with Net Tonnage, which is the volume of all cargo carrying space of a ship.

Limits of Liability: Pollution insurance policies contain liability limits, which refer to the maximum amount of money an insurer will pay to an insured party in the case of a pollution incident. Depending on the terms of the policy itself, the financial limits and time periods of coverage will vary.

Navigable Waters: These are all U.S. waters and territorial seas. The term navigable waters also encompasses more than bodies of water large enough to accommodate a boat. The term may also include streams, creeks, and wetlands that empty into larger rivers and lakes as well as their adjoining shorelines.

National Pollution Funds Center (NPFC): The NPFC was created to implement certain provisions of the Oil Pollution Act, which includes administering the Oil Spill Liability Trust Fund (see below). Managed by the USCG, the NPFC certifies that vessels have the financial ability to pay for oil spill damages. In the event of an oil spill, the NPFC provides the funding and response, compensates claimants for cleanup costs and damages, and is responsible for recovering costs from responsible parties. The NPFC is also responsible for administering the USCG portion of Superfund/CERCLA, which funds the clean-up of hazardous substances.

Natural Resource Damage Assessment (NRDA): The USCG states NRDA is “the process of collecting and analyzing information to evaluate the nature and extent of injuries resulting from an incident and determine the restoration actions needed to bring injured natural resources and services back to baseline and make the environment and public whole for interim losses.” 

Non-Tank Vessel Response Plan (NTVRP): In 2013, the USCG Final Rule went into effect, which requires owners and operators of non-tank vessels to submit oil spill response plans. A “non-tank vessel” is defined as a self-propelled, non-tank vessel of 400 gross tons or more that carries oil of any kind as fuel for main propulsion and operates on U.S. navigable waters. In brief, an NTVRP must identify who will implement removal actions; who and what equipment will respond to an oil discharge; and outline the required personnel training and equipment testing. There are scaled response requirements based on the amount of fuel oil carried.

Oil Pollution Act (OPA): Passed by Congress in 1990, shortly after the disastrous Exxon Valdez oil spill, OPA placed increased restrictions on companies shipping oil in the U.S. These restrictions include mandating double hull tankers, requiring documentation of oil spill prevention plans and emergency response/clean-up plans, and more. OPA also established the Oil Spill Liability Trust Fund (OSLTF). The USCG is responsible for enforcing this act.

Oil Spill: The USCG defines , and therefore requires the reporting of, an oil spill as “ An occurrence or series of occurrences having the same origin, involving one or more vessels, facilities, or any combination thereof, resulting in the discharge or substantial threat of discharge of oil into or upon navigable waters of the United States, adjoining shorelines, or the exclusive economic zone (e.g., oil spill in coastal waters from a tanker).

A spill that impacts groundwater, but not the navigable waters of the U.S., is not an OPA spill.”

Oil Spill Removal Organization (OSRO): The USCG established the OSRO program in response to OPA. Organizations apply to and are evaluated by the USCG to become an approved OSRO; part of this process is receiving a classification based on the organization’s ability to respond to and recover oil spills of varying sizes, in different types of operating areas. The USCG classification ensures that an OSRO is able to prepare an appropriate spill response plan, and is capable of or can exceed the spill response needed by companies or vessels, per regulatory requirements.

Responsible Party: The individual or company that has been deemed at fault in the event of an oil spill or pollution incident, and must pay for the damages and associated clean-up costs. The responsible party for an oil spill is typically the vessel owner and/or operator.

Spill Management Team (SMT): SMTs launch the response efforts in the event of an oil spill, providing qualified personnel for incident command system (ICS) positions. The spill response network typically includes not only the SMT, but also representatives from federal, state, and local agencies who work in conjunction to mitigate the impacts of a spill. 

Unified Command: For some oil spills, the ICS expands into a larger response management structure, called Unified Command. Operating as a triage, Unified Command includes the Federal On-Scene Coordinator (FOSC), State On-Scene Coordinator (SOSC), and the responsible party (see above). The goal of Unified Command is to facilitate collaboration and streamline the actions needed to quickly respond and contain the incident.

Vessel: As defined by 1 U.S.C. 3, a vessel includes all means of water transportation. This encompasses watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water.

Vessel Response Plan (VRP): Required by the USCG for vessels carrying certain quantities of chemicals and/or refined petroleum products, a VRP details the actions and contingencies an owner or operator will take in the event of an oil spill. Among other things, this document includes information about the vessel itself, contact information for the vessel owner or operator, the vessel’s operational zones, contact information for the SMT, and the vessel’s insurance coverage.

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