E-book: Marine Insurance

Pollution

Pollution Insurance is compulsory for pollution cover of vessels, as direct actions against the insurer, with limited defenses, are the substantive and procedural means under CLC and Oil Pollution Acts in order to meet the purposes for a regime that reduces the number of oil pollution incidents and provides adequate compensation to oil pollution victims. Civil liability for oil pollution from vessels which carry persistent oil as cargo is based on two conventions:

International Convention on Civil Liability for Oil Pollution Damage 1992 (CLC 1992)

International Convention on the Establishment of an international Fund for Compensation for Oil Pollution Damage 1992 (the Fund Convention)

Liability for oil pollution from oil used as bunkers derives from Bunker Convention 2001.

Since the Torrey Canyon, Erika, Prestige cases many countries have recognized Oil Pollution Acts which provide for the strict liability of the owner as well as the level or limits of liability for oil pollution accidents, including countries whose coastal lines were damaged by oil pollution and had difficulties in collecting costs for clean-up operations from owners.

The difficulties, which also apply to spills of bunker oil from vessels other than tankers (Bunker Convention 2001), included:

• Proof of negligence of the owner
• Oil pollution liability cover
• Enforcement of judgments against owners of vessels

The CLC is an international regime which remedies these difficulties and all claims are considered under the CLC and the Fund Convention. However, an owner is strictly liable for illegal discharge or escape of oil and the pollution caused. Exceptions include only act of war or natural phenomenon. In respect of a spill, no claim is made against servants or agents of the owner, pilots, charterer, salvor, unless the damage results from a personal act or omission by any of those parties.

The Fund Convention is the regime that compensates claimants when a claim is exempt from liability under the CLC, however, the claims exceed the CLC limits and owners and insurers cannot pay the amount.

The IMO established also the International Convention for the Control and Management of Ships’ Ballast Water and Sediments in 2004, to prevent and control pollution for the marine environment. All vessels must carry a ballast water management plan on board, record book and comply with certain standards for water ballast exchange.

The owners’ liability for pollution is protected under P&I Club rules which also have a limit for liability to US 1b.