2015 PCS CATASTROPHE CONFERENCE
ENVIRONMENTAL POLLUTION
LIABILITY CLAIMS
Environmental Pollution Liability Claims
OBJECTIVES
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Introduce some Historical Information about Environmental Pollution Spills
Introduce General Information on Scope of and Types of Reported Incidents
Review of OPA 90 - Oil Pollution Fund
Review Typical Third Party P&C Claim Types and Related Incident Response
Cost Definitions
Promote Proper Analysis, Inspection, Investigation, Control and Conclusion of
Pollution Liability Claims
Promote Importance of Safety and Security during an Environmental Pollution
Incident
History of Pollution Liability Events
. . . And resulting regulatory reaction
While overall quantities of oil spilled have decreased, the liability
exposure for even the smallest spills has skyrocketed
History of Pollution Liability Events
SIGNIFICANT HISTORICAL SPILLS
• Oil Tanker – Torrey Canyon on Seven Rocks in the English Channel – 35 Million gallons of
Kuwait Crude Oil
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$15 Million in cleanup costs
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$7.2 Million in settlements to both Britain and France
• 1969 Santa Barbara offshore platform spill
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$5 Million in cleanup costs
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Seven class actions filed demanding $5 Billion in damages
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$500 Million claim for damage to Natural Resources
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Seven years later – settlement reached $17 Million
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Total overall costs estimated at $60 Million
• 1978 Amoco Cadiz oil tanker spill: 68 Million gallons of oil
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$80 Million in Cleanup costs
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Litigation lasted for years; Demands > $2.2 Billion
History of Pollution Liability Events
HISTORICAL SPILLS cont’d
• 1980 Bay of Campeche, Mexico – 140 Million gallons of oil released for 292 days
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$40 Million in Cleanup costs
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Millions in Claims and Litigation costs
• 1989 Exxon Valdez oil tanker spill – Alaska
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Millions in Cleanup costs
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Billions in Natural Resource damages
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Billions in Claims and Litigation costs
• Legislation: Oil Pollution Act of 1990 “OPA 90”
Types of Spills / Releases
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Oil Spills – (Crude or Other Petroleum Product)
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Hazardous or Toxic Chemical Spills Causing
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Pipelines
Storage Tanks
Refineries
Vessels
Offshore Rigs and Platforms
Evacuations, Property Damage, Others
Air emission Concerns
Soil/Water Surface Pollution
Subsurface Soil Pollution
Ground Water Pollution
Non-Toxic Spills
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MTBE - (methyl tertiary-butyl ether) is a chemical compound that is manufactured by the chemical reaction of
methanol and isobutylene and is almost exclusively used as a fuel additive in motor gasoline.
Environmental Pollution Liability Events
VALDEZ OIL SPILL
Environmental Pollution Liability Events
WELL BLOWOUT - TRECATE, ITALY
Environmental Pollution Liability Events
TANK FARM EXPLOSION
Environmental Pollution Liability Events
CHEMICAL PLANT EXPLOSION
Environmental Pollution Liability Events
TRAIN DERAILMENT / EXPLOSION
Environmental Pollution Liability Events
GULF OF MEXICO WELL BLOWOUT
Environmental Pollution Liability Events
PIPELINE RUPTURE
Environmental Pollution Liability Events
HURRICANE KATRINA – TANK RUPTURE
Recent Events
ARKANSAS PIPELINE RUPTURE
Recent Events
TEXAS OVERSPRAY EVENT
Small island impacted requiring cleanup
of residential, commercial and
personal properties.
OIL POLLUTION FUND
Oil Spill Liability Trust Fund (“The Fund”)
1986 The Fund (OSLTF) - created from tax on the petroleum industry (per
barrel tax) to pay for cleanup costs, damages and claims.
OIL POLLUTION FUND
Oil Pollution Act of 1990 (“OPA 90”)
OPA 90 - fueled by the Exxon Valdez oil spill (March 24, 1989); amended the
Clean Water Act (“CWA”), addresses issues associated with preventing,
responding to, and paying for oil pollution. Title I of OPA established oil spill
liability and compensation requirements.
OIL POLLUTION FUND
U.S. Coast Guard's National Pollution Funds Center (NPFC)
1991 (NPFC) – created to implement Title I of the OPA 90, and to
ensure ensure responsible parties (RP) are held accountable for
cleanup costs and damages
OIL POLLUTION FUND
TYPES OF CLAIMS UNDER “THE FUND”
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Costs for removal of contaminated property
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Real and Personal Property Damage
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Loss of Profits and Earning Capacity
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Loss of Government Revenue
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Cost of Increased Public Services
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Loss of Subsistence use of Natural Resources
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Claims for costs or damages incurred by the Responsible Party (RP)
Responding to a Major
MAN-MADE Catastrophic Event
CLAIMS UNDER OPA 90
USCG
OPA 90
Regs.
UNIFIEDCOMMAND
COMMAND
UNIFIED
FINANCE
Logistics
Cost Management
and Control
Resource Tracking
Invoice Control
Invoice Payment
Management Reporting
Treasury
Insurance
Legal
Public Relations
Operations
THIRD PARTY
LIABILITY CLAIMS
Liability Claims
Reserve Analysis
Management Reporting
Claims Payment Program
Planning
Insurance Recovery
Claim Preparation
Settlement Negotiation
LIABILITY CLAIMS MANAGEMENT
Types of Third Party Liability Claims
Property Damage
Evacuation
- Piers/Docks
- Real Property/Farms
- Housing
- Out of Pocket Costs
- Inconvenience
Personal Property
- Vessels / Yachts
- Pleasure Boats
- Automobiles
Loss of Income
- Fishermen
- Hotels and Restaurants
- Local Businesses
Bodily Injury
Demurrage
LIABILITY CLAIMS MANAGEMENT
When it happens . . .
YOU HAVE
Chaos
A mess to clean up
Potential third party complaints
Imminent legal action
Not enough staff and not
enough hours in the day
To report to Executives &
Shareholders
YOU’LL WANT
Experienced, calm personnel
To know what resources are
employed at what locations and
how much they are costing
Timely cost information properly
categorized
To understand third party
liability exposures and to handle
all claims assertions as potential
lawsuits and to accurately &
securely record and report on all
claims handing activities (i.e.,
claims payments)
Knowledgeable support to assist
and ensure a successful recovery
process
LIABILITY CLAIMS MANAGEMENT
PHASED CLAIM PAYMENTS PROGRAM
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Pay the Largest Group
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With the smallest provable claim(s)
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And the greatest perceived need, first because
“America loves the Little Guy”
Note: This creates community expectations for fair treatment and small
payments for only verifiable claims.
LIABILITY CLAIMS MANAGEMENT
Key Considerations – Evacuation
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Transportation: Directed by Public Safety / Re-Entry Plan
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Dissemination of Information
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Shelter: Hotel/Motel (Volume Discounts), (Methodology, Approval),
Pets? Security?
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Red Cross?
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Food / Per Diem
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Medical Services / Hospitals / ER Facilities
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Security of Evacuation Area / Routes
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Out of Pocket Expenses / Inconvenience
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Liability Claims Management Program
LIABILITY CLAIMS MANAGEMENT
Mock Incident – Scenario
Yellow:
Orange:
Blue:
Green:
Initial Evacuation Zone
Evacuation Zone
Water Plume
Air Plume
LIABILITY CLAIMS MANAGEMENT
Establishing a Claims Office:
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Immediate establishment of a toll free hotline (Call Center) to ensure
compliance with OPA ’90 requirements. (See ICS Structure Slide)
Working with client to establish liability & proper claims handling
procedures
Recording all claims into a comprehensive, web-based database
accessible by authorized parties, to procure and maintain virtual files
Daily reports to client and flexibility in reporting formats
LIABILITY CLAIMS MANAGEMENT
Establishing a Claims Office Cont’d:
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Litigation support including document preparation & control,
claims, valuations and investigation.
Documentation of claims handling and processing procedures.
Establishment of claim file construction and required
documents.
Providing documentation to substantiate a claim of recovery
with all the necessary audit trails.
LIABILITY CLAIMS MANAGEMENT
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Initial Actions at Impacted Area
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Orientation
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Cause & origin
Potential effects on claimant population
Potential for claims and litigation
Survey and Overflight
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Conduct a claims survey
Determine relevant, meaningful sources of information
Typical overflight details
Initial Exposure Modeling, “Straw Man”
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Develop a profile of exposures by types of claim
Cost all types of claims individually and in aggregate
LIABILITY CLAIMS MANAGEMENT
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Early Planning and Response
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Develop general and daily goals
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General work plan to achieve broader goals
Daily work plan focused on immediate goals
Initial Strategy Meeting
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Identify and reaffirm corporate objectives
Establish overall performance expectations
Review/revise “Straw Man” model analysis
Approve General and Daily Work Plans
Public Advertisement for claims
Establish claims office
LIABILITY CLAIMS MANAGEMENT
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Decision Support and Phased Settlements
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Develop detail categorization and analysis of claims
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Dollar exposures, Damage types, Property profile, and
Mapping
Develop basic information queries and establish reporting
requirements
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Modify Claims Tracking database as necessary base on
Exposures and Reporting requirements
LIABILITY CLAIMS MANAGEMENT
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Decision Support and Phased Settlements Continued:
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Develop claims payments program
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Eligibility parameters
Settlement and documentation guidelines
Prepare claim forms and release documents
Establish physical office complete with security
Advertise office location
On-going Quality Control
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Initial training and development of written procedures &
flowcharts
Daily staff informational meetings
LIABILITY CLAIMS MANAGEMENT
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Subsequent Summary and Support
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Data management and reporting
Data QC and upload of document images
Back-up and secure data
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Documentation management and storage
QC of all hardcopy files
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Develop and implement permanent, secured, long-term storage
Maintain inventory of all stored items
LIABILITY CLAIMS MANAGEMENT
Types of costs that need to be measured and managed
TOTAL COST OF INCIDENT
Third Party P&C Liability Claims
Emergency Response Cleanup & Remediation
Litigation / Class Action
Natural Resource Damages (NRDA)
Internal Costs (Outside the Norm)
Governmental Fines and Agency ER Fees
Deductible / Retention
NET COST OF INCIDENT (claim on your policy)
LIABILITY CLAIMS MANAGEMENT
Identify All Potential Costs for Inclusion in
Claim/Proof of Loss
(Interviews & Investigation)
Address Insurance Program(s) for
coverage and indemnification purposes
Gather Documentation to support claim
Prepare and present claim in
straightforward easily understood manner
Provide follow-up and expert support
throughout recovery and litigation process
Looking into the Future
Fewer spills
Bigger claims
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Pollution events are highly variable from year to year
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The cost of litigation and class action responses in
pollution liability cases continue to escalate
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It’s more and more cost effective for responsible
parties to proactively manage losses
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TPL claims mitigation processes will continue to
change with technology and regulation and litigation
Looking into the Future
What it takes to be a TPL project adjuster
ENIRONMENTAL POLLUTIONS CLAIMS SERVICES
HOLY SHIT . . .