That Sinking Feeling

By Matthew Valcourt
Tuesday, November 27, 2012

What is the duty of a vessel owner when his vessel sinks and becomes a hazard?  What is a facility’s duty when it comes to vessels at their docks? On top of the oil, wreckage, and loss of use, there are legal duties and penalties for parties associated with the vessel – under relevant federal and state statutes – after it sinks.

Vessel Owners and Operators 
It’s the call that most owners/operators do not like to get: their vessel is partially submerged at a dock or in some navigable waterway and poses a threat to navigation. If in Navigable waters, sunken vessels must be marked and removed, pursuant to the Rivers and Harbors Act (33 U.S.C. § § 401-467 et seq.). Under the 1986 amendments to the United States “Wreck Act,” 33 U.S.C. §409, et seq., a vessel owner is responsible for promptly marking and removing any wreck which poses a hazard to navigation or, in the alternative, the owner will be strictly liable to the United States for the cost of the Government’s removing the wreck from its navigable waters (33 USC § 414).
As with most government appropriations, you want to be the one contracting with the salvors and not the government, because it will be neither cheap nor easy. For example, and in a case out of New Bedford, MA, the owner estimated a $500 cost to refloat and remove a vessel and the government sought and obtained over $50,000 for removal and disposal of the very same vessel. In a recent Hurricane Katrina case, removal of a drydock and barge in the New Orleans Industrial Canal wrought initial charges by a government contractor in excess of $9 million. The company involved may still be challenging the reasonableness of the charges.
In addition to the cost of removal, the wreck removal statutes carry criminal liability and hefty daily fines up to $25,000 per day. Up to half the fine amount may be granted to the person or persons giving information that leads to a conviction (33 USC § 411). And, it is important to note that a bareboat charterer is the “owner” of the vessel insofar as the statutory duty to locate and mark a sunken vessel created by 33 U.S.C. § 409 is concerned. Such a duty rests entirely with the bareboat charterer of the vessel at the time of the sinking and not with the title owner of the vessel.
Many marine insurance policies have provisions for wreck removal either under a hull “Sue and Labor Clause” or under a P&I policy wreck removal provision. Sue and labor expenses are sums spent by the insured or its representative in an effort to mitigate damage and loss once an accident has occurred.  Mitigation can include preventing fines and penalties for failure to remove a wreck.
In action on marine policy to recover the cost of removal of a sunken vessel, an owner must initially prove that vessel was a wreck within provision of the policy. A wreck is generally defined as a vessel damaged to an extent of being rendered unnavigable. Even if underwriters or owners attempt to abandon the vessel, owner may still liable to its removal if ordered to do so. “Compulsory removal” under admiralty law is when a hull has been abandoned by an owner and the hull underwriter but, the vessel must be removed from navigable waters due to a government order.
Some jurisdictions allow for insurance coverage for wreck removal even without an express order from a governmental agency requiring the removal of the vessel was needed. A three-pronged test is suggested; that is, a removal is compulsory by law if it was reasonably required by law, or failure to remove would expose the insured to liability of such magnitude as to justify removal, and the insured believed that removal was necessary to avoid legal consequences of the type covered by the policy. Progress Marine, Inc. v. Foremost Ins. Co., 642 F.2d 816 (5th Cir. 1981).
A vessel owner has a duty to act to remove a wreck or navigation hazard, under the law and also has a duty under the insurance policy to act prudently to mitigate damages and penalties if possible. Additionally, under OPA 90 and various statutes, the owner or operator has the duty to clean up the oil escaping from a wrecked vessel and also faces substantial fines and penalties as a responsible party for failing to do so. 
Previously, an argument could be made by an innocent owner whose vessel was sunk due to the fault of another or an Act of God to tender abandonment of the vessel and allow the government to remove it at the cost to the public. The 1986 amendments to the Wreck Act, removed the phrase “voluntarily or carelessly” from the first clause of Section 409, and courts have found that this removal expanded the potential for vessel owners’ liability without fault for governmental wreck removal costs.  
Nineteen years after Wyandotte, Congress changed § 409’s standard for liability from negligence to strict liability.  The new §§ 414(b) and 414(c) now permit the United States to hold a non-negligent vessel owner personally liable for the total amount of governmental  wreck removal  costs when it fails to remove its sunken vessel as required by the third clause of § 409.
OPA 90 does not have an innocent owner component at the outset of the spill.  That is, if oil is coming from your vessel or appears to be coming from your facility, and you are deemed a “responsible party” by the USCG or a state authority, you need to clean up first and sue the negligent party later for indemnity or put forth your defenses including Act of God defense to escape liability after the costs have been expended. 
Florida has enacted a Derelict Vessel Act, Florida Statute §376.15, for vessels abandoned or foundered in navigable waters and attaches civil and criminal liability for failure to remove the vessel. The Florida statute states that it is unlawful for any person, firm, or corporation to store, leave, or abandon any derelict vessel in this state. The Florida Fish and Wildlife Conservation Commission and its officers and all law enforcement officers are authorized and empowered to remove any derelict vessel from public waters. All costs incurred by the commission or other law enforcement agency in the removal of any abandoned or derelict vessel are recoverable against the owner of the vessel.
Louisiana has also enacted the “Removal of Sunken Vessels From Navigable Waterways” Act, which carries civil and criminal penalties. And, at least 19 other states and the Virgin Islands have some form of wreck removal statutes so operators should be aware of the peculiar requirements in the jurisdictions they operate in. Commentators have argued that the state statutes or parts of them may be in conflict with the Wreck Act and therefore not be enforceable due to federal preemption. In any event, it’s a dangerous game. As very few vessels operate without fuel oil, lubricants and hydraulic fluids, you may be a responsible party and often the most expeditious way to remove the oil spill hazard is to remove the vessel. A word to the wise: check your insurance policies and make sure you have coverage for wreck removal, sue and labor and oil pollution liability.

Waterfront Facilities
There are some occasions where waterfront facility operators who provide dockage and wharfage to vessels may be directed to remove a derelict or sunken vessel from the facility. For example, if the vessel owner has abandoned the vessel and the facility has taken custody of the vessel to enforce a storage or dockage lien. Even though the facility is not the owner, there may be a bailment created where the facility could be ordered to take action. In this case, a caretaker for a vessel could be deemed an owner, lessee or operator of a vessel under Section 15(b) of the Rivers and Harbors Act.
When a vessel is abandoned on private property, it often becomes the burden of the property owner to take the necessary steps to resolve the issue. If a vessel is leaking oil at a facility, a government authority can order the facility to assist in cleaning up under OPA 90, the Rivers and Harbors Act 1899 (Refuse Act) or the Clean Water Act.
The Clean Water Act (originally enacted as the Federal Water Pollution Control Act Amendments of 1972), has as its goal the protection and maintenance of the chemical, physical and biological integrity of the nation’s waters. The Refuse Act establishes a program to regulate activities affecting navigable water of the U.S. waters, including wetlands.
Section 1002(a) of OPA-90 provides that the responsible party for a vessel or facility from which oil is discharged, or which poses a substantial threat of a discharge, is liable for: (1) certain specified damages resulting from the discharged oil; and (2) removal costs incurred in a manner consistent with the National Contingency Plan (NCP). Often times at the outset of an oil spill the USCG cannot determine the source of the spill and may order all hands on deck to assist in the cleanup. While the facility may ultimately recover the costs of the removal of oil from a vessel owner, they may still be required to act – especially in a case where the owner cannot be readily identified, is absent, or the vessel was abandoned at a facility. Failure to comply with a Federal removal order can result in civil penalties of up to $25,000 for each day of violation.
To avoid liability, a responsible party under OPA-90 has the burden of establishing by a preponderance of the evidence that the discharge and damages were caused solely by an act of God, an act of war, an act or omission of a third party, or any combination of those causes. A facility cannot rest there because a responsible party cannot claim the defenses allowed by the Oil Pollution Act when a named responsible party has failed to report the incident as required by law, or to provide all reasonable cooperation and assistance requested by a responsible official, or, without sufficient cause, fails to comply with an order regarding removal. Hence, even an innocent facility operator can attach liability to itself for failing to assist and cooperate. 
In a case arising out of Hurricane Opal, a marina facility recovered expenses against an insurer for raising sunken vessels which were leaking oil. The facility was told orally by the USCG to clean up the oil from its storage tanks and the sunken vessels, which it did. The insurer attempted to exclude its liability as to third party vessel removal costs and the court found that under the circumstances the facility was under a duty to raise the unidentified and identified vessels to stop the discharge of oil and that it was sort of a de facto responsible party even though it was never officially designated by the state or USCG. 
Facilities can protect themselves by knowing who the owner of the vessels are that frequent their facility and requiring proof of insurance and full contact details for the owner. A prudent facility should make sure or require that vessels are properly marked and identifiable under a state, federal, or international scheme, which demonstrate registration, USCG or IMO numbers while at the facility.

Avoiding That Sinking Feeling
The moral of this story is to act fast to mark and then remove a sunken or wrecked vessel, work closely with the insurer and government agencies to mitigate the loss and remove the vessel and if a facility, exert some quality control as to who you let into your facility, including proof of ownership and insurance so as to reduce your exposure … so you do not get that sinking feeling.
 

(As published in the November 2012 edition of Marine News - www.marinelink.com)

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