Oil Spills and Criminal Sanctions: An Insurer’s Perspective

Criminal sanctions are an acceptable deterrent used to combat deliberate dumping of oil and other intentional environmental misconduct. Since insuring against intentional criminal acts is against public policy, pollution insurers have not provided coverage.
Paper ID #01536, 2001 International Oil Spill Conference

ABSTRACT

Criminal sanctions are an acceptable deterrent used to combat deliberate dumping of oil and other intentional environmental misconduct. Since insuring against intentional criminal acts is against public policy, pollution insurers have not provided coverage. The growing use of strict liability and negligence statutes by the Department of Justice (DOJ) and other law enforcement agencies, and the corresponding lower culpability level necessary for criminal liability, however, have resulted in insurance coverage being developed for certain criminal liabilities.

New issues are now facing the responsible party (RP) and its insurer as a result of this increased use of criminal sanctions. When a spill occurs, the vessel operator, anagement, and crew need to be aware that they may be a target of a criminal investigation. They may need to assert their Fifth Amendment right against self-incrimination. Assertion of Fifth Amendment rights, however, could hinder a cleanup response and also could be considered .lack of cooperation with responsible officials,. which could result in a breach of a vessel.s liability limits under the Oil Pollution Act of 1990 (OPA 90). The cost of providing a defense also may become an issue. It may be necessary to appoint several attorneys to represent divergent vessel and crew interests. The Certificate of Financial Responsibility system under OPA 90 also may be jeopardized by the prosecution of criminal liabilities for environmental crimes by the DOJ. Under OPA 90, a guarantor/insurer has certain defenses to claims arising from a spill, including the willful misconduct of the insured. Willful misconduct established by a criminal prosecution may allow an insurer to recover from the Oil Spill Liability Trust Fund (OSLTF). Some of the inequities in the use of criminal sanctions against RPs eventually may be addressed by legislation. Unless there is legislation that results in major changes, however, the use of criminal sanctions must be considered by a RP and its insurer when planning oil spill response strategies and responding to a spill. This paper will examine the issues involved.

Background

Criminal penalties for oil spills and other environmental mishaps have existed under U.S. law for over 100 years. For most of the twentieth century, law enforcement agencies and the courts xercised discretion by treating environmental violations as civil matters and not criminal violations unless there was obvious riminal intent. In the past several years, however, the number nd severity of criminal sanctions against vessel owners, operators, crewmembers, and masters has increased dramatically.

This increase is probably the result of several factors, including an increased public awareness of environmental issues and increased scrutiny of environmental incidents by the U.S. Environmental Protection Agency (EPA), Federal Bureau of Investigation (FBI), and U.S. Coast Guard. The Department of Justice (DOJ) also has been a major factor by utilizing several laws to criminalize a strict liability statute where those statutes were not intended to be used in spill events. Public statements by DOJ personnel have indicated that they are doing this because they believe that Congress has failed to enact appropriate pollution legislation. In this atmosphere, owners, operators, masters, and crew all face exposure to criminal sanctions.

Download WQIS Corporate Fact Sheet