2015 PCS CATASTROPHE CONFERENCE ENVIRONMENTAL POLLUTION LIABILITY CLAIMS

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1 2015 PCS CATASTROPHE CONFERENCE ENVIRONMENTAL POLLUTION LIABILITY CLAIMS

2 Environmental Pollution Liability Claims OBJECTIVES 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

3 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

4 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 o o $15 Million in cleanup costs $7.2 Million in settlements to both Britain and France 1969 Santa Barbara offshore platform spill o o o o o $5 Million in cleanup costs Seven class actions filed demanding $5 Billion in damages $500 Million claim for damage to Natural Resources Seven years later settlement reached $17 Million Total overall costs estimated at $60 Million 1978 Amoco Cadiz oil tanker spill: 68 Million gallons of oil o o $80 Million in Cleanup costs Litigation lasted for years; Demands > $2.2 Billion

5 History of Pollution Liability Events HISTORICAL SPILLS cont d 1980 Bay of Campeche, Mexico 140 Million gallons of oil released for 292 days $40 Million in Cleanup costs Millions in Claims and Litigation costs 1989 Exxon Valdez oil tanker spill Alaska Millions in Cleanup costs Billions in Natural Resource damages Billions in Claims and Litigation costs Legislation: Oil Pollution Act of 1990 OPA 90

6 Types of Spills / Releases Oil Spills (Crude or Other Petroleum Product) o o o o o Pipelines Storage Tanks Refineries Vessels Offshore Rigs and Platforms Hazardous or Toxic Chemical Spills Causing o o o o o Evacuations, Property Damage, Others Air emission Concerns Soil/Water Surface Pollution Subsurface Soil Pollution Ground Water Pollution Non-Toxic Spills o 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.

7 Environmental Pollution Liability Events VALDEZ OIL SPILL

8 Environmental Pollution Liability Events WELL BLOWOUT - TRECATE, ITALY

9 Environmental Pollution Liability Events TANK FARM EXPLOSION

10 Environmental Pollution Liability Events CHEMICAL PLANT EXPLOSION

11 Environmental Pollution Liability Events TRAIN DERAILMENT / EXPLOSION

12 Environmental Pollution Liability Events GULF OF MEXICO WELL BLOWOUT

13 Environmental Pollution Liability Events PIPELINE RUPTURE

14 Environmental Pollution Liability Events HURRICANE KATRINA TANK RUPTURE

15 Recent Events ARKANSAS PIPELINE RUPTURE

16 Recent Events TEXAS OVERSPRAY EVENT Small island impacted requiring cleanup of residential, commercial and personal properties.

17 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.

18 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.

19 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

20 OIL POLLUTION FUND TYPES OF CLAIMS UNDER THE FUND Costs for removal of contaminated property Real and Personal Property Damage Loss of Profits and Earning Capacity Loss of Government Revenue Cost of Increased Public Services Loss of Subsistence use of Natural Resources Claims for costs or damages incurred by the Responsible Party (RP)

21 Responding to a Major MAN-MADE Catastrophic Event

22 CLAIMS UNDER OPA 90 USCG OPA 90 Regs. UNIFIED COMMAND Logistics FINANCE Treasury Insurance Legal Public Relations Operations Planning Cost Management and Control Resource Tracking Invoice Control Invoice Payment Management Reporting THIRD PARTY LIABILITY CLAIMS Liability Claims Reserve Analysis Management Reporting Claims Payment Program Insurance Recovery Claim Preparation Settlement Negotiation

23 LIABILITY CLAIMS MANAGEMENT Types of Third Party Liability Claims Property Damage - Piers/Docks - Real Property/Farms Personal Property - Vessels / Yachts - Pleasure Boats - Automobiles Loss of Income - Fishermen - Hotels and Restaurants - Local Businesses Evacuation - Housing - Out of Pocket Costs - Inconvenience Bodily Injury Demurrage

24 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

25 LIABILITY CLAIMS MANAGEMENT PHASED CLAIM PAYMENTS PROGRAM Pay the Largest Group With the smallest provable claim(s) 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.

26 LIABILITY CLAIMS MANAGEMENT Key Considerations Evacuation Transportation: Directed by Public Safety / Re-Entry Plan Dissemination of Information Shelter: Hotel/Motel (Volume Discounts), (Methodology, Approval), Pets? Security? Red Cross? Food / Per Diem Medical Services / Hospitals / ER Facilities Security of Evacuation Area / Routes Out of Pocket Expenses / Inconvenience Liability Claims Management Program

27 LIABILITY CLAIMS MANAGEMENT Mock Incident Scenario Yellow: Orange: Blue: Green: Initial Evacuation Zone Evacuation Zone Water Plume Air Plume

28 LIABILITY CLAIMS MANAGEMENT Establishing a Claims Office: 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

29 LIABILITY CLAIMS MANAGEMENT Establishing a Claims Office Cont d: 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.

30 LIABILITY CLAIMS MANAGEMENT Initial Actions at Impacted Area Orientation Cause & origin Potential effects on claimant population Potential for claims and litigation Survey and Overflight Conduct a claims survey Determine relevant, meaningful sources of information Typical overflight details Initial Exposure Modeling, Straw Man Develop a profile of exposures by types of claim Cost all types of claims individually and in aggregate

31 LIABILITY CLAIMS MANAGEMENT Early Planning and Response Develop general and daily goals General work plan to achieve broader goals Daily work plan focused on immediate goals Initial Strategy Meeting 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

32 LIABILITY CLAIMS MANAGEMENT Decision Support and Phased Settlements Develop detail categorization and analysis of claims Dollar exposures, Damage types, Property profile, and Mapping Develop basic information queries and establish reporting requirements Modify Claims Tracking database as necessary base on Exposures and Reporting requirements

33 LIABILITY CLAIMS MANAGEMENT Decision Support and Phased Settlements Continued: Develop claims payments program 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 Initial training and development of written procedures & flowcharts Daily staff informational meetings

34 LIABILITY CLAIMS MANAGEMENT Subsequent Summary and Support Data management and reporting Data QC and upload of document images Back-up and secure data Documentation management and storage QC of all hardcopy files Develop and implement permanent, secured, long-term storage Maintain inventory of all stored items

35 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)

36 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

37 Looking into the Future Fewer spills Bigger claims Pollution events are highly variable from year to year The cost of litigation and class action responses in pollution liability cases continue to escalate It s more and more cost effective for responsible parties to proactively manage losses TPL claims mitigation processes will continue to change with technology and regulation and litigation

38 Looking into the Future What it takes to be a TPL project adjuster ENIRONMENTAL POLLUTIONS CLAIMS SERVICES

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40 HOLY SHIT...