Risk and Rewards
Pollution Events Present Significant Liability Threats to Port Operators Does Your Facility Have a Fully Integrated Prevention & Response Plan in Place? By C. Daniel Negron
TT Club Mutual Insurance Limited
T
he catastrophic oil spill that took place in the Gulf of Mexico recently serves as a reminder that pollution poses significant risks to operators in the port and terminal industry. The explosion that caused the spill presents an extreme example of what can happen to a water system by an uncontrolled contaminating event. While miles of absorbent booms have been deployed to prevent the oil slick from reaching sensitive shore areas, contamination of some parts of the coastal shoreline is almost inevitable. As this issue went to press, oil had already begun to reach parts of Louisiana and Florida.
line along the Gulf will likely be affected by the spill. The investigation as to the cause of the accident is now focusing on the safety procedures and condition of the equipment employed at the site. Studies have found that inadequate procedural systems and improperly maintained equipment and facilities are among the most significant contributors to accidents.
INLAND PORTS AT RISK
It does not take an event like the Gulf oil spill for a terminal operator to incur significant liability. In one case, a Gulf Coast grain terminal faced a class action suit from a neighboring community when dust generated Recommendations for an effective from its stevedoring operation spill prevention and response pro was alleged to have contaminated the town. The residents • The use of stockpile water sprays or complained that airborne grain covered stockpiles to prevent dust pollution dust had clogged vents, created large amounts of dust and caused • Installation of fire detection and suppression respiratory ailments to the resisystems, especially at critical work areas dents. As part of the settlement agreement, the terminal agreed • Installation of temperature monitoring to move its operation to another devices on potential heat and spark sources side of the terminal and to perform its operations at certain • Installation of gas leakage detection systems times of the day. on potential heat and spark sources In numerous other cases involving explosions and serious • The development of a fully detailed fire losses, these events are often Emergency Response Plan attributed to inadequate equipment maintenance, faulty wiring, and hydraulic fuel or gas leaks. Multiple class action law suits seeking In a recent explosion at the port of San billions of dollars have already been filed by fishermen, seafood companies, property Juan, Puerto Rico, the accumulation of gas fumes is believed to have been at the root owners and charter boat captains. Hotels and restaurants along the coast are bracing of an explosion involving a tanker ship that destroyed a significant part of the terminal for the loss of visitors. Virtually any entity that is connected in some way to the shore- facility.
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In warehouses and port installations, fires have been exacerbated by the failure to observe operational procedures and by the failure to have adequate fire suppression systems.
HAVE YOUR PLANS IN PLACE BEFORE YOU NEED THEM Given the seriousness of these exposures, underwriters and loss control specialists recommend a fully integrated approach to the prevention and control of pollution-causing events. This involves the establishment of a prevention program, the development of an emergency response program and the procurement of an appropriate insurance program. Rigorous environmental liability regulations and other environmental challenges that confront port and terminal operators present the need to obtain pollution liability insurance. Most general liability policies actually exclude cover for pollution risks, and the cover must be added back to the policy through a “pollution buy back”. When the cover is brought back, the policy will require that the pollutioncausing event take place within the policy’s period of insurance. They will require that the event be sudden, unexpected and unintended, and that the operator become aware of the event within a short period of time, usually 72 hours. The operator must then report the event to his insurer within 30 days of its occurrence. The effect of these requirements is to confine the cover to events that are sudden and accidental, rather than to May/June 2010