Responsible Party NOT Responsible for Disproving Gross Negligence Under OPA 90 for Reimbursement from the Oil Spill Liability Trust Fund

Great Am. Ins. Co. v. United States, 55 F. Supp. 3d 105 (N.D. Ill. 2014)

Authored By: Emma Aucoin

           In Great Am. Ins. Co. v. United States, Great American Insurance Company and Gulf Coast Marine (as insurers of Egan Marine Corporation (EMC)), filed an action against the United States seeking judicial review of the decision made by the National Pollution Funds Center (NPFC) to deny its claims under the Oil Pollution Act of 1990 (OPA 90).

           The claims brought by EMC under OPA 90 for reimbursement of oil removal costs ensued from an explosion aboard the EMC 423. The explosion occurred on January 19, 2005 and resulted in a spill of 4,718 gallons of clarified slurry oil into the Chicago Sanitary and Ship Canal.

           An analysis of certain OPA 90 provisions were at the heart of the issue of this case: “[W]hether the NPFC correctly interpreted OPA to require Plaintiffs to prove by a preponderance of the evidence the proximate cause of the explosion on EMC 423 in order to demonstrate a limitation of liability and recover from the Fund.”

           Section 2708(a) of OPA 90 gives the Responsible Party the right to assert a claim to recover removal costs and damages from the Oil Spill Liability Trust Fund (The Fund). The Responsible Party may recover from the Fund if it can demonstrate its entitlement to a complete defense under Section 2703, or entitlement to a limitation of liability under Section 2704. The former statute imposes the preponderance of the evidence standard on the Responsible Party, while the latter does not.

           Unlike 33 U.S.C. § 2703(a), the language of 33 U.S.C. § 2704(a) does not mention the preponderance of the evidence standard, but merely states that the total of the liability of a Responsible Party “shall not exceed [calculable amounts based on the type and tonnage of the vessel involved]” unless there is an applicable exception. The exceptions provide that Section 2704(a) does not apply if the incident was proximately caused by the gross negligence or willful misconduct of the responsible party, or if the responsible party violated a federal safety, construction, or operating regulation.

           While a Responsible Party is not required to establish its right to limitation of liability by a preponderance of the evidence, Section 2708(a) of OPA 90 does require a Responsible Party to “demonstrate” its entitlement to the limitation of liability. In order to validly demonstrate its right to a limitation of liability, the Responsible Party must first demonstrate that it is the “owner of the type of vessel or facility for which a limitation is allowed under Section 2704(a) and, in the case of a vessel, establish the gross tonnage of the vessel.” The Responsible Party must then demonstrate the removal costs it has incurred that exceed the limitation amounts in accordance with the appropriate vessel.

           The burden is undoubtedly on the Responsible Party to provide evidence that frames the circumstances of the relevant incident in order for the NPFC to make a reasonable determination regarding the cause and contributing factors of the incident. The regulations outline what proof is necessary for the responsible party to obtain removal costs: “(a) that the actions taken were necessary to prevent, minimize, or mitigate the effects of the incident; (b) that the removal costs were incurred as a result of these actions; and (c) that the actions taken were consistent with the National Contingency Plan or directed by its representative.”

           The United States District Court for the Northern District of Illinois stated that two past district court decisions – Bean Dredging, L.L.C. v. United States and Water Quality Ins. Syndicate v. United States – have focused on acts that were deemed grossly negligent or in violation of a federal regulation rather than reconciling Sections 2703 and 2704.

           In the present case, the NPFC conceded that it did not find the plaintiffs were grossly negligent in the incident or in violation of a federal regulation. Without a finding of either of the aforementioned exceptions listed in Section 2704(c)(1), the general rule for limitation of liability would apply. However, the NPFC instead denied recovery primarily because of its determination that the claimant had the burden of proving the cause of the incident by a preponderance of the evidence. In response, this court held that a finding which requires claimants to “disprove all possible theories of gross negligence in order to obtain the benefit of the ‘general rule’ of limitation does not appear to advance Congress’s intent.” Thus, the United States District Court for the Northern District of Illinois set aside the NPFC’s determination, as it was not in accordance with the relevant OPA 90 provisions.

            At first glance, this would appear to conflict with the opinion of Water Quality Ins. Syndicate v. United States.[1] A combined analysis of the present case and Water Quality Ins. Syndicate v. United States will be posted soon.

[1] 632 F. Supp. 2d 108 (D. Mass. 2009)