Managing Claims in Large Incidents

Petroleum Association of Japan
28 February 2013

José Maura
International Oil Pollution Compensation Funds

The international compensation regime
History• 1969 Civil Liability Convention• 1971 Fund Convention (ceased to be in force inPrevious regime

2002)

Current regime

2003 Supplementary
Fund Protocol• 1992 Civil Liability Convention• 1992 Fund Convention• Supplementary Fund

The compensation regime
How does it work?

Compensation regime

Source of money

Third tierOil receivers inMember States

Supplementary
Fund

Oil receivers inMember States

1992 Fund

Ship owner(strict liability)

Insurance(P&I Clubs)

Second tier1992 FundConvention
First tier1992 CivilLiabilityConvention

Claimants

SupplementaryFund

Paying organism

1992 Civil Liability Convention
First Tier

• Strict liability of registeredshipowner. No fault
required. Very few
exceptions• Limitation of liability basedon the gross tonnage of theship• Shipowners required to havethird party liability
insurance1992 Fund Convention
Second Tier

WhatWhen

Kicks in whencompensation under
the first tier isinsufficient

Shipowner is exempt
under the 1992 Civil
Liability Convention

Damage occurs innon-Member StateMaximum
compensation is
203 million SDR,including the amountalready paid under
CLC

Shipowner isfinancially incapable

Damage is causedby an act of war or
spill from a warship

Creates the 1992
Fund

Damage exceeds theshipowner’s liability

Claimant cannot
prove it came from a
ship

Not applicableSupplementary Fund
Third Tier•

Protocol establishing a
Supplementary Fund entered into
force in 2005•

Maximum compensation 750 million
SDR (USD 1 159 million), including
amounts payable under 1992
Conventions•Contributions from oil receivers inState Parties to Supplementary Fund
ProtocolCompensation limits
Laid down by the Conventions

1992 Civil Liability Convention

1992 Fund

Supplementary Fund

SDR (millions)

750 m
Supplementary Fund

1992 Fund203m
1992 CLC05140

Gross Tonnage (x 1 000 tonnes)

135 mHow does the IOPC Funds work?

IOPC Funds Governing Bodies
1971 Fund
AdministrativeCouncil

1992 Fund
Assembly

1992 Fund
Executive
Committee

SupplementaryFund
Assembly

Fund Lawyers

TechnicalExperts
Local ClaimsHandling OfficeSecretariat
29 staff

Investment
Advisory Body

Audit Body

The Member States
February 2013••

1992 Fund Convention (109 Member States)
1992 Civil Liability Convention (130 States)••

Supplementary Fund (28 States)
1969 Civil Liability Convention (36 States)

Claims and compensation
Open incidents
1971 Fund
Vistabella
Aegean Sea
Iliad
Plate Princess
Nissos Amorgos

France,1991
Spain, 1992
Greece, 1993
Venezuela, 1997
Venezuela, 1997

1992 Fund
Erika
Prestige
Solar 1
Hebei Spirit
Volgoneft 139

France, 1999
Spain, France, Portugal, 2002
Philippines, 2006
Republic of Korea, 2007
Russia, 2007

Presidente Ilia

Argentina, 2007

King Darwin
JS Amazing
Redfferm
Alfa 1

Canada, 2008
Nigeria, 2009
Nigeria, 2009
Greece, 2012

Major incidents and compensation

Amount paid in claims(includes shipowner’s contribution under CLC)
160

£142m

140£111m120£99m (so far) £104m (so far)

1008060

£52m

40
200
Braer (UK, 1993)

Nakhodka (Japan, Erika (France, 1999) Prestige (Spain,Hebei Spirit (Korea,1997)
France and Portugal,2007)
2002)£ millions

Hebei Spirit
Republic of Korea, December 2007•

Approximately 10 900 tonnes ofcrude oil spilled•

CLC limit was 89.8 million SDR(approximately KRW 186.8 billion)•Special Law to compensate victimsof the spill•

Korean Government decides to‘stand last in the queue’ with itsclaims•

128 400 claims assessed for KRW180.8 billion•KRW 171.9 billion paid

cTaean, Republic of Korea
7 December 2007

Hebei Spirit
Republic of Korea, 2007

Claim assessment teams•

Komos, Hyopsung, Spark, Inteco,Homarus, CMA, ITOPF•

Four local companies andinternational experts carry outassessments•

Claims managers from IOPC Funds
and P&I Club•75 experts (mainly Korean)•Local claims office (‘Hebei SpiritCentre’)•

Limited evidence of loss•

Non-licensed activity•Large number of claims for smallamounts

Working Groups
Large number of claims for small amounts• Dramatic rise in the number of claims for small amounts, particularly
where claimants could not prove losses
 Erika (1999): 7 000 claims
 Solar 1 (2006): 32 000 claims
 Hebei Spirit (2007): 128 000 claims• Each claim has to be individually assessed• In 2009, Working Group was established To make recommendations to Assembly on how make the compensation
regime more efficient for the benefit of claimants

Working Group
Large number of claims for small amounts

1.
2.
3.
4.

The role of Member States
Existing practices
Changes to the Claims ManualAmendments to the Conventions

Deepwater Horizon
United States, April 2010c

Gulf of Mexico, USA
20 April 2010•••••••

Not a spill from ship
Not a Member State
CLC/Fund not applicable
Large incidentInternational interest
Large number of claims
New demands for fast andefficient compensation

Hebei Spirit
Claims progress
35,00030,00025,00020,000Claimed15,00010,000Assessed
5,000
Mar-08 Jun-08 Oct-08 Mar-09 Jun-09 Oct-09 Jun-10 Oct-10 Mar-11

Jul-11

Oct-11 Apr-12 Oct -12

015-Mar

08-Mar01-Mar

22-Feb

15-Feb

08-Feb

01-Feb

25-Jan18-Jan11-Jan04-Jan28-Dec100,000

21-Dec14-Dec07-Dec30-Nov

23-Nov

16-Nov

09-Nov

02-Nov

26-Oct19-Oct12-Oct05-Oct

28-Sep21-Sep14-Sep07-Sep31-Aug24-AugDeepwater Horizon

Claims progress

600,000

1 million claims processed
between Aug 2010 – Mar 2012

500,000

400,000

Total Unique Claimants

300,000

200,000

Total Paid Claimants

Working Group’s proposal
The role of Member States•

Stand last in the queue•

MoU with domestic insurance companies•

Access to statistical data•

Grouping of claims and claimants•Standard reference prices•

Reimbursement of overpayment ofinterim payments•

National expert list and expert mediationpanel•

Use of social security system

Working Group’s proposal
Existing practices

1.
2.
3.
4.
5.

Partnership with commercial adjusters and accountants
The use of economic models
Outsourcing
Remuneration of experts
Claims Manual and claims forms in languages of Member States

Working Group’s proposal
Large number of claims for small amounts

Revision to Claims Manual Fast track' assessment of claims
 Fraudulent claims

 Target time frame for assessing claims
 Use of economic models

Guidance documents
 To set out the various ‘tools’ that Member States could use in the event of an oil spill To assist on presenting claims in the tourism sector

Issue of interim payments still to be resolved

Deepwater Horizon
Gulf Coast Claims Facility

Three options offered to claimants
Interim Payment Claims

1 million claims processed$6.2 billion paid
between Aug 2010 - Mar 2012
(on average 1 500 claims/day)Covers only past damages & requires documentation of loss
Doesn’t require signing a release
Claimants can reapply for additional interim damages every quarter

Quick Payment Final Claims
Pays $5 000 for individual claimants, $25 000 for business claimants
Requires signing a release & covenant not to sue

Full Review of Final Payment Claims
Submit documentation of loss & receive a lump sum payment for all past andfuture lossesRequires signing a release & covenant not to sue

Hebei Spirit
Claims and assessed losses

4,500

4,023 billion

KRW (billion)

4,000

3,500

2,774 billion

3,000
2,500
2,000
1,500

736 billion

1,000500

180 billion

322 billion

0
Assessed by the Fund

Assessed by Court

Claimed in Hebei Spirit
CentreClaimed in Limitation
Proceedings

The international compensation regimeConclusions•

More than 140 incidents great and small, in over 30 years•

Flexible enough to adapt to changing circumstances•

Identifying and preparing for new threats•

Constantly under review to ensure it meets the needs of society inthe 21st century

www.iopcfund.org

José Maura
Director
International Oil Pollution Compensation Funds