Claim Number 

Claimant 

Type of Claimant 

Type of Claim 

Amount Requested 

BACKGROUND 

Incident 

CLAIM SUMMARY I DETERMINATION FORM 

P05005-124 

Federal Insurance Company 

Corporate (US) 

Property Damage with one small Removal Cost component 

$4,554,314.05 

On 26 November 2004, the Cypriot-flagged tank vessel ATHOS I struck a submerged anchor as 

it approached the CITGO Asphalt Refining Company terminal at Paulsboro, New Jersey. The 

anchor punctured the hull and caused the discharge of Venezuelan crude oil into the Delaware 

River. The U.S. Coast Guard Federal On-Scene Coordinator (FOSC) directed the incident 

response, which included decontamination and oil removal upriver and downriver from the 

discharge location. 

Responsible Party 

The FOSC issued a Notice of Federal Interest designating the vessel's owner, Frescati Shipping 

Company Limited, as the Responsible Party (RP). The RP denied all claims under the Oil 

Pollution Act of 1990 (OP A). On February 16, 2005, the National Pollution Funds Center 

(NPFC) advertised procedures by which claims may be presented to the Oil Spill Liability Trust 

Fund (Fund). 

Claimant 

The Claimant, Federal Insurance Company (FIC or Claimant),1 is a subrogated insurer of the 

Philadelphia Marine Center (PMC), a Delaware River waterfront complex leased to, and 

operated by Brandywine Realty Trust (Brandywine). PMC's property is located just upriver 

from the Ben Franldin Bridge and is in an area that received light to medium oiling from the 

spill? According to the Athos I Incident Response Shoreline Sign-Off Inspection Form dated 

May 6, 2005, the FOSC and the Pennsylvania State On-Scene Coordinator (SOSC) determined 

that Philadelphia Marine Center Piers 12-24 met. cleanup endpoint criteria. 3 The inspection form 

noted that "only stains remain." 

The PMC property occupies approximately 17.37 acres

4 identified as piers 12, 13/15, 19, and 24, 

including a marina, and facilities on, and adjacent to, the piers.5 Pier 12 houses the marina 

1 Federal Insurance Company is a subsidiary ofthe Chubb Group of Insurance Companies. See 

www.chubb.com/corporate/chubb 11887.html 2 Pennoni Associates report January 2005 and USCG Memo 16465 dated21 Nov 2005. 3 Athos I Incident Response, Shoreline Sign-off Inspection Form 5/6/2005. We note that piers "12-24" are wholly 

comprised of piers 12, 13/15, 19 and 24. 4 Integra Realty Resources Coastal New Jersey Consulting Appraisal Report, Summary of Salient Facts and 

Conclusions. Land area varies among 9.87 acres, 15.38 acres and 17.37 acres depending on which record is 

referenced. 

2 
services office and storage; Pier 13/15 was subleased to, and occupied by, a seasonal restaurant; 

Pier 19 was subleased to, and occupied by, two restaurants, and Pier 24 was subleased to a 

parking lot operator. The piers account for 5.45 acres ofthe 17.37 acres. 

PROCEDURAL HISTORY 

Initial Claim 

On August 15, 2006, FIC presented its claim to the Fund, initially seeking reimbursement of 

$3,196,391.05 for alleged damage to real or personal property at PMC caused by the incident. 

This amount was based on a May 6, 2005 report produced by Pennoni Associates, in which 

Pennoni provided a revised cost estimate for removing, decontaminating and replacing oiled 

property at the PMC.6 The property is described as a 308-slip marina, including floating docks 

and a floating wave attenuator (breakwater). 7 Three breakwater systems were replaced. Costs 

related to fixtures installed on the breakwaters and dock/pier system were also claimed. 

Pennoni's May 6, 2005 cost estimate allegedly reflects the oil-impacted condition of the marina 

property after the cleanup conducted by the O'Brien's Group, which was contracted by the U.S. 

Coast Guard to conduct removal activities. The following list reflects the different parts of the 

property allegedly injured or destroyed by the oil and for which FIC sought reimbursement: 

1. Floating Dock System 

2. Gauges 

3. Water Supply Line 

4. Breakwaters 

5. Satellite TV Cable 

6. Plumbing Line 

7. Fuel Dispensing Equipment 

8. Petroleum Piping 

9. Card Access System 

10. Wireless Phone Network 

11. Electric Lines 

12. Pilings 

13. Power Posts 

In its initial determination dated August 4, 2008, the NPFC offered Claimant $38,521.30, noting 

that $38,521.30 was the compensable amount for dredge decontamination,8 emergency repairs to 

5 Number of slips varies between 308 and 337 depending on document referenced. Integra Realty Resources 

Coastal New Jersey Consulting Appraisal Report states 337 whereas claimant states 308. 6 Pennoni Associates, Inc. was hired by Claimant and its original November 2,004 Athas I Crude Oil Spill Site 

Inspection and Evaluation, Philadelphia Marine Center, January 2005, was prepared by Pennoni Associates, Inc. 

prior to the decontamination and FOSC/SOSC inspection signoff on May 6, 2005. The original report noted that 3 

breakwater systems, floating docks, piers and seawalls were oiled and would require removal, decontamination and 

replacement, totaling $4,150,748.60. The report also noted that "[T]here are no anticipated long or short-term 

effects." 

7 Claim narrative submitted with initial claim 8/14/06. 8 On reconsideration NPFC found that a portion of this amount included removal costs paid by Great American 

Insurance (GAl) and reimbursed to GAl by the NPFC under GAl's own separate claim to the Fund. \Vhen informed 

ofthis, Claimant verified that the costs had been paid (excluding $3,363.30 for the crane rental) and subsequently 

withdrew its claim for all but $3,363.30 of the amounts initially offered by the NPFC for removal costs related to the 

dredge. 

3 
broken parts of the floating dock system, replacement of broken gauges, and emergency repairs 

to a broken potable water line. The rest of the claim was denied. 

Request for Reconsideration 

On October 3, 2008, the NPFC received a fax letter requesting reconsideration of the initial 

determination. Via a letter dated July 23,2009, the Claimant amended its claim amount upward 

to $4,554,214.05. With the July 2009 letter, the Claimant submitted five additional documents to 

support its request for reconsideration: 1) Integra Realty Resources, Coastal New Jersey 

Consulting Appraisal dated AprilS, 2009 (Integra appraisal report); 2) An opinion letter dated 

February 12, 2009, by Haley & Aldrich on the environmental consequences of the remaining oil 

contamination; 3) An opinion memo from former NPFC director, , dated 

February 23, 2009, stating that PMC acted in good faith and took steps to mitigate the damages 

and their actions prevented further contamination; 4) A declaration by , Director 

of Operations at the marina, dated January 16, 2009, asserting that disassembling; removing and 

reinstalling the property would be more expensive and would cause additional damage, and 5) A 

summary dated either October 8,12006 or 2007,9 by Young Adjustment Company giving the 

rationale for the replacement of the property. 

The Claimant seeks reimbursement of replacement costs for the floating breakwaters, floating 

dock system and fixtures attached to them10 along with removing or wrapping pilings. 

Claimant's Arguments on Reconsideration 

The Claimant increased its sum certain to $4,554,315.04 in its request for reconsideration 

seeking additional costs paid since the initial claim was submitted. The Claimant seeks to 

recover all the costs relating to tlie dismantling and replacement of the marina's entire 

breakwater, pier and dock system along with the attached support systems and extraction of 

some old pilings that were deemed unnecessary11 or wrapping pilings that were to remain in 

place to prevent possible leaching of oil into the river. The following is the updated list of 

claimed property in the request for reconsideration: 12 

1. Breakwaters 

2. Floating dock system 

3. Satellite TV Cabling 

4. Plumbing Line 

5. Relocating Fuel Dispensing Equipment 

6. Petroleum Piping 

7. Card Access System 

8. Wireless Phone Network 

9. Electric Lines 

10. Timber Pilings 

9 Both years are written on the document. 1

° Fixtures include: electrical wiring, satellite TV cables, plumbing lines, a security card access system, a wireless 

telephone system and petroleum piping. 11The Claimant determined that these old pilings were not necessary so wrapping was not needed and cleaning was 

impractical. The Claimant made a business decision to remove them from the water but provided no evidence that 

the removed pilings were leaching oil or posed a substantial threat. 12 Blank Rome letter dated 07/23/2009 

4 
11.· Power Posts 

Claimant argues that the oil spill caused physical damage to the PMC marina property and that 

Brandywine chose replacement because it was less expensive thanremoving, decontaminating 

and reinstalling the property. 

Claimant also argues that the replacement of the oiled property was to prevent further pollution 

to the river and that a failure to expend monies for complete remediation (i.e., replacement of all 

the oiled marina property at PMC) would have resulted in risks to Brandywine's lease. Thus, 

"the replacement of all the items within [the] claim was the most feasible decision on many 

levels, including cost, efficiency and dependability,"13 and total replacement was "not only 

prudent, but necessary to preserve the real property and surrounding environment."14 

Claimant's request for reconsideration relies on the Integra appraisal report. "The purpose of the 

report is to evaluate the compensability of monies expended as a result of the Athos I spill which 

were necessary to secure the property interest and maintain the marketability of the ownership 

interest in the real estate (protection from damages)." 15 According to Integra, the report was 

"prepared to specifically consider the reasonableness of the owner's costs expended in light of 

the long-term consequences of not completing any further remediation following the gross 

decontamination by the U.S. Coast Guard." 16 . 

In order to complete this task Integra was asked to determine the market value17 of the leasehold 

property on November 25, 2004, just before the incident (unimpaired value), the leasehold 

market value on November 27, 2004 (impaired value prior to remediation), and the leasehold 

market value ofthe property on April30, 2007, the date remediation was complete (value upon 

restoration). 18 "Integra concluded that (1) PMC was required to expend the monies used for 

complete remediation ofthe contamination, or it otherwise risked the potential loss of its lease on 

the property; (2) the use and expenditure of the monies was consistent and reasonable to protect 

the value of the leasehold and was reasonable considering the long-term economic value of the 

property; and (3) PMC's leasehold position would have been significantly impaired and 

essentially unmarketable absent the expenditure of these monies in the remediation, inclusive of 

the replacement of the docks, breakwater, and other improvements undertaken by the PMC."19 

FIC also provided two opinion letters. A February 12, 2009l~tter by 

senior engineer at , discussed the remaining oil contamination and stated that 

without action to address it, pollution to the river would continue. A second letter dated February 

· 23, 2009 from Daniel Sheehan discussed in very general terms whether PMC's actions were 

removal actions or property damage; and stating that PMC acted in good faith, took steps to 

mitigate the damages, and if their actions prevented further contamination, "so much the better". 

Two other documents, .a summary dated October 8, 2006 (or 2007 - as both years are stated) 

13 See Blank Rome letter dated Aprill2, 2010. 14 Blank Rome LLP Request for Reconsideration letter dated July 23, 2009. 15 Integra Appraisal Report, p. 3 16 Integra Appraisal Report, p. 32. 17 According to the Integra appraisal report "market value" is defined as "the most probable price which a property 

should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each 

acting prudently and knowledgeably, and assume the price is not affected by undue stimulus." 18 Integra Appraisal Report, p. 37 19 Blank Rome letter dated July 23, 2009. 

5 
from Young Adjustment Company, and a January 16,. 2009 declaration by 

(PMC's Director of Operations), state that the decision to replace all the marina 

components was the most feasible decision. 

Applicable Claims Regulations 

Under 33 CFR §136.105(a) and §136.105(e)(6), the claimant bears the burden ofproviding all 

evidence, information, and documentation deemed necessary by the Director, NPFC, to support 

the claim. Claimant asserts real and personal property damages and seeks reimbursement of its 

damages; therefore, the claimant must submit the information as required by 33 CFR § 

136.215(a). Allowable compensation payable from the Fund is governed by 33 CFR § 

136.217(a) (1) ~ (3). 

33 CFR §136.215(a) provides the specific proof requirements for property damage claims. A 

claimant must establish --

(1) An ownership or leasehold interest in the property; 

(2) That the property was injured or destroyed; 

(3) The cost of repair or replacement; and 

(4) The value ofthe property both before and after injury occurred. 

Under 33 CFR §136.217(a), the "amount of compensation allowable for damaged property is the 

lesser of--

(1) Actual or estimated net cost of repairs necessary to restore the property to substantially 

the same condition which existed immediately before the damage; 

·(2) The difference between the value of the property before and after the damage; or 

(3) The replacement value." 

NPFC ANALYSIS on RECONSIDERATION 

The NPFC's adjudication on reconsideration includes a de novo review of the administrative 

record and the initial determination dated August 4, 2008/0 and a review of the information 

submitted with the request for reconsideration. 

The Claimant argues that it replaced the breakwaters, floating dock system, seawalls and 

associated fixtures because a failure to do so would (1) result in risks to Brandywine's leasehold 

interest and (2) could have resulted in further pollution of the river; therefore, total replacement 

was the most feasible decision on many levels, including cost, efficiency and dependability and it 

was not only prudent, but necessary to preserve the real property and surrounding environment. 

Based on the administrative record the Claimant has not provided the documentation, 

information and valuations needed to establish entitlement to compensation of its claim for 

· property replacement costs in the amount of $4,554,214.05 and the claim is denied. The analysis 

is detailed below. 

33 CFR §136.215(a) 

20 NPFC's previous offer was rejected by the Claimant and the offer is void. 

6 
Under Subpart 136.215(a) a claimant is required to provide evidence of (1) ownership/leasehold 

interest in the property, (2) injury to or destruction of the property, (3) the cost of repair or 

replacem.ent, and (4) the value of the propc:rty both before and after the injury occurred. 

The Claimant must provide documentation to support each element of the provision. The 

documentation must address the relevant property that is damaged and for which the Claimant 

seeks compensation. In this claim, the Claimant seeks compensation for the timber pilings, 

breakwaters, floating dock system and the attached fixtures. It is not clear from the 

administrative record provided by the Claimant that all the replaced docks and breakwaters were 

injured by the Athos oil. The Coast Guard cleanup sheets reflect that as of May 6, 2005 the piers 

met cleanup standards and only staining remained; the Pennoni Report states that no anticipated 

long or short-term damages were anticipated. The Claimant provided some pictures but there are 

no pictures of the breakwaters or piers after the CG decontamination showing that they were still 

contaminated with Athos oil. 

While the Claimant provided replacement costs for the claimed property it did not provide repair 

costs or the before spill and after spill value of the claimed property. The NPFC notified the · 

Claimant several times of the requirements to provide additional information as required in the 

regulations?1 Via emails and a letter, the NPFC requested that the Claimant provide an objective 

repair estimate and the before spill and after spill values of the damaged property. NPFC also 

requested the cost of the property when it was originally purchased, which would have allowed 

the NPFC to determine the depreciated replacement value.22 The Claimant informed the NPFC 

that it did not have objective repair pricing and that it did not have purchase prices for the items 

when they were originally installed?3 Claimant refused to provide tax records for 2003-2007 

showing the effect of the spill on the property, claiming business confidentiality.24 Claimant 

stated that no adjuster's report valuing the damage is available; therefore, it provided no actual 

appraised value of the damages to the property.25 The Claimant stated that there is no appraiser's 

report valuing the damage to the claimed property.26 Claimant stated that invoices and receipts 

are not available to show the price of property at installation or before the spill.27 Claimant 

stated that no report, estimates or other documents showing the objective pricing for repair of the 

damage to the property are available?8 ·Further, Claimant states that there is.no insurance risk 

analysis for the property before the spill?9 

In summary the Claimant refused to provide the before and after value of the damaged property · 

items. Instead the Claimant insisted that the before and after value of the entire leasehold was the 

appropriate measure. 

21 See NPFC e-mail to Claimant dated August 21, 2009; NPFC email to Claimant dated December 1, 2009, and 

NPFC letter to Claimant dated February 18, 2010. 22 Depreciated replacement value is a well-known measure in the insurance industry. Policyholders generally are 

compensated for the depreciated replacement value of destroyed property. They generally don't receive new for old. 

' 23 See Blank Rome letter dated April12, 2010. 

24 See April 12, 2010 letter. The NPFC believes tax records might contain depreciation tables for the components, 

which would show either the purchase price for the property or the depreciated value at the time of the spill, or both. 25Blank Rome letter dated April12, 2010. . 26 See Aprill2, 2010 letter. 27 See April 12, 2010 letter. 

28 See April12, 2010 letter. 

29 See Aprill2, 2010 letter. The NPFC sought this information hoping that it would provide the valuation of the 

marina components prior to the spill. 

7 
On reconsideration Claimant attempted to provide pre-and post- values by providing a pre- and 

post- spill valuation of the entire leasehold, but the leasehold valuations are irrelevant because 

only the marina's floating dock system and breakwaters and various related equipment and 

fixtures were the property that was allegedly injured or destroyed, not the leasehold-itself. These 

leasehold values do not support the Claimant's replacement costs claim. 

While 33 CFR § 136.215(a) provides that the claimant must establish the cost of repair or 

replacement of injured or destroyed property, the magnitude ofthe replacement costs sought here 

for injured and/or destroyed property and the claimant's arguments as to cost effectiveness of 

replacement, make it particularly important that the record have sufficient information on repair 

and replacement costs and values in order to determine the allowable compensation as provided 

at 33 CFR § 136.217(a). 

33 CFR §136.217(a) 

The evidence required in Subpart 136.215(a) is critical in determining the amount of damages 

that may be payable from the Fund because Subpart 136.217(a) provides that the Fund is only 

available to pay a claimant the lesser of 1) the cost to repair, 2) the difference between the value 

of the property before and after the damage, or 3) the replacement value. This provision does not 

state that the Claimant may reqover replacement costs; it states "replacement value." Stated 

another way the Fund is not available to pay the full cost of replacement but only the depreciated 

replacement value if that is the lesser value. 

According to the Integra appraisal report, substantial portions of the marina were installed in 

1986-1987, which means they may have been at least 17 years old when the incident occurred; 30 

Integra's assessment of the property value showed that PMC was generally found to be in fair 

condition with-"below average" construction quality and with 5 years of economic life 

remaining.31 Physical property generally depreciates as it ages, making it less valuable as it gets 

older. Given the age of the marina components and their depre~iated replacement value, the 

difference between the pre- and post-injury values or the repair cost are more likely less than the 

replacement costs that the Claimant seeks because Claimant seeks the cost of new property to 

replace its older depreciated property. The Fund may be available to compensate property 

owners for damage from oil discharges with the goal of placing them in the same position they 

were in prior to the spill, butit is·not available to place an owner in a better position. In this 

instance the Fund is not available to pay the replacement costs sought by the Claimant. 

Claimant also seems to argue that replacement of the claimed property constituted a removal 

action because if the components had not been replaced they would have continued to discharge 

oil to the environment.32 Mr. , in his opinion letter, explains that if oil remained on the 

components it could cause sheening on the Delaware River and that the definition of "reportable 

discharge" includes sheening.33 

30 See Claimant's March 7, 2007 response to NPFC query. 31 Integra report p.21. Integra omitted a discussion of the condition and remaining economic life of the marina 

section of the property. Since the marina section and its improvements are the focus of the claim, that portion 

should have been addressed by Integra appraisal report. · 32 July 23, 2009 Blank Rome letterp.l. 33 February 12, 2009 Haley & Aldrich letter p.3. 

8 
In this case, the replacement of the marina components does not constitute a compensable 

removal action. The discharge occurred when the ATHOS I discharged oil into the river. 

Sheening from Athos I oil that remained on Claimant's property does not constitute a new 

discharge. IfPMC personnel had observed sheening, they should have reported it to the Coast 

Guard for further decontamination as part of the response. To be compensable from the Fund, a 

removal operation must be performed at the direction of the FOSCor determined by the FOSC to 

be consistent with the National Contingency Plan (NCP). See 33 CFR § 136.203(c). The record 

does not establish that replacement of the marina components was conducted at the direction of 

the FOSC or that replacement was otherwise a removal activity consistent with the NCP. 

Conclusion on Property Damages 

Claimant only provided the costs to replace the breakwaters, the floating dock system and their 

fixtures with brand new ones. Claimant did not provide, and the record does not otherwise 

include, evidence sufficient to establish the costs of repair, depreciated replacement value, or the 

difference between the value of the property before and after the damage, required to determine 

the lesser amount allowable as compensation. 33 CFR §136.217(a). 

Other costs 

Damages include the reasonable cost of assessing damages; however, assessment costs are not 

payable from the Fund if the alleged damages are not also payable. In this case Claimant has not 

provided evidence to establish that the underlying damages, that are the subject of the assessment 

activities, are payable from the Fund. 

Removal Costs Related to Dredge 

The Claimant seeks $3,363.30 for the cost to rent a crane from Sautter Crane Rental. The crane 

was used to lift the Claimant's dredge from the water for cleaning. The NPFC previously found 

that the dredge had been cleaned in accordance with spill response procedures and compensated 

another claimant for the costs to clean it because NFPC determined that they were compensable 

OP A removal costs. Consequently, as a component of that same removal activity, the costs. of 

the crane used to facilitate the oil removal is OPA compensable; therefore, the full $3,363.30 is 

compensable. 

DETERMINED AMOUNT: $3 3 

Claim Supervisor: 

Date of Supervisor's review: September 11, 2013 

Supervisor Action: Approved 

Supervisor's Comments: 

9