S.F. Oil Spill Ship Has $39M Liability Limit

Unless negligence or misconduct is found, the owners and operators of the container ship that polluted San Francisco Bay with a 53,000 gallon oil spill will have liability limited to $39 million, according maritime insurance experts.

The incident, which is the subject of a federal criminal investigation, occurred on Nov. 7 when the Cosco Busan, hit a tower of the San Francisco Bay Bridge, gashing open its hull, the U.S. Coast Guard said.

Chris Kende, a member of Cozen O'Connor law firm's international insurance practice, said under the U.S. Oil Pollution Act of 1990, containership vessels are strictly liable for spills with a limit of $600 per ton.

According to a listing on the Equasis registry of ships, the German-built Cosco Busan has a weight of 65,131 tons, which would make the spill liability $39,078,600 under the act.

Mr. Kende said under the law, plaintiffs can break that limitation if there is gross negligence, willful misconduct or a violation of a federal safety, construction or operation regulation.

He said that if the ship had been an oil tanker, it would have had a liability limit of $1,200 a ton.

A certificate of financial responsibility is required of vessels when they operate in confined waterways, and if none is on board, the Coast Guard may fine the operators and hold the ship in port.

David Loh, Mr. Kende's associate and a partner in the firm said that based on reports he had seen, the 900-foot container carrier had a pilot on board during foggy conditions, and the pilot blamed the collision on improper communication by the vessel's crew.

Mr. Loh said he would expect the vessel's operators to seek to avoid responsibility for error by claiming "we just followed the pilot."

He added that under the law it is virtually impossible to get liability against a pilot as they are essentially judgment proof. Mr. Kende said pilots are generally not held responsible under law unless there is intentional error.

According to the Coast Guard, the expensive cleanup effort involves 40 state, federal and local agencies, 59 vessels, three helicopters and seven miles of containment boom.

More than 22 beaches are said to have been hit with the oil, at the north and south coastlines of the bay, and 10 wildlife recovery teams have been deployed to remove oil from birds and other animals.

In addition to the criminal investigation by the U.S. Attorney's Office in San Francisco, there is also a probe underway by the National Transportation and Safety Board.

The ship owned by Regal Stone Ltd. in Hong Kong has Steamship Mutual Underwriters Assn. Ltd as the insurer, said Darrell Wilson, a spokesman for the shipping company.

Mr. Wilson said in an interview that he understood that the vessel is on a lease to Hanjin Shipping in Hong Kong.

In a statement he issued, Mr. Wilson said that although Regal Stone -- owners of the Cosco Busan -- has been named the Responsible Party by the state of California, this designation has no connection with 'responsibility' for the accident."

"That responsibility will be clearly determined by the official investigation, which the USCG is undertaking and in which we as owners are fully participating."

The designation Responsible Party is a term of law which means the party initially responsible for the clean-up and response.

"This is a responsibility Regal Stone has embraced since the start of this very regrettable accident. We will meet all of our responsibilities to the full extent of the law," said Wilson.

This article updated Nov. 13, 10:14 a.m. EST