3. Andrew J. Garger Vice President, Legal & General Counsel Water Quality Insurance Syndicate

4. Mississippi River Spill Ground rules: Current & Potential Litigation Cannot give opinion regarding coverages Cannot give opinion regarding coverages No opinions regarding ultimate outcome No opinions regarding ultimate outcome If I happen to give opinions about any of the above they are my personal opinions, not WQIS’s. If I happen to give opinions about any of the above they are my personal opinions, not WQIS’s.

5. Do You Remember?

6. THE OIL POLLUTION ACT OF 1990 (OPA) P.L. 101-380 Responsible Party: Owner, Operator or Charterer by demise Nature of Liability: Strict, joint and several

7. Pollutant: Oil of any kind, except if classified as an hazardous substance under CERCLA THE OIL POLLUTION ACT OF 1990 (OPA) P.L. 101-380 Jurisdiction: Navigable waters, adjoining shorelines, or the Exclusive Economic Zone

9. WHAT IS RECOVERABLE ? Removal Costs Removal Costs Natural Resource Damages Natural Resource Damages Damage to Property Damage to Property Loss of Subsistence Use Loss of Subsistence Use Lost Revenue Lost Revenue Lost Profits Lost Profits Increased Costs of Public Services Increased Costs of Public Services

10. Mississippi River Spill Collision July 23 rd – Barge DM-932, TUG MEL OLIVER, M/V TINTOMARA Mile 99 near entrance to Harvey Canal Mile 99 near entrance to Harvey Canal Approximately 9000 bbls of #6 oil (heavy). Approx. half spilled Approximately 9000 bbls of #6 oil (heavy). Approx. half spilled ACL, owner of the DM-932 (double skinned barge) is responsible party ACL, owner of the DM-932 (double skinned barge) is responsible party

11. Mississippi River Spill CASUALTY RESPONSE On scene- spill response managers, spill response contractors, environmental experts, Coast Guard, state officials, 3 rd party claims handlers. On scene- spill response managers, spill response contractors, environmental experts, Coast Guard, state officials, 3 rd party claims handlers. Over 1000 responders at height of cleanup. Over 1000 responders at height of cleanup.

12. Mississippi River Spill SPILL RESPONSE Coast Guard closed 58 miles of the Mississippi River (at least 3 days). Coast Guard closed 58 miles of the Mississippi River (at least 3 days). Down-river water intakes boomed off. Down-river water intakes boomed off.

13. Mississippi River Spill

20. Beach Cleanup Using Boom

21. Aggressive Cleanup Measures

22. Mississippi River Spill Public Commentary (NOLA.COM) “Was Joseph Hazlewood piloting the tanker?” “Was Joseph Hazlewood piloting the tanker?” “Sounds like someone had too much to drink.” “Sounds like someone had too much to drink.” “How in the hell do you not see a 600 foot tanker? Can you say DUI.?” “How in the hell do you not see a 600 foot tanker? Can you say DUI.?” “Sounds like Al Qaeda.” “Sounds like Al Qaeda.” “I might just call it a day and get on out of work and throw and oil spill party.” “I might just call it a day and get on out of work and throw and oil spill party.” “If they were only using Cosmo Kramer’s bladder system that he invented this could have all been avoided.” “If they were only using Cosmo Kramer’s bladder system that he invented this could have all been avoided.” “The oil futures just went up again.” “The oil futures just went up again.”

23. Mississippi River Spill “Does this oil contain Benzene? My research tells me that ingestion of Benzene builds character. Everyone take a deep breath.” “Does this oil contain Benzene? My research tells me that ingestion of Benzene builds character. Everyone take a deep breath.”

24. Mississippi River Spill Coast Guard Investigation Hearing August 8 th. Took a break for Hurricane Gustav. Continued in October. Hearing August 8 th. Took a break for Hurricane Gustav. Continued in October. Close to thirty witnesses Close to thirty witnesses Barge pilot took the 5 th. Barge pilot took the 5 th. Preliminary Statement by Coast Guard indicated improper licensure. Preliminary Statement by Coast Guard indicated improper licensure.

25. Mississippi River Spill Congressional Hearings Coast Guard stated that federalizing spill triples the cost. Coast Guard stated that federalizing spill triples the cost. Insisted that rules be implemented regarding the inspection of tug boats as required by Coast Guard Act of 2004. Insisted that rules be implemented regarding the inspection of tug boats as required by Coast Guard Act of 2004.

26. What Now?

27. Mississippi River Spill Current Status Incident Command System remains in place. Incident Command System remains in place. Free floating oil cleaned up – still locating oily debris. Free floating oil cleaned up – still locating oily debris. 200 miles of impacted shoreline were surveyed – 90 % of impacted areas cleaned. 200 miles of impacted shoreline were surveyed – 90 % of impacted areas cleaned.

28. Natural Resource Damage Assessment Huge potential damages Huge potential damages Passive-Use (loss of enjoyment) Passive-Use (loss of enjoyment) Wildlife habitats Wildlife habitats Bird kills Bird kills

29. Mississippi River Spill Class Action Lawsuits At least six filed naming ACL, DRD, and others. At least six filed naming ACL, DRD, and others. Includes loss of revenue claims. Includes loss of revenue claims. Classes have not been certified. Classes have not been certified.

30. Other Pollution Coverage Issues Eventual Submission to National Pollution Funds Center Many roadblocks to recovery Many roadblocks to recovery Long process Long process Unreasonable Standards Unreasonable Standards  Morris J. Berman  Tako Spirit

31. BREAKING LIABILITY LIMITS Gross negligence, willful misconduct (no privity or knowledge of owner required). Gross negligence, willful misconduct (no privity or knowledge of owner required). Violation of federal safety, construction or operating standard. Violation of federal safety, construction or operating standard. Failure to report spill or cooperate with clean-up. Failure to report spill or cooperate with clean-up.

32. Criminal Liability Oily Water Separator Cases Oily Water Separator Cases Overseas Shipholding Group Inc (OSG) Overseas Shipholding Group Inc (OSG) Plead Guilty to 33 Felony counts Plead Guilty to 33 Felony counts  Deliberate Vessel Pollution from nine ships  False pollution log entries in three additional ships

33. Criminal Liability Record fine: $37 million penalty for violations that occurred on the twelve vessels Record fine: $37 million penalty for violations that occurred on the twelve vessels  $27.8 million criminal fine  $9.2 million organizational community service payment Three-year term of probation Three-year term of probation

34. Magic Pipe O.W.S. Acquittal Athenian Sea Carriers of Greece Athenian Sea Carriers of Greece Suezmax Tanker Captain X. Kyriakou Suezmax Tanker Captain X. Kyriakou Acquitted of charges of false statements and the use of an illegal discharge pipe Acquitted of charges of false statements and the use of an illegal discharge pipe Seven total acquittals Seven total acquittals Reports calling acquittal an industry first Reports calling acquittal an industry first

35. Criminal Liability Background Greater potential that environmental violations will be treated criminally Greater potential that environmental violations will be treated criminally Statutory Basis for Liability Statutory Basis for Liability  OPA 90  Migratory Bird Treaty Act  Refuse Act

36. Criminal Liability Good Operators targeted for negligent violations (OPA 90 Standard) Good Operators targeted for negligent violations (OPA 90 Standard) Use of Strict Liability Statutes Use of Strict Liability Statutes  Lose Government Contracts  Onerous terms of Probation

37. Criminal Liability Example: Eklof Towing (1998) $9.5 million fine $9.5 million fine Fine and Probation for company president and tug captain Fine and Probation for company president and tug captain Collateral Consequences Collateral Consequences  Lose Government Contracts  Onerous terms of Probation

38. Criminal Liability Solutions Legislative Legislative Educate Employees Educate Employees Identify Criminal Defense Counsel Identify Criminal Defense Counsel EPA / DOJ want compliance programs EPA / DOJ want compliance programs Choose Location of a Violation Carefully Choose Location of a Violation Carefully

39. Mississippi River Spill – Insurance Reservation of Rights Reservation of Rights Potential Recovery by Insurers Potential Recovery by Insurers Recovery – NRDA Recovery – NRDA Suits Against DRD/ACL?? Suits Against DRD/ACL??

40. Thanks!