ENVIRONMENTAL INSURANCE COVERAGE
for
OCEAN INCINERATION VESSELS
By:
Lyman H. Clark
Washington, D.C.
Robert H. Oppenheimer
Winchester, Massachusetts
and
Engineering Computer Optecnomics, Inc.
Annapolis, Maryland
for:
Office off Policy, Pttannlag and Evaluation
U.S, Environmental Protection Agency
August 15, 1985
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625R85001
'^ ENVIRONMENTAL INSURANCE COVERAGE
for
OCEAN INCINERATION VESSELS U.S. Environmental Protection Agency
Region III Information Resource
Center (3PM52)
Contents 841 Chestnut Street
Philadelphia, PA 19107
Section Page
1. Introduction 1-1
2. Costs of Cleanup and 2-1
Mitigation of Spill Agents
2.A Introduction 2-1
2.B Estimated Spill Rates and 2-1
Spill Volumes
2.B.I Spill Rates 2-1
2.B.2 Spill Volumes 2-2
2.C Fate and Behavior of 2-3
Spills at Sea
2.D Cleanup and Mitigation 2-3
Procedures and Costs
3. Insurance Coverage for Incineration Vessels 3-1
3.A Introduction 3-1
3.B Risks 3-1
3.C Insurance Held by Incineration Vessels 3-3
3.C.I Legal Liability Limits 3-4
3.C.2 Defenses and Limitations 3-3
3.C.3 Insurance Held by 3-5
Incineration Vessels
3.D Availability of Insurance for 3-6
Insurance Vessels
3.D.I Methodology 3-7
3.D.2 Trends in the Insurance Industry 3-8
3.D.3 Availability of Insurance 3-9
for Incineration Vessels
3.D.4 Extending the Coverage Available 3-9
3.E Summary and Conclusions 3-13
4. Effect of Environmental Impairment Insurance 4-1
Costs Upon the Required Freight Rate
for Ocean Incineration Vessels
4.A Methodology 4-1
4.B Results 4-2
4.C Conclusion 4-3
Appendix 1. Request for Rate Indication
and Coverage Availability
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Section 1. Introduction
On February 28, 1985 the U. S. Environmental Protection
Agency (EPA) published proposed regulations for ocean
incineration of hazardous wastes. In this proposal EPA
requested comments on the levels of liability that should be
required of ocean incineration vessels. EPA proposed
liability limits of from $50 million to $500 million.
This study examines the question of liability
requirements for incineration vessels from several points of
view. The first section analyses the major risk associated
with incineration vessels, namely the risk of an accidental
spill. Estimates are provided both for the probability of
such a spill as well as for the costs of cleaning up and
mitigating the spill. These estimates do not include the
costs of restoring the environmental damage or the costs
associated with damages to third parties.
The next section examines the insurance marketplace and
discusses the insurance that is available for incineration
vessels and the probable costs of that insurance. This
section also suggests several steps that might be taken to
increase the insurance coverage available for incineration
vessels and/or to reduce the cost of such insurance.
The final section estimates the impact of environmental
insurance costs upon the costs of operating an incineration
vessel and upon the rates such a vessel must charge for
incinerating wastes.
1-1
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Section 2. Costs of Cleanup and Mitigation of Spill Agents
2.A Introduction
The objective of this Section is to analyze and
estimate the costs of cleaning up and mitigating a sudden
and accidental spill from an incineration vessel. A three
step procedure is required to provide the estimate of the
cost and mitigation efforts. First, the expected rate of an
oil spill per voyage of the incineration vessel is
developed along with the estimated distribution of the size
of the spill resulting from the spill event. Secondly, the
fate and behavior of the spilled substance is discussed and
finally, the costs of cleanup efforts and mitigation
measures are developed.
Throughout this section the spilled product is assumed
to exhibit the characteristics^/ of an oil like substance to
take advantage of the wealth of data concerning cleanup and
mitigation. The hazardous nature of the product is taken
into account, however, in estimating the costs of cleanup
and mitigation.
2.B Estimated Spill Rates and Spill Volumes
2.B.I Spill Rates
Spill rates for tankships within a deadweight range of
2,000 to 10,000 long tons were developed from a proprietary,
worldwide, tankship accident and spill data base entitled
ECOTANK which is held and maintained by ECO, Inc. of
Annapolis, Maryland. This data base presently contains
approximately 10,000 worldwide tank ship accidents and over
1,000 tank ship spill events that occurred during the period
from 1969 to 1982. Among other things, each file lists the
type of casualty (i.e., collision, grounding, ramming,
\_l The main characteristic determinants exhibited are the
density and evaporation rates of the substance. The
substance is considered lighter than water and therefore
would float, and would loose little of its mass due to
evaporation. Products caried by the incineration vessel may
vary in terms of density, evaporation rates, toxicity and
persistences from the oil like substance considered.
2-1
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TABLE 2-1: EXPECTED SPILL RATES FOR INCINERATION VESSEL
TYPE OF LOCATION
CASUALTY
PIER and MOBILE BAY COASTAL BURN ZONE TOTAL
HARBOR
COLLISIONS SPILL RATE 5 728E-06 2.275E-06 6.783E-06 4.75E-06 1.954E-05
(per voyage)
GROUNDINGS SPILL RATE 4.492E-07 4.486E-06 7 762E-06 0 1.27E-05
(per voyage)
RAMMINGS SPILL RATE 3.213E-07 1.928E-06 2.785E-06 0 5.034E-06
(per voyage)
TOTAL SPILL RATE 6.498E-06 8.689E-06 1.733E-05 4.75E-06 3.727E-05
(per voyage)
SOURCE ECCTANC ECO. INC Annapolis, f1f
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THREE TMKS OR MORE
PROBABILITY^. OS
FIGURE 2-1. SPILL VOLUME DISTRIBUTION
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explosion, fire, etc.), data on the ship's characteristics
including deadweight tonnage, the resulting extent of
damage, the location of the incident both geographically and
by operating environment or location (i.e., at a pier, in a
harbor or similar type body of water, within an entranceway,
in a coastal zone, or at sea), and spill data.
This data was used to provide a sufficiently large data
base to permit examination of various tank ship design
characteristics and operational practices that would not be
possible analyzing only the limited operating experience of
incineration ships worldwide.
Historical spill rates (spill event per voyage) for
tank ships whose deadweights are between 2,000 long tons and
10,000 long tons were developed from this data base for the
three categories of impact-type casualties - collisions
(ship to ship casualties), groundings, and rammings (ship to
object casualties). The rates were adjusted to reflect
vessel and operating characteristics that would be unique to
the incineration vessels and would reduce the spill risk of
the marine operation. The adjustments reflect the double
hull construction of incineration vessels and permit-imposed
U.S.C.G. navigation restrictioins on the movement of
incineration vessels. These rates were derived in a
previous incineration ship study prepared by ECO, Inc. for
the EPA (Contract No. 68-01-7033, Work Assignment No. 29).
The estimated spill rates for the incineration vessel
are given in Table 2-1. That table indicates that the
vessel would have a spill rate of 3.727 spills in 100,000
voyages (3.727 E-05 voyages) in total. Of those spills,
about 52% would be incurred as a result of a collision, 34%
as a result of a grounding, and 14% due to a ramming
accident. About 17% of the spills would occur in the pier
and harbor area, 23% in Mobile Bay, 47% in the coastal area
within 50 miles of shore, and the remaining 13% at the burn
site.
2.B.2 Spill Volumes
Spill volume distributions for the incineration vessel
were estimated by using an analytical approach that
considers spills involving: 1. a single cargo tank; 2. two
adjacent cargo tanks; and, 3. three or more cargo tanks
(including the loss of the entire cargo). In the case of
collision, grounding, and ramming spill events, the
significance of each of the combinations is shown in Figure
2-1. There is an 80 % probability that, given the
occurrence of one of these events, only one cargo tank will
be affected. There is a 15% probability that, in the event
of a spill two adjacent cargo tanks will be affected. Since
2-2
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4J
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FIGURE 2-3 OIL SLICK NOMINAL THICKNESS
DECREASE AS A FUNCTION OF TIME
10'
10'
10
10
-1
10
-2
10
-3
10
-1
-10
-2
U)
W
01
c
-3
o
10"
10
-5
10
SOURCE:
-6
SURFACE
TENSION
107 gal.
10'
10'
10-
3170 nr
800 ia3
400 m3 (105 gal.)
10 100
Time, hours
1000
10000
Shen Wang, Ph.D., and Li-San Hwang, Ph.D., "A Numerical Model
for Simulation of Oil Spreading and Its Application in Pre-
dicting Slick Movement in Bays," Department of Transportation
U.S. Coast Guard, February, 1974
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FIGURE 2-4 SLICK AREA FOH 131 FF URKNT WINI <.:< IN'!.v! T I ON.-
(')Or bbl/r. SPILL FOP 4B HOURS)
FINAL AREA FOR
24.00O bbl SPILL
»0 20 30 40
TIME AFTER LEAK BEGAN - hn
SOURCE: "Computer Simulation of Offshore Oil Spill Clean-up
Operations", R.A. Cochran, G.A. Menney, and J.P. Fraser,
1975 Conference on Prevention and Control of Oil Pollution
March 25-27, 1975, San Francisco.
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the incineration ship is designed to remain afloat with the
loss of two adjacent compartments (i.e., the "two
compartment standard" of subdivision and damage stability
throughout the cargo length), accidents which inflict damage
to either one or two tanks would not cause the ship to sink.
Lastly, there is a 5% probability that a spill would involve
three or more (including the totality of eight) cargo tanks.
The average cargo tank volume of the incineration ship
is assumed to be 400 cubic meters (m3). Therefore, in the
case of a spill involving one cargo tank, the maximum spill
volume would be 400 m3. In the case of a spill involving
two cargo tanks, the maximum spill volume would be 800 m3.
In the case of a spill involving three or more cargo tanks,
the maximum spill volume would be 3,170 m3 or the total
volumetric capacity of the cargo tanks. As a matter of
note, in the cases of grounding or ramming events, it is
less likely that the entire contents of affected cargo tanks
would be released, because the cargo ordinarily would not be
in free communication with the sea as would be the case with
most collision damage. However, in the interest of
conservatism, the entire contents of a cargo tank is
considered to be released from any affected cargo tank
regardless of impact casualty type.
2.C Fate and Behavior of Spills at Sea
Numerous studies have analyzed the behavior of spills
in an uncontained area. The consensus of these studies is
that spill behavior is best characterized by a rapid
spreading through various regimes. Figures 2-2 and 2-3,
adapted from Wang and Hwang, are fairly representative of
these studies and are used for the purposes of this study.
It should be noted that these figures are for calm seas, and
do not take into account wind or current factors which
accentuate the slick spreading velocity, elongate the slick
form, and increase the slick area. Figure 2-4 shows the
wind effect on a continuous spill and is indicative of the
spreading increase that will occur. Obviously, as the
spreading increases, the thickness of the slick decreases
and the spill becomes more difficult to contain and/or
recover.
2.D Cleanup and Mitigation Procedures and Costs
An effective marine spill cleanup and recovery
operation must include two elements: 1. efforts at the spill
site and contiguous waters (or "offshore") to contain and
recover and/or mitigate the spill from the water; and, 2.
efforts on the shoreline to remove that portion of the spill
not contained, recovered, or mitigated and which impacts the
shoreline.
2-3
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The efforts in the offshore element involve the use of
containment barriers or "booms", recovery devices or
"skimmers", and chemical dispersants. The effectiveness of
a recovery system, consisting of booms and skimmers
operating in conjunction with each other, is dependent on
the amount of the spill that it can reach within a specific
period of time. This is a function of the thickness of the
spill that the recovery system is exposed to and the speed
with which the recovery device can traverse the area of the
spill. As the thickness of the oil decreases, and the area
increases, the effectiveness of the system within a specific
time period decreases. The amount of chemical dispersants
used also depends upon the thickness of the spill and the
area covered.
Land cleanup efforts generally are limited to manual
labor practices. These depend upon the linear extent of the
impacted area as well as its ecological use and natural
cleaning capability. The cleanup of shorelines is a
labor-intensive, extended process that can consume great
quantities of resources in restoring the impacted area.
In order to adequately assess these myriad problems, it
is necessary to use an integrated model to estimate the
costs of cleanup and mitigation measures. ECOSPILL is a
proprietary model that estimates the cost to cleanup and
mitigate the impacts of spill events resulting from marin
transportation. It integrates the fate and effects of
spills with cleanup and mitigation methods and the costs of
applying those methods in order to provide an estimate of
the level of effort and cleanup costs associated with the
spill event. The model allows the opportunity to evaluate
the impact of various techniques and assumptions on the
spill response effort. For the purposes of this study, the
following assumptions, based on most probable spill
scenarios, have been made for two spill sites:
Mobile Harbor/Bay spill:
The spill will reach the shoreline within
thirty-six hours of the spill event.
Offshore containment boom and recovery
systems will be deployed within six hours
and will be the primary offshore response
technique.
All cleanup efforts will require
protective clothing at a premium of 50% of
labor rate.
2-4
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Burn site spill:
Any shoreline impact will occur 8-10 days
after the spill event, but shoreline
protection activities will begin within
the first five days of the spill.
Offshore containment boom and recovery
systems will be deployed within 12 hours
of the spill.
Air deployment of dispersant will be the
primary offshore response technique.
Dispersant deployment capability and
approval will be obtained within 36 hours.
The three most probable spill sizes, as discussed in
Section 2.B, were analyzed for each of the two scenarios.
The results from the exercise of the ECOSPILL model are
given in Tables 2-2 and 2-3. They show that the cleanup
costs in the Mobile Bay/Harbor spill range from $1.8 million
to approximately $10 million depending on spill size. The
cleanup costs for the offshore spill range from $0.86
million to $3 million.
2-5
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TABLE 2-2: CLEANUP AND MITIGATION COSTS FOR SPILLS IN MOBILE BAY
CLEANUP AND MITIGATION
ACTIVITY
OFFSHORE CONTAINMENT
AND RECOVERY
HOURS OF OPERATION
COST (In $)
SPILL RECOVERED (cu. meters)
DISPERSANT
AREA DISPERSED (In aq. mites)
COST (In $)
SHORELINE CLEANUP ACTIVITES
DURATION (days)
COST (In $)
SUPPORT ORGANIZATION
SPILL SIZE (In cubic meters)
400 800 3.170
30
52.500
60
10
1.617,760
167.026
30
52.500
75
18
3.390,336
344.284
30
52.500
112.5
28
9.038.400
909.090
TOTAL COST (In $)
1.837.286
3.787.120
9.999.990
SOURCE: ECOSPILL. ECO Inc.. Annapolis. Maryland
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TABLE 2-3: CLEANUP AND MITIGATION COSTS FOR SPILLS AT THE BURN SITE
CLEANUP AND MITIGATION
ACTIVITY
OFFSHORE CONTAINMENT
AND RECOVERY
HOURS OF OPERATION
COST (In $)
SPILL RECOVERED (cu. meters)
DISPERSANT
AREA DISPERSED (In so. miles)
COST (In $)
SHORELINE CLEANUP ACTIVITES
DURATION (days)
COST (In $)
SUPPORT ORGANIZATION
TOTAL COST (In $)
SPILL SIZE (in cubic meters)
400 800 3.170
60
105,000
225
3.45
105.207
10
572.000
78,221
860.428
108
189.000
405
5.8
147.921
10
572.000
90.892
999,813
140
490.000
700
16.3
783.172
28
1.425.360
269,853
2.968.385
SOURCE: ECOSPILL. ECO Inc.. Annapolis. Maryland
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Section 3. Insurance Coverage For Incineration Vessels
3.A Introduction
This section examines the availability of environmental
insurance for incineration vessels. The section first
summarizes the risks that are inherent in the operation of
incineration vessels and the types of insurance currently
carried by these vessels. This provides the background for
considering the types and levels of insurance that are
available in today's marketplace for U. S. licensed
incineration vessels and the problems associated with the
currently available coverage. The section concludes with
the authors' suggestions of measures that might be taken
both to extend the insurance coverage available for
incineration vessels and to reduce the costs of such
coverage. These suggestions are made on the initiative of
the authors and do not reflect EPA policy.
3.B Risks
In establishing insurance requirements for incineration
vessels it is important to consider all of the risks
inherent in their operation. This section summarizes the
potential risks against which incineration vessels might be
insured and discusses the potential magnitude of losses that
might be sustained. :
In any accident involving an incineration vessel the
parties that might be affected include: 1. the owners and
operators of the vessel, 2. the environment, 3. the
government (federal, state, and local), and 4. other
individuals (third parties).
In the event of a spill or other accident the owners
and operators of incineration vessels stand to lose their
ship, cargo, and revenues and may be liable to the crew and
third parties as well. The value of the ship and cargo is
limited. In the case of incineration vessels it would be in
the neighborhood of $10 million to $40 million. The
liabilities to the crew are not investigated herein. The
liabilities to third parties are discussed below in this
section and in the section that follows.
3-1
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The risk to the environment can be separated into the
cost of cleanup and mitigation of the spill plus the
restoration of any damage to the environment. As has been
shown in Section 2 the costs of cleanup and mitigation
procedures for an accidental spill from an incineration
vessel could range up to $10 million.
This figure places a first bound on the potential risk
to the environment, but does not describe this risk
completely. Even if the most modern procedures are used to
cleanup a spill, there may be substantial damage to the
environment. One example is that of an incineration ship
sinking with a hazardous cargo on board. The cost of
remedying such a situation, if a remedy were possible, would
be enormous. The possibility of accidents such as these
make it very difficult to place an upper bound on the
potential risk to the environment from incineration vessels.
Federal, state, and local governments would be at risk
from incineration vessels to the extent that they could not
recover from responsible parties any costs incurred in
cleaning up the spill, restoring the environment, and/or
compensating aggrieved parties. As was described above the
cost of cleaning up a spill should not be larger than $10
million, but the potential cost of restoring the environment
and/or compensating third parties may be much larger.
The potential risk to individuals from incineration
vessels is similarly impossible to estimate. Considerable
damage to third parties could be caused by one accident
involving an incineration vessel. The costs associated with
this damage could be very large.
Even though the size of the potential losses associated
with accidents involving incineration vessels is very large,
the probability of such losses occuring is very small.
Hazardous wastes have been incinerated by six different
ships off the European coast in the North Sea since 1972.
The three ships Vulcanus I, Vulcanus II and Vesta have made
about 320 voyages and incinerated approximately 650,000
metric tons of hazardous wastes. No casualties, such as
collisions, groundings, rammings or fires have occurred, nor
have there been any spills from loading these ships in port.
In Section 2 it was estimated that the probability of a
spill from an incineration vessel operating out of Mobile
Harbor would be 3.7 spills in 100,000 voyages, or 1 spill in
every 26,800 voyages. With an estimated 14-18 voyages per
year, this averages out to 1 spill every 1,500 to 2,000
years. The probability of a major spill occuring would be
even less. (See Section 2.B.I)
3-2
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3.C Insurance Held by Incineration Vessels
Marine insurance policies are available for incineration
vessels but, as with all marine insurance policies, these
policies cover only the legal liabilties of the owners and,
therefore, are limited by law in most cases to the value of
the vessel and do not cover certain types of accidents.
Further limitations are often included in most policies. In
examining the insurance policies of incineration vessels, it
is important to consider not only the stated liability
limits of the policies, but also the legal limits that apply
to those policies and the range of incidents they cover.
This section first discusses the legal liability limits
and standard defenses and limitations that apply to marine
insurance policies and then discusses how these affect the
insurance coverage that is currently held by incineration
vessels .
3.C.I Legal Liability Limits
The insurance policies currently available for
incineration vessels cover legal liabilites only. The
following two sections provide a layman's summary of a
complex area of 'he law intended to familiarize the reader
with how the liabilities applicable to incineration vessels
are limited by law and how the available insurance coverage
is affected thereby.
Under maritime law the legal liabilities of an owner of
a vessel extend in most instances only to the value of the
vessel plus any earned freight revenues. For incineration
vessels the value of the vessel would be in the range of $10
million to $40 million. If the vessel is damaged or lost at
sea, the legal liabilities of the owners extend only to the
value of the vessel after the accident.
In the case of an incineration vessel there is some
possibility that the standard of limitation might be
circumvented in instances where it could be shown that the
damage was caused not by the vessel, but by its incinerator
or the use thereof. This would result in unlimited
liability for the vessel's owners. It must be noted,
however, that this area of the law is open to considerable
interpretation.
In addition to the fundamental standard of limitation
of liability for vessels Congress has recently enacted two
other liability statutes that apply to vessels. Under the
Clean Water Act an owner of a vessel is liable up to $150
per gross ton for any oil pollution damages. For most
incineration vessels the legal liability under this statute
3-3
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would be in the range of $300,000 to $600,000. Under CERCLA
an additional legal liability limit of $5 million applies to
damages from vessels involved in chemical spills. If an
incineration vessel were to be classified not as a vessel
but as a treatment and disposal facility, then the legal
liability limit under CERCLA would increase to the total
cost of response to the accident plus $50 million.
3.C.2 Defenses and Limitations
Insurance underwriters will pay claims only if they
have no legal defenses that protect them from doing so.
Because marine insurance policies cover only legal
liabilities a number of such defenses are available.
Furthermore, many policies limit the kinds of incidents that
are covered.
Under marine law the owners and operators of
incinerator vessels are not liable to third parties for
damages caused by acts of God. Marine insurance policies,
therefore, do not provide liability coverage for acts of
God. Thus, if an incineration vessel were to be damaged in
a storm, the existing insurance policies would provide no
liability coverage for third parties injured by the
accident.
Similarly, the owners and operators of incineration
vessels are not legally liable for damages caused by the
negligence of other parties. Thus, if a spill were to
result from the collision of an incineration vessel with
another vessel and it could be shown that the other vessel
was at fault, then the incineration vessels' insurance
policy would not cover the damages to third parties. If
both vessels were found to be negligent, then the
incineration vessel's insurance would cover third party
damages only in proportion to the incineration vessel's
contribution to the accident.
In addition to the defenses provided by the legal
limitations on shipowners' liabilities, marine insurance
policies typically exclude incidents not due to negligence.
This means that if a spill or the cause thereof is
deliberate rather than accidental, the liability insurance
does not apply.
The net effect of these defenses and limitations is to
restrict the incidents covered by existing insurance
policies to those accidents caused by the negligence of the
insured. Thus, there are many possible accidents and other
situations that are not covered by existing insurance
policies .
3-4
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3.C.3 Insurance Held by Incineration Vessels
Typically vessels such as oil tankers carry three types
of insurance: 1. hull insurance to cover the vessel and its
machinery, etc., 2. protection and indemnity (P & I)
insurance to cover liabilities to third parties, and
3. pollution insurance to cover liabilities arising from
various pollution statutes. The coverage available under
each of these types of insurance is subject to the legal
liability limits and defenses discussed above.
The types of insurance coverage carried by incineration
vessels appear to be the same as for most oil tankers. To
provide an example of the kind of coverage currently held by
incineration vessels, this section summarizes the insurance
policies provided to EPA by one operating company. It
should be noted that these policies were written overseas
and were not governed by U. S. laws. There are no
incineration vessels currently insured in the United States.
EPA's proposed regulations, however, require that the
insurance companies be licensed in the United States.
The insurance policies held in 1984 by the subject
incineration vessel include:
1. Hull Insurance
The vessel, machinery, etc. (the "hull") was
insured for a total of $16,_JO,000. The annual
premium was approximately $120,000.
2. Warrisk Insurance
The same amount of insurance was obtained to cover
the hull, machinery, etc. from risk of war,
strikes, riots, etc. The annual premium was
approximately $4,000.
3. Oil Pollution Insurance
Oil pollution insurance was obtained with a stated
limit of $350 million. This stated limit covered
only "legal or Tovalup^./ liabilities" and excluded
_2y To meet the liability requirements of oil pollution
statutes the tanker owners have created insurance pools.
The first, known as the Tanker Owners Voluntary Agreement on
Liability for Oil Pollution (TOVALOP), has been replaced by
the Civil Liability Convention. This latter convention
covers clean-up and direct damages to the environment caused
by an oil spill and is limited to $140 per gross ton,
slightly less than the legal liability set forth in the
Clean Water Act.
3-5
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all claims arising out of the use of the
incineration vessel "solely as a floating factory
for the purposes of waste disposal". These
exclusions effectively limit the liabilities
covered by this policy to the value of the vessel
or $150 per gross ton (about $500,000), whichever
is greater. Thus, the maximum effective limit of
this policy is about $16.5 million, considerably
less than the stated limit of $350 million. The
annual premium for this policy was approximately
$20,000.
4. Third Party Liability Insurance
Additional liabilities to third parties arising
out of the use of. the vessel for waste disposal
were insured for $15 million. Again, this limit
was subject to "any laws pertaining to limitation
of shipowners' liability". The annual premium for
this policy was approximately $39,000.
In summary, the one incineration vessel studied carried
hull, P & I, and oil pollution policies each with legal
limits of liability of approximately $16 million. All
policies were subject to the standard defenses and ,thus,
did not cover acts of God or accidents caused by third
parties. Total annual premiums amounted to approximately
$183,000.
3.D Availability of Insurance for Incineration Vessels
Standard marine insurance for incineration vessels is
available up to the limits of their legal liabilities, but
insurance to cover the environment and third parties beyond
the legal liabilities of the owners is a new concept in the
insurance marketplace. There are no policies being written
today which go beyond the legal limits and standard defenses
that apply to existing policies.
To determine the current availability of insurance for
incineration vessels and to investigate the potential
availability and cost of an insurance program that would
reach beyond the legal limits of existing policies the
authors met with representatives from several leading U. S.
insurance companies. The results of those discussions are
presented in this section.
3-6
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3.D.I Methodology
The insurance companies included in these discussions
were the following: the Hartford Insurance Group, the
Travelers Insurance Group, CIGNA (Insurance Company of North
America), and the Water Quality Insurance Syndicate. These
companies are the major individual U. S. providers of marine
insurance and are also among the most influential members of
the major hull and P & I marine insurance syndicates.
Another potential market for insurance of incineration
vessels is Lloyds of London. Lloyds was not included in
this study, because time and budget constraints made it
impractical.
The discussions held with the representatives of these
insurance companies were strictly for the purposes of
obtaining information. No commitments were made on behalf
of any insurance company. All of the specific information
on insurance policies, rates, etc. was understood to be
confidential. The results presented herein are the authors'
summation of the information obtained from the participating
companies.
The representatives from each company were asked to
comment first on the types, limits, and costs of insurance
coverage that is availble for incineration vessels in the
current marketplace. They were also asked to comment upon
the potential availability of insurance coverage that would
go beyond standard legal liability limits and defenses.
Each incineration vessel presents a unique challenge to
insurance underwriters. The risks will depend upon such
factors as the age, size, and type of vessel, the port out
of which it operates, the location of the burn site, the
nature of the hazardous wastes it will carry, and the
safeguards and restrictions under which it will operate.
Furthermore, because the insurance being requested is new to
the marketplace, there is no precedent on which underwriters
may base their judgements.
To help overcome many of these uncertainties the
authors prepared a "request for a rate indication and
coverage availability for a 'prototype' risk". This
document is presented in Appendix I. The request identified
the Vulcanus II operating out of Mobile Harbor as the
incineration vessel to be covered and summarized the
conditions under which it would operate. The insurance
requested was identified as an "environmental impairment
policy" to include "coverage for costs of cleanup and/or
mitigating the adverse effects of the spill" as well as
"absolute liability to third parties for losses arising out
of injury and/or damage to persons or property or the
environment". Liability limits of from $50 million to $500
million were requested and, because the policy was to
3-7
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include absolute liability, it was understood that these
limits would be at risk.
For the purposes of these discussions it was understood
that absolute liability coverage would cover all occurances
whether accidents, acts of God, incidents in which the
insured was not negligent. It was also understood that
legal liability limits would not apply and that there would
be no defenses available to the underwriters. Thus, under
this understanding of absolute liability the underwriters
would be liable up to the full amount of the policy limits
no matter what the cause of the occurance. Damages arising
from all eventualities, including both spills and air
pollution incidents, were to be included in the policy
limits.
3.D.2 Trends in the Insurance Industry
Before discussing the responses from the insurance
companies, it is important to note that the insurance
industry is changing rapidly. In response to the phenomenal
losses that have been experienced by insurance companies as
a result of the ever increasing awards for all types of
third party damages - the recent problems at Lloyds of
London because of the U. S. courts' awards for asbestos
damages are an excellent example - the insurance companies
have been reducing drastically the liability limits that
they are willing to cover.
The largest amount of insurance currently held for any
one risk appears to be the $2.0 - $2.5 billion policy that
covers the oil drilling platforms in the North Sea. This
policy does not cover third party liabilities, however. It
covers only the platforms themselves. A similar policy with
limits of $1 billion covers the Alaskan pipeline.
Third party liability insurance limits have never been
as high as the above and are being reduced drastically. Oil
and natural gas tankers that had $300 - $500 million of
third party liability insurance last year are finding that
they can purchase only $60 - $80 million this year.
The drastic reduction in liability insurance limits has
been caused not only by the high amounts being awarded by
U.S. courts but also by the high costs that insurance
companies are incurring to process and adjudicate the vast
increase in the number of claims. The trend toward more and
more litigation is beginning to cost the insurance companies
as much or more in legal fees as it is in damages. Thus a
$50 million policy that covers liabilities to a number of
third parties may eventually cost an insurance company $100
million, $50 million for damages and $50 million for legal
fees.
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3.D.3 Availability of Insurance for Incineration Vessels
The insurance companies represented in these
discussions agreed that standard marine insurance is
available for incineration vessels, but insurance to protect
third parties above and beyond legal liabilities is not
currently available. Standard marine insurance includes
hull and P & I insurance with the liabilities limited by the
legal statutes and standard defenses described above. The
available insurance covers accidents relating to the
pollution of water only. No insurance is available to cover
any air pollution related damages that might be caused by
incineration vessels.
The Water Quality Insurance Syndicate currently offers
a marine risk pollution liability policy that covers the $5
million of liability required by CERCLA, but does not cover
risks from air pollution. The annual cost of this policy is
approximately $20,000.
The participating insurance companies agreed that
standard marine insurance policies with liability limits
beyond the $5 million CERCLA limits could be made available
for incineration vessels. The maximum amount of coverage
that would be available was thought to be on the order of
$50 million. It was estimated that the annual premium for
such a policy would amount to approximately 10% of the
liability limit or approximately $5 million for a $50
million policy. As with the existing policies this
insurance coverage would apply to legal liabilities only and
would be subject to the standard defenses and limitations.
3.D.4 Extending the Coverage Available
Because the available insurance coverage does not cover
many of the risks associated with incineration vessels, the
authors worked with the incurance company representatives to
determine what might be done to provide the coverage
required to cover all damages to the environment and third
parties under all circumstances.
The four insurance companies included in this study
were unanimous in agreeing that absolute liability insurance
for incineration vessels would not be available under
standard conditions, and that considerable negotiation
would be required to establish such a policy. At a minimum
it appears that the underwriting companies would require a
considerable deductible and would also require that their
processing and adjudication costs be included in the policy
limits. If these two conditions can be met satisfactorily,
absolute liability coverage could be made available.
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The underwriting companies were concerned about
adjudication costs because an accident caused by an
incineration vessel could result in damages to many third
parties. These potential defense costs create a major
uncertainty for underwriters and are considered by the
insurance companies when they set the limits for their
policies and when they establish the premiums.
If processing and adjudication expenses were to be
included within the policy limits, the insurance companies
would be relieved of a major uncertainty in their
underwriting. This would remove a major barrier to their
willingness to provide the type of insurance that is
required for incineration vessels.
The maximum coverage that would be available, if
adjudication costs were included within the policy limits,
was generally thought to be $50 million. The premiums would
be high. For the first $10 million of coverage, the most
difficult to get, the annual premium would be approximately
$2.5 million. For the $10 million - $50 million layer of
coverage the annual premium would be an additional $2.5
million. Thus, the annual cost of the simplest kind of a
$50 million "environmental impairment policy" would be $5
million.
The deductible considered most appropriate for this
kind of a policy would be $100,000 plus 10% of any loss
above $100,000 up to a maximum deductible of $1,000,000.
Another measure that might be taken to reduce the
uncertainties surrounding adjudication expenses would be to
limit the jurisdiction for all litigation to the federal
courts. Without such a limitation claims could be taken to
federal courts, state courts, or admiralty courts. By
limiting jurisdiction to federal courts, the complexity and
the time and costs required for adjudication could be
reduced substantially.
Further discussion with the participating companies
indicated that both the liability limits available and the
annual premiums for incineration vessels could be made more
favorable by reducing the exposure and/or the expenses of
the underwriters and by "pooling" the risks and premiums
among several incineration vessels.
Many alternative approaches for extending the coverage
available and/or for reducing the premiums were discussed.
The measures summarized below emerged as being the most
useful. It should be noted that these ideas were all
developed by the authors in conjunction with the
participating insurance companies without any participation
on the part of the U. S. Environmental Protection Agency.
They do not represent or reflect EPA policy.
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1. Reducing Adjudication Costs
Even if defense costs are included in the policy
limits, it would still be beneficial to both the insurers
and the insured to reduce these costs as much as possible.
The most effective way to reduce processing and adjudication
expenses would be to establish a procedure for settling
claims without having to go through the courts. Once a
claim goes to court the time and expenses for awarding
claims escalate and the insurance companies use all
available legal defenses to reduce their liabilities.
Processing and adjudication costs could be reduced
dramatically, if instead of having claims adjudicated in the
courts, an arbitration board could be established to award
damages. The insurance companies would have to agree to be
bound by decisions of this board and to waive their legal
defenses in cases brought before the board. The board's
task would be to decide which claims have standing and what
the dollar amount of the damages should be. A claimant who
goes before the board would have to justify his claim for
damages, but would be saved the time and expense of having
to adjudicate the legal issues in court. Claimants could
also choose to take their claims to court, but then they
would have to bear the time and expense involved in court
proceedings as well as risk the court's deciding against
their claim.
Such an arbitration board could be established jointly
between the federal government and the participating
insurance companies. Legislation probably would be required
to give the board the necessary authority.
Both the EPA and the public would benefit by having
claims processed quickly and by having more insurance
coverage available to protect their interests. This would
enable EPA both to extend the coverage available for
incineration vessels and to free most of that increased
coverage for the paying of damages to the environment and
third parties.
If an arbitration board were established, it is
estimated that the coverage available for incineration
vessels could be extended from $50 million to $150 million.
The discussions with the participating insurance companies
indicate that the annual cost of this second layer of
insurance would be approximately $3.0 million. Thus, he
total cost of the entire $150 million insurance coverage
would be $8.0 million.
2. Pooling
A very effective way to reduce the costs of environ-
mental impairment insurance would be for the owners and
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operators of several incineration vessels to purchase the
upper layers of insurance under a single, joint policy. In
other words, instead of having separate policies covering
the losses above, say, $10 million, several owners could
form a pool and purchase only one policy. This joint policy
would pay for losses from any of the vessels included.
The total annual premium for such a policy would be
larger than that for a separate policy covering only one
incineration vessel, but because several owners would be
paying this premium together, the cost for any one
incineration vessel would be reduced substantially. For
example, a pool might be created to purchase a joint policy
for five incineration vessels covering losses between $10
million and $150 million. As stated above, the cost of the
$10 million - $150 million layer would be $5.5 million
without pooling ($8 million less $2.5 million for the first
$10 million coverage). The cost of a joint policy that
would provide the same coverage for five incineration
vessels would be more than $5.5 million, but considerably
less than five times that. It would probably be in the area
of $10 million to $15 million. If the cost for the joint
policy were $12.5 million, the annual cost per vessel would
be reduced to $2.5 million. The total annual cost for the
entire $150 million of coverage per vessel would thereby be
reduced to $5 million, $2.5 million for the first $10 of
coverage for each vessel plus $2.5 million for the pooled
coverage f^om $10 million to $150 million.
3. Self Insuring
As discussed above the first $10 million of losses are
the most likely to occur. For this reason the first $10
million of cover will be the most difficult to obtain and
will be the most expensive. A simple pooling arrangement
will probably not be possible for this layer of coverage.
One way to reduce premiums would be for the owners of
incineration vessels to assume the risk themselves and
simply to pay an insurance company a fee for processing
claims.
Under this arrangement the owners of incineration
vessels would pay a fee of about $500,000 per year to an
insurance company simply to process all claims. The owners
would establish a reserve fund to pay any losses that might
occur. This fund could be built up out of the premiums
saved during the first years of self insuring. A separate
reserve account could be set up individually for each
incineration vessel, but it would be more economical to set
up a reserve pool that all participating incineration
vessels could draw upon in case of an accident.
The effective cost of liability insurance for the first
$10 million of cover could, through this device, be reduced
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from $2.5 million to $500,000 per year plus the annualized
cost of the reserve fund. If five incineration vessels were
to participate in this fund the annual share of the
insurance fee would be approximately $100,000 for each
insurance vessel depending upon how the charges were to be
allocated. The reserve fund could be funded in a variety of
ways. For the purposes of this discussion it will be
assumed that the total annual cost of a pooled,
self-insurance plan for the first $10 million of coverage
would be $300,000 per incineration vessel. This estimate is
based on five vessels each paying an insurance fee of
$100,00 and forgoing the interest on $2 million for one
year. This estimate assumes, of course, that there are no
losses to be paid. With a pooled self-insurance plan such
as this plus pooled policies for the insurance between $10
million and $150 million the total annual cost per vessel
would be reduced to $2.8 million.
3.E Summary and Conclusions
Table 3-1 summarizes the insurance alternatives that
can be used to cover incineration vessels.
The standard CERCLA marine insurance policy is
available with limits of $5 million and an annual premium of
approximately $20,000. This policy excludes any damages
that might be caused b. incineration and is limited to legal
liabilities. It may not cover many of the risks associated
with incineration vessels.
The liability limits of the standard marine insurance
probably can be extended to $50 million at an annual premium
of $5 million. Such a policy would also be limited to legal
liabilities and would be subject to all the standard
defenses of marine insurance policies.
Insurance policies that would provide coverage for all
risks associated with incineration vessels are not available
in today's marketplace. Such policies probably will not be
made available unless arrangements are made to deal with the
critical uncertainties.
The minimum conditions for obtaining an environmental
impairment policy that would provide coverage beyond legal
liability limits and without standard defenses are the
following: 1. a deductible probably on the order of $100,000
plus 10% of any losses up to $1,000,000, and 2. including
all processing and adjudication expenses within the insured
limits. If these minimum conditions can be met, an
environmental impairment policy with absolute liability
limits of up to $50 million should be made available. The
annual premium would be approximately $5 million. This is
designated as alternative #1 in Exhibit 3-1.
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Another major step that might be taken would be to
reduce potential adjudication expenses by establishing an
arbitration board to handle all claims. If such a board
could be established the amount of insurance available could
be extended, probably to $150 million. The annual premium
would be approximately $8 million. This policy is
designated as Alternative #2 in Exhibit 3-1.
If several incineration vessels could form an insurance
pool and purchase the higher layers of insurance in the form
of a joint policy covering all vessels, then the high cost
of these policies could be reduced substantially. The
authors estimate that, by creating a pool of five vessels to
purchase insurance for the layers from $10 million to $150
million, the annual premium per vessel for $150 million in
coverage could be reduced to $5 million. This is designated
as Alternative #3 in Exhibit 3-1.
Another step that might be taken to reduce the annual
premiums would be for the incineration vessels to
self-insure for the first $10 million of coverage.
Participating vessels would simply pay an insurance company
an annual fee to process any claims. This could be done
individually by each vessel or could be organized as a pool
among several vessels. If such a pool were organized, the
costs to the participants would be the annual processing
fees, say $200,000, plus the cost or any capital they might
have to set aside. Under this arrangement the total annual
cost per vessel for the first $10 million of coverage might
be as low as $300,000. This would bring the total cost per
vessel of the $150 million coverage down to $2.8 million.
This is designated as Alternative #4 in Exhibit 3-1.
In summary the major conclusions to be drawn from this
sec.tion of the study are:
1. Insurance that would cover all risks associated
with incineration vessels is not available in
today's marketplace. The standard marine
insurance policies that are available cover only
legal liabilities and exclude many possible causes
of accidents, such as acts of God and third party
negligence.
2. Obtaining additional insurance will be difficult
and will require substantial negotiation.
3. Reducing the uncertainties associated with
adjudicating claims will be a prerequisite for
obtaining such insurance. Possible ways of doing
this include limiting jurisdiction to federal
courts, including processing and adjudication
expenses within the policy limits, and
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establishing an arbitration board to handle
disputes.
4. If these measures are taken, absolute liability
coverage of $50 million might be available without
an arbitration board. With an arbitration board
coverage of $150 million might be available.
5. Premiums will be very high, probably on the order
of several million dollars.
6. Premiums could be reduced if several incineration
vessels could form a pool and purchase joint
policies covering all vessels in the pool.
7. Premiums could be further reduced, if the
incineration vessels were to self-insure for the
first $10 million of coverage. This would best be
done as a pool.
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Table 3-1
INSURANCE ALTERNATIVES FOR
INCINERATION VESSELS
(all $ amounts in millions)
Type of Policy
Policy Limit
Annual Premium
Provisions
Absolute Liability
Adjudication Costs
Included
Arbitration Board
Pooling
Self-Insuring
STANDARD
CERCLA EXTENDED
ENVIRONMENTAL IMPAIRMENT
$5
$50
$0.02 $ 5
$50 $150
$5 $ 8
$150 $150
$ 5 $2.8
X
X
X
X
X
X
X
X
X
X
X
X
X
X
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Section 4.
Effect of Environmental Impairment Insurance
Costs Upon the Required Freight Rate For
Ocean Incineration Vessels
This section employs an incineration vessel operation
cost model to show what effect various insurance rates will
have on the cost of operating an incineration vessel.
Section A.A Methodology
The criterion used to determine operating cost is
called the Required Freight Rate (RFR) expressed in dollars
per ton of cargo incinerated per year. The Required Freight
Rate is the rate the owner must charge to cover all costsjV
involved in the incineration of the cargo. RFR is
determined by the formula:
Where :
RFR = ((CRF * 1C) + Y)/T
RFR = Required Freight Rate in dollars per
ton of cargo incinerated
CRF = Capital Recovery Factor
1C = Initial Cost (vessel construction cost)
Y = Operating expenses
= vessel operating costs
= crew wages
+ stores and supplies
+ maintenance and repairs
+ insurance
= hull insurance
+ P & I insurance
+ environmental impairment insurance
+ fuel cost
= fuel/port
+ fuel/steaming
+ fuel onsite
+ port charges
T = Tons of cargo incinerated per year
!_/ Only vessel costs are considered in the RFR. Profit and
other costs such as corporate overhead are not included.
4-1
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The Required Freight Rate is calculated by spreading
the initial construction cost of the incineration vessel
over the life of the vessel by means of the capital recovery
factor, adding the operating expenses, and then dividing by
the number of tons incinerated per year. Included in the
operating expenses is the cost of the environmental
impairment insurance.
Values for RFR have been calculated without any
environmental impairment insurance and for four possible
insurance alternatives: 1. standard CERCLA marine insurance
with the $5 million CERCLA legal liability limits; 2. full
environmental impairment as described in Section 3 with $50
million absolute liability limits that include adjudication
costs; 3. full environmental impairment with $150 million
absolute liability limits that include adjudication costs
and provide for the settling of disputes through an
arbitration board; and, 4. full environmental impairment
limits as in #3 but with pooling and self-insuring among
several incineration vessels. The environmental impairment
alternatives used correspond to alternatives 1,2, and 4 in
Table 3-1.
The RFRs were calculated assuming an initial
construction cost for the incineration vessel of $40
million, an expected life of 20 years, and a capital
recovery factor of 12%. It was also assumed that the
incineration vessel would make 18 trips per year and would
incinerate 3,100 tons of cargo per trip (55,800 tons per
year). The total annual capital costs and operating
expenses for the incineration vessel without any
environmental impairment insurance were calculated to be
approximately $12.7 million.
Section 4.B Results
The effect of environmental impairment insurance costs
upon the Required Freight Rate for the model incineration
vessel are shown in Table 4-1 and in Figure 4-1.
Without any environmental impairment insurance the RFR
is calculated to be approximately $227 per ton of cargo
incinerated. The CERCLA policy adds approximately $1 per
ton to the RFR. The full environmental impairment policies
add considerably more. The simplest policy with $50 million
limits brings the RFR up to $317, an increase of 40%. The
most expensive $150 million policy without pooling brings
the RFR up to $371, an increase of 63%. If several vessels
can cooperate and purchase pooled policies with self
insuring as described in Section 3, then the RFR need only
be increased to $277. This would hold the cost increase
down to $50 per ton, or 22%.
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Section 4.C Conclusion
Full environmental impairment insurance will be a major
.expense for incineration vessels. Depending upon how this
insurance is written the premiums could add from 20% to 60%
to the annual cost of owning and operating the vessel. The
amount that a new vessel would have to charge just to break
even to incinerate one ton of hazardous waste would be
increased from $227 to $277 - $371.
Whether such an increase would make a difference to the
potential availability of incineration vessels will depend
upon the costs of alternative means of disposal and how much
disposers are willing to pay to have their wastes
incinerated .
Negotiating the environmental impairment policies will
play a crucial role in determining the future cost of
incinerating hazardous wastes at sea. If the necessary
conditions as described above are attained, the cost of
incineration at sea can be reduced by almost $100 per ton.
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Effect of Environmental Impairment Insurance
Upon the Required Freight Rate for
Ocean Incineration Vessels
RFR
($/Ton)
400 --
300--
200--
100--
Insurance
227
None
371
277
CERCLA"
Environmental Impairment
#3 #4
Limits
($ Million)
$5
$50
$150
$150
$150
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Table 4-1
EFFECT OF ENVIRONMENTAL IMPAIRMENT INSURANCE
UPON THE REQUIRED FREIGHT RATE FOR
OCEAN INCINERATION VESSELS
ENVIRONMENTAL
INSURANCE
None
Legal Liability
CERCLA
Extended
POLICY
LIMIT
Absolute Liability
Alternative #1
Alternative #2
Alternative #3
Alternative #4
$ 50,000,000
$150,000,000
$150,000,000
$150,000,000
ANNUAL
PREMIUM
($/yr)
$ 5,000,000 $ 20,000
$ 50,000,000 $5,000,000
$5,000,000
$8,000,000
$5,000,000
$2,800,000
REQUIRED
FREIGHT RATE
($/ton)
$227
$228
$31.7
$317
$371
$317
$277
Assumptions:
Construction Cost
Life of Vessel
Interest Rate
Tons/Year
$40,000,000
20 years
12 %
55,800
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Appendix I
REQUEST FOR RATE INDICATION AND COVERAGE AVAILABILITY
-------
A REQUEST FOR A RATE INDICATION AND COVERAGE AVAILABILITY
FOR A 'PROTOTYPE' RISK SET FORTH BELOW:
Assured
Business:
Coverage:
Limits:
Owner, Operator(s), and others as their interest may
appear.
Handling, transportation, and incineration at sea of
hazardous waste materials, including but not limited
to toxic chemicals, such as Phenol, Isopsene,
Carbamate Pesticides, Organometallic Waste, and
waste products containing PCB's.
Environmental Impairment Liability Policy. Coverage
for costs of cleanup and/or mitigating the adverse
effects of the spill. Further, the coverage includes
absolute liability to third parties for losses arising
out of injury and/or damage to persons or property., or
the environment. (Excludes any loss or damage to the
contractor's vessel or its contents or any loss
normally covered by P & I insurances respecting third
parties or any injury or sickness to crew or other
employees.)
Quote: (1) $50,000,000 any one loss or annual
aggregate.
(2) $250,000,000 any one loss or annual
aggregate.
(3) $500,000,000 any one loss or annual
aggregate.
-------
Deductible
Applying to
Owner/Operator:
Rales:
Form:
Claims Made
Provision:
Loss Experience-
(1) No deductible
(2) $ 1,000,000 any one loss
(3) $500,000 plus 10% of loss subject to a maximum
of $5,000,000.
Insurance Company assumes full liability and
subrogated against owner/operator for deductible.
Warranted deductible to be uninsured by
owner/operator.
Estimated number of voyages per year 18. Requires a
rate per voyage (round-trip) subject to an annual
minimum premium for each of the above limit and
deductible combinations.
Environmental Impairment Liability Policy modified
to meet these specifications.
Three year discovery period of the economic loss or
six years from the date of instant spill/or end of
policy period whichever is the longer.
Hazardous wastes have been incinerated off the
European coast in the North Sea since 1972. Both
VULCANUS I AND VULCANU5 II have operated out of
European ports. Hazardous wastes have also been
incinerated by MATHIA5 I, MATHIA5 II, and MATHIAS
III and VEST A. VULCANUS I, VULCANUS II, and VESTA
have made about 320 voyages and incinerated
approximately 650,000 metric tons of hazardous
wastes which includes several trial burns made by
VULCANUS I and VULCANUS II. No casualties, such as
collisions, groundings, rammings or fires, have
occurred, nor have there been any spills from loading
these ships in port.
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Exposure
Estimates:
Basic System
Operation:
The expected spill rate for incineration ships
operating out of Mobile, Alabama, has been estimated
to be one spill event per 16,600 voyages. (Study
available if required).
The maximum exposure (worst case) within the Port
of Mobile or Mobile Bay is estimated to be:
(1) For cleanup and/or mitigation within the Port of
Mobile or Mobile Bay $ 10,000,000
(2) For cleanup and/or mitigation in the offshore
(deepwater) environment $3,000,000
(3) For environmental and third party exposure
Up to policy limit
The vessel would load liquid and/or solid wastes at
the site within Mobile Harbor. The vessel would then
proceed down Mobile Harbor, utilizing the deepwater
channel, to the EPA designated waste incinerator site,
about 200 miles offshore. The incinerator would be
preheated with clean fuel oil or permitted non-
hazardous waste during the last part of this
voyage so that burning could begin upon arrival at the
burn site. Incineration would continue for ten days,
during which time the vessel would steam slowly and
maintain a heading into the wind so that the
incinerator exhaust plume blows away from the ship.
After completing the incineration the ship would
return to the loading terminal.
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Warranted
Safety Require-
ments Applying
to Owner/Opera-
tor Only:
The EPA/U.S. Coast Guard have placed restrictions on
incineration ships between the loading terminal at
Chickasaw, Alabama, along the Chickasaw Creek
Channel and the Entrance Channel to Mobile Bay.
These restrictions include limiting operations to
daylight hours only and when the visibility is two
nautical miles or greater and imposing a moving
safety zone that will be strictly controlled by a Coast
Guard escort vessel to restrict any vessels from
coming within 100 yards of the incineration ship.
This has the effect of essentially prohibiting any
other major marine traffic from meeting or
overtaking the incineration ship within the 400-foot
wide, Lower and Upper Reach Channels of Mobile Bay
and precluding the occurrence of any traffic from the
Intracoastal Waterway and Hollingers Island Channel
to cross or enter the main shipping channel when the
incineration ship is in the vicinity of those inter-
sections within Mobile Bay. In the Pinto Island,
Mobile Channel, Blakeley Island, and St. Louis Point
Beaches of the channel above Mobile Bay to the
Chickasaw Creek Channel, with average channel
widths of approximately 600 feet, the effect of these
navigation requirements is to allow meeting or
overtaking situations to occur only when, in the
opinion of the Coast Guard escort vessel, the
situation provides a sufficient margin of safety to do
so.
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Other Informa- The following additional informational resources are
lion available upon request from ECO, Inc., Annapolis,
Maryland, at (301)757-3245:
(1) "Chemical Waste Incinerator Ships: The
Interagency Program to Develop a Capability in the
United States".
(2) "Spill Rates for an Incinerator Ship Operation Out
of the Port of Mobile".
(3) Chart of the Port of Mobile and Mobile Bay.
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