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Chennai oil spill

‘Liability could touch millions’

February 12, 2017 01:39 am | Updated 11:28 am IST

Volunteers trying to clean up the sludge that washed ashore in Chennai.

Volunteers trying to clean up the sludge that washed ashore in Chennai.

The liability cost of the recent oil spill could be higher than anticipated if it is established that it happened due to the negligence of the ship owner, according to experts.

“This is an incident involving the collision of vessels carrying hazardous material. As such, the parties concerned could potentially incur liability from third parties for loss or damage to their life or property. There could be pollution liabilities as well as environmental liabilities for endangering the marine life and the bio-diversity. Further, there could be potential regulatory action,” said Rashmi Iyer, Principal Officer and Director, Aon Global Insurance Brokers Pvt. Ltd.

She also added that the cost could be millions of dollars, depending on the extent of the spill.

In 2010, in the aftermath of an oil spill incident off the Mumbai coast after a collision involving the ships m.v. Chitra and m.v. Khalija , the actual cost of damage was estimated to be ₹514 crore as per NEERI's impact assessment report.

Ship owners insure for their hull and machinery, and also cover the risk through protection and indemnity insurance, which covers third party liabilities and expenses arising out of the ownership or operating ships such as collision, and loss of property.

According to Shrikanth Hathi, Managing and Practicing Partner, at Brus Chambers, a Mumbai-based law firm, India has ratified the International Convention on Civil Liability for Oil Pollution 1969, which came into force on June 19, 1975.

“The convention lays down the principle of strict liability for ship owners and creates a system of compulsory liability insurance. Ship owners are strictly liable for pollution damage,” he said.

As per the convention, a ship owner is exempt from liability only if he proves that the damage (a) resulted from an act of war, hostilities, civil war, insurrection or a natural phenomenon of an exceptional, inevitable and irresistible character, or (b) was wholly caused by an act or omission done with intent to cause damage by a third party, or (c) was wholly caused by the negligence or other wrongful act [by public authorities] for the maintenance of lights or other navigational aids.

Mr. Hathi said ship owners were normally entitled to limit their liability to an amount calculated on the basis of the tonnage of the ship. However, ship-owners were deprived of the right to limit their liability if the pollution damage resulted from the ship owner’s personal act or an act of omission, he said.

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