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Insurance payments for oil spill unsure

September 22, 2006

GOTCHA By Jarius Bondoc
The Philippine Star 09/22/2006

AFTER the rush cleanup of M/T Solar-1’s oil spill in Guimaras Strait, the next phase is long-term restoration of the damaged environment. But completely squeezing bunker oil from the white sand beaches, replanting mangrove patches, and replenishing coral reefs cost money. Starved for cash, the government is hoping that pollution insurance of the ship owner and charterer will bankroll the work. President Gloria Arroyo in fact has told owner Sunshine Maritime and charterer Petron Corp. to start collecting so they can also commence rehabilitation. Some local officials in despoiled Guimaras are even concocting epidemic outbreaks in the hope of partaking of P300 million that Petron reportedly expects to receive. Fishermen who were forced to stay ashore for weeks, seaside resort operators who suffered booking cancellations, and fruit plantation owners affected by the black muck are filing class suits.

They’re all in for a nasty surprise. For, the Special Board of Marine Inquiry has ruled that Sunshine and Petron violated basic safety rules and thus caused the tanker to capsize and sink. In which case, no insurer would likely pay for negligence or outright contract breaches.

Maritime industry insiders aver that insurers always investigate the cause of a ship sinking or pollution, and pay only if these were accidental. Safety breaches, however, are deemed intentional and not subject to recompense.

Among the findings is that the ship left Limay, Bataan, overloaded with 2.2 million liters of bunker oil. Its bottom, limited to only 4.9 meters below water surface, was submerged 5.2 meters, indicating by its storage capacity an overload of 150 tons. Solar-1 obviously and dangerously had lost buoyancy.

Compounding it was that shipmaster Norberto Aguro sailed in extremely rough southwest monsoon waters. From the crew’s account that they were buffeted by four-meter-high waves, investigators calculated that Solar-1 took in another 200 tons of water due to a leaky hull. All this caused the tanker to list on its right, then flip over and sink. The SBMI blamed all this on Petron.

Sunshine committed equally serious offenses. Already widely reported was that Aguro did not even have a license to command an oil tanker. What he had, which he and Sunshine president Clemente Cancio claimed to be far superior, was a license to run a chemical tanker. Assuming they were right, the captain was an expert in operating a huge truck but was driving an unfamiliar puny scooter.

Sunshine also had wangled from the Maritime Industry Authority a heavier deadweight capacity. This required the owner to compute new trims for stability, which it did not undertake and thus compromised Solar-1’s seaworthiness for any voyage, loaded or not.

After Solar-1’s last dry dock in February, Sunshine scrapped its safety inspection contract with a foreign firm, and moved it to the MARINA. The agency issued it an interim document of compliance (DOC) up to June 7, 2006 only. Sunshine then applied for a full audit only on June 13. Hence, the SBMI concluded: “Without a valid DOC, the company should temporarily cease its operation. However, despite non-compliance, the vessel continued its operations.” (Only when the spill and sinking were being investigated did authorities cancel the owner’s operating permits.)

There could be more basic reason for insurers to not pay. And it has nothing to do with the SBMI’s findings. Reports have it that Sunshine could not pay the P212,000-premium for Solar-1’s hull and machinery insurance. Naturally, Stronghold Insurance Company Inc. cancelled the P20-million policy. Premium must be paid for an insurance policy to take effect, SICI president Romulo de los Reyes reminded Sunshine of the obvious. To which Cancio could only sheepishly reply that “paying never used to be a problem until now.”

Another insurer based in Luxembourg also might refuse paying $301 million in accident coverage. Under policy clauses of the Shipowners’ Mutual Protection and Indemnity Association, Sunshine’s failure to check Aguro’s license is tantamount to negligence and bad faith, both grounds for nonpayment. The exclusion rule is clear: “There shall be no right of recovery of any claim from the Association if it arises out of willful misconduct on the part of the insured.”

In spite of his violation, Cancio is hopeful the Luxembourg group will pay up. It already has sent representatives to the affected island to assess the damage and instruct residents how to file claims. Still, all those do not mean it would release funds to cover Sunshine’s transgressions. As murky as the oil spill is the future of thousands of Guimaras villagers.

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