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September 22, 2017

Legal Update
Dylan Sanders

First Circuit sinks OPA oil spill claims against Navy ship crewed by private contractor, but revives negligence claims against the government

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The First Circuit Court of Appeals has held that a liability exemption in the Oil Pollution Act (“OPA”) for oil spills from “public vessels” extends to spills from a Navy ship that is crewed and maintained by a private contractor. The decision, in Ironshore Specialty Insurance Company v. U.S. (September 15, 2017), affirmed a lower court’s dismissal of strict liability claims against the United States and a defense contractor arising from a 2014 oil spill at a Boston Harbor dry dock. But the First Circuit reinstated the accompanying negligence claims against the government, holding that those claims were not precluded by the OPA. The decision is an important development in light of the Navy’s increased reliance on private contractors to crew and operate certain ships.

The Navy vessel at issue was the USNS Fisher, a large transport ship that carries military vehicles and containerized cargo for the Defense Department. A division of the Navy—the Military Sealift Command—contracted with the American Overseas Marine Company (“AMSEA”), a subsidiary of General Dynamics, to crew and maintain the Fisher. In June 2014, the Fisher was undergoing maintenance in a Boston Harbor dry dock owned by Boston Ship Repair (“BSR”), a subcontractor of AMSEA. While the Fisher was in dry dock, over 11,300 gallons of diesel fuel spilled from the ship. BSR cleaned up the fuel, allegedly incurring over $2.7 million in doing so.

Ironshore Specialty Insurance Company reimbursed BSR under a pollution policy. The insurer then filed an action in federal court to recover what it paid, asserting claims against the United States and AMSEA under the OPA, and negligence claims against the same defendants under maritime law.

Enacted in the wake of the Exxon Valdez oil spill disaster, the OPA imposes strict liability for oil spill response costs on the party “responsible” for the vessel from which oil is released. Where the oil spill occurs from a ship, the OPA defines a “responsible party” as “any person owning, operating, or demise chartering the vessel.” But the statute expressly exempts from its scope all oil discharges involving “public vessels,” defined as those “owned or bareboat chartered and operated by the United States” and not “engaged in commerce.”

Thus, the viability of the insurer’s OPA cost reimbursement claims hinged on whether the Fisher was a “public vessel” at the time of the spill. While it was undisputed that the Navy owns the Fisher, AMSEA was the operator of the ship at the time of the spill, and therefore, the insurer argued, the ship was not “owned and operated” by the United States. The First Circuit disagreed. Recognizing that this was a matter of first impression under the OPA, the court reasoned that “when Congress opted to exempt ‘public vessels’ from OPA liability, it did so against a backdrop of federal laws that consistently interpreted the term ‘public vessels’ to include government-owned ships crewed by private contractors acting on behalf of the government.” Further, examining the contract between the Navy and the private contractor, the court concluded that the Fisher was sufficiently under the Navy’s “operational control” and “administrative control” to qualify as a “public vessel” exempt from liability under the OPA.

The court also ruled, however, that the OPA did not preclude a negligence claim brought against the federal government under maritime law, where the OPA was inapplicable. The court clarified—and arguably narrowed the scope of—an earlier decision which the lower court had interpreted as holding that the OPA supplanted all other federal claims for oil spills. This is not the case, the First Circuit now made clear, for claims “outside the OPA context.” Since “public vessels” are exempt from liability under the OPA, claims under maritime common law are still viable with respect to oil spills from such vessels, and thus the court reinstated the insurer’s negligence claims against the government.

While the merits of the negligence claim have yet to be determined, it has saved the insurer’s case from an early dismissal, thereby demonstrating the wisdom of pleading under multiple, alternative theories of liability.