1. Spill Oil, Kill Birds, Go to Jail: The New Paradigm for Mariners Presentation to: San Francisco Marine Insurance Seminar May 6-7, 2010 Jeffrey L. Bornstein K&L Gates LLP 4 Embarcadero Center, Suite 1200 San Francisco, CA 94111 Email: jeff.bornstein@klgates.com

2. 1 The “7 Seas” (or ‘Cs’ in this case)  Chain of Errors  Accidents involve a Chain of Errors (but someone will be blamed)  Criminal  If your client spills oil and there is environmental damage, assume there could be Criminal liability  Coverage  Insurance Coverage for criminal counsel and pollution events is essential – protect your clients – their liberty and assets are at risk  Consultation  Before making statements to investigators, your client needs to Consult with legal counsel  Cooperation  The decision to Cooperate with the government (or not) may be different for a company vs. an individual  Compliance  Rigorous Compliance (and training) is an important key to preventing accidents  Communication  Effective Communication between maritime professionals is fundamental

3. 2 The Scene November 7, 2007 A very foggy morning…

4. 3 The Cosco Busan’s bridge was equipped with radars, electronic chart, and manned by the ship’s Master and two officers and an experienced San Francisco Bar Pilot.

5. 4 Cosco Busan

6. 5 Damage to the Cosco Busan

7. 6 Damage to the Bay Bridge Pier

8. 7 Oil Slick on SF Bay 53,500 gallons of oil spilled 2,500 birds killed  Also delayed opening crab season until after Thanksgiving

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10. 9 What Happened  Timeline of Key Events  6:20 a.m. Pilot boarded the vessel  6:24 a.m. Initial exchange of information with the ship’s Master  6:37 a.m. Coast Guard Vessel Traffic Service (VTS) notified of ship’s intended passage through the “Delta-Echo” opening of Bay Bridge  7:44 a.m. Cosco Busan leaves dock in heavy fog  8:30 a.m.Cosco Busan scrapes the Bay Bridge Pier and begins to leak bunker fuel

11. 10 Reliance on Basic Assumptions  Pilot – The Master and his bridge officers know their ship and their equipment. They will follow the basic international standards relating to a ship leaving port in the fog  Master – The Pilot is the local expert who will take over and navigate us safely from the Oakland Port, through the Bay, and out to sea  Coast Guard VTS – There is an experienced pilot on board who knows what he is doing

12. 11 Chain of Errors  Lack of Compliance/Training  Master/Crew not well-trained; did not know how to operate ship’s equipment (including the electronic chart)  There was no real pre-sailing voyage planning even though it was otherwise required by law and company protocols  The Master and his officers did not follow international standards or ship’s procedures relating to lookouts, monitoring of ship’s position, and interactions with Pilot  Master and officers modified various ship records after the incident

13. 12 Chain of Errors (cont.)  Failure to Communicate  Exchange of information between Pilot and Master incomplete  Master and Pilot misunderstood key symbols on the ship’s electronic chart  Master “guessed” at their meaning  He was wrong in his guess  Ship ultimately badly out of position to safely transit through the opening of the Bay Bridge span  No warning from ship’s Master or crew  Coast Guard’s VTS failed to warn  Knew pilot’s intention to sail through “Delta – Echo” portion of Bay Bridge span  Actively monitored ship’s progress  Timely warning – even in the last minute – could have avoided the accident.

14. 13 Ferries & Other Vessels on the S.F. Bay that Morning

15. 14 Electronic Chart (“Red Triangles” and “Center of Bridge”)

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21. 20 The Investigation – The Critical Players  First Responders  Coast Guard  Fish & Game/OSPR  Environmental Protection Agency  Federal Bureau of Investigation  Federal and State Prosecutors  United States Attorney’s Office  Department of Justice Environmental Crimes Division  Local District Attorney’s Office  National Transportation Safety Board  Licensing Bodies  Representatives of Ship Owners/Operators  Public Opinion  Media  Politicians

22. 21 The Media - Someone Must Be Held Accountable  Pilot  Bar Pilot on Errant Ship Had Several Mishaps in Past (San Francisco Chronicle, November 9, 2007)  State Charges Bay Spill Pilot with Misconduct (San Francisco Chronicle, December 7, 2007)  Role of Pilot’s Sleep Medication Probed (San Francisco Chronicle, January 19, 2008)

23. 22 The Media - Someone Must Be Held Accountable (cont.)  Ship’s Master and Crew  Probe into Cargo Ship Bay Bridge Crash Focuses on Communication (San Jose Mercury News, November 9, 2007)  Federal Prosecutors Charge Shipping Company in Bay Oil Spill (San Jose Mercury News, July 23, 2008)  Felony Charges for Ship’s Management (San Francisco Chronicle, July 24, 2008)

24. 23 The Media - Someone Must Be Held Accountable (cont.)  Coast Guard  Response to Fuel Spill under Bay Bridge Called ‘Unusually Slow’ (San Francisco Chronicle, November 9, 2007)  Coast Guard Monitors Didn’t Warn Ship’s Crew (San Francisco Chronicle, November 16, 2007)  Senators Blast Coast Guard Response to Bay Oil Spill (San Francisco Chronicle, November 15, 2007)  Coast Guard May Be Neglecting Its Maritime Mission (San Francisco Chronicle, November 16, 2007)  Oil Spill Report Berates Coast Guard (San Francisco Chronicle, January 28, 2008)

25. 24 The Law  Clean Water Act (33 U.S.C. § 1319(c)(1)(A); 33 U.S.C. § 1321(b)(3))  Elements  Defendant discharged a harmful quantity of oil into U.S. waters;  Defendant was negligent; and  Defendant’s negligence was a proximate cause of the discharge.  Ordinary Negligence (same as in any civil case)  Can be sent to prison for up to one year  Intentional conduct is a felony (deliberate oil spills or dumping of other pollutants)  Failure to report an oil spill is also a felony

26. 25 The Law (cont.)  United States v. Franklin Hill, et al. (D. Mass)  Defendant was responsible for the navigation of the tugboat. Left his post for 15 minutes without his hand-held radio. There was no one else on the bridge. Barge crashes upon the rocks that were clearly marked on the electronic and paper charts.  Defendant was sentenced to five months imprisonment.  Hanousek v. United States (9th Cir.)  During rock removal operations a backhoe operator accidentally struck high pressure pipeline near the railroad tracks, spilling between 1,000 and 5,000 gallons of oil into the river.  Supervisor of the project was off duty and at home when the accident occurred. Nevertheless, he was convicted under the Clean Water Act for negligently discharging oil into the river. Sentenced to six months of imprisonment followed by six months in a halfway house.

27. 26 The Law (cont.)  Migratory Bird Act (16 U.S.C. §§ 703, 707(a))  On the books since 1918.  Purpose = Regulating Hunting  Elements  The killing of a migratory bird including Brown Pelicans (Pelecanus Occidentalis), Marbled Murrelets (Brachyramphus Marmoratus), and Western Grebes (Aechmophorus Occidentalis); and  Without permission or authority as required by law.  Strict Liability – No need to prove negligence.  Cases beginning to question applicability to pollution events

28. 27 The Law (cont.)  Various State Laws  Crime to negligently or intentionally spill oil or fail to report spills.  Seafarers’ Training, Certification and Watchkeeping Code (STCW)  Navigation with pilot on board  The Master is always in charge of his ship.  Presence of pilots on board does not relieve the master or ship’s officers from their obligation to keep the ship safe.  The master and pilot must have a meaningful exchange of information before the ship leaves the dock.  The master and his officers must cooperate closely with the pilot and maintain an accurate check on the ship’s position and movement.

29. 28 The Allegations  12 specific negligent acts alleged in criminal indictment including:  Ship’s Master and crew inadequately trained  Pilot and ship’s Master/crew failed to navigate an accident free course  There was an inadequate review before departure of the ship’s navigational charts and the proposed course  The ship departed in heavy fog  The ship’s Master failed to ensure that adequate lookouts were posted  The ship’s Master/crew failed to notify the Pilot that the ship was off-course  The ship’s operating company is vicariously liable for the acts of the ship’s Master/crew

30. 29 How does a company defend itself?  Clean-up response is paramount  Understanding key evidence – What happened? Why? Who’s at fault?  Drug/alcohol testing of key personnel  Preserving paper and electronic evidence  Interviewing key personnel  Hiring lawyers to represent witnesses/subjects/ targets  Managing the public relations nightmare

31. 30 Insurance Coverage – Make Sure the Policy Protects Your Client  Anyone who operates any seagoing vessel needs insurance coverage to protect against pollution-causing incidents  Some policies may contain a Pollution Exclusion and Buyback clause  Make sure your client knows what this clause means and that the exclusion is not unreasonable given the risks faced by normal operations  Important lesson from the Cosco Busan – Your clients’ liberty and assets are at risk if their vessel is involved in an accident, and fuel oil spills into the water and kills migratory birds – They deserve to be protected!

32. 31 Insurance Coverage – Make Sure the Policy Protects Your Clients (cont.)  Insurance companies tend to narrowly construe their obligations  We have excellent coverage lawyers who can help  Federal criminal investigations following a pollution incident are and should be covered by standard liability policies  If you are an insurance broker, make sure you are looking out for the rights of your insured (and not the insurance company)  Get to know their business so you can appreciate their risks  Remember, the Cosco Busan accident arose from what otherwise would be considered “normal operations”

33. 32 How does an individual defend herself?  You need advice from competent counsel – preferably before you say anything.  Are you required to make any statements to anyone? If so, make it clear that you are requesting the right to consult with counsel first.  What does the Company expect you to do?  Whatever you do, only tell the truth.  Who is going to pay for your legal expenses?  Are you going to be made the scapegoat?

34. 33 How does an individual defend herself? (cont.)  Regardless of whether you cooperate or assert your 5th Amendment rights, if you give any statements –  Only tell the truth.\  Do not change or alter any electronic or paper charts or documents even if you are asked/ordered to do so  Don’t try to “get your story straight” with other members of the crew  Assume that oil spills in sensitive environmental areas will be investigated as a crime  Usually the United States Coast Guard is the lead investigative agency  Even a case that is initially civil can be criminal  Coast Guard investigators may have varying degrees of training/ experience

35. 34 If you spill oil and kill birds, will you go to jail?  Sentencing Guidelines  Standardized system designed to equalize sentencing in all federal courts  Intentional conduct treated more harshly than negligence  Applicable Sentencing Range – (as high as) 10-16 months (statutory maximum for negligence – 1 year)  Intentional acts can be punished with up to 3-5 years imprisonment

36. 35 If you spill oil and kill birds, will you go to jail? (cont.)  Judge Illston’s Comments at Sentencing  “The Exxon Valdez was an object lesson to everyone.”  “…What happened [in the Cosco Busan case] is exactly what was meant to be protected against by the statutes. The consequences are just exactly as severe as you might expect….

37. 36 Lessons learned  Accidents usually involve a Chain of Errors  Fault on behalf of many – Pilot, Ship’s Master and Officers, Ship’s operating company, the United States Coast Guard (VTS and Captain of the Port)  Only the Pilot and Ship’s operating company were charged with crimes  Lack of an effective Compliance and training program for the ship’s crew  Volumes of written policies  Most in English and almost all of the crew were not proficient in English  Conflicting responsibilities made it impossible to follow all of the procedures  Crew did not have time to review and absorb the procedures  Vessel Traffic Service (VTS) (failure to Communicate a clear warning)  Inadequate exchange of information between maritime professionals can be devastating

38. 37 Lessons learned (cont.)  Having to fight your own insurer for Coverage makes it difficult to defend yourself against the government  Pilot had to initially fund his own defense  Insurers at different levels fought about who was responsible to pay for attorney’s fees.  See e.g., California Harbors and Navigation Code, Section 1198 – Pilot is entitled to indemnification

39. 38 Lessons learned (cont.)  Life is not fair  Bad things can – and do – happen to good people  The media wants a story and there is a tendency to look for a scapegoat  The government (and politicians) want to hold someone accountable  Sometimes you can show up for work, make a mistake, lose your profession, and even end up in prison  Good training, clear policies and procedures, rigorous Compliance, and good Communication are all keys to avoiding accidents

40. 39 So... if you spill oil and kill birds, will you go to jail? IT DEPENDS (but knowing your clients are protected by a comprehensive insurance policy and can consult with qualified criminal counsel will help)