Compensation and Claims Management

The principal role of the IOPC Funds is to pay compensation to those who have suffered oil pollution damage in a Member State who cannot obtain full compensation for the pollution damage from the shipowner under the relevant Civil Liability Convention. Claimants may be individuals, partnerships, companies, private organisations or public bodies, including States or local authorities.

Claims settlement

In the great majority of cases, claims are settled out of court. The Director has the authority to settle claims and pay compensation up to predetermined levels. However, for incidents involving larger claims or where a specific claim gives rise to a question of principle which has not previously been decided by the governing bodies, the Director needs approval from the relevant governing body of the Fund in question. The Director is further permitted, in certain circumstances, and within certain limits, to make provisional payment of compensation before a claim is settled if this is necessary to mitigate undue financial hardship to victims of pollution incidents.

Under the Fund Conventions, the Funds are obliged to ensure that all claimants are given equal treatment so if the total amount of the established claims exceeds the total amount of compensation available under the Civil Liability and Fund Conventions, each claimant will receive the same proportion of the loss. When there is a risk that this situation will arise, the Funds may have to restrict compensation payments to a percentage of the losses to ensure that all claimants are given equal treatment. The payment level may increase at a later stage if the uncertainty about the total amount of the established claims is reduced. One important effect of the establishment of the Supplementary Fund is that, in practically all cases, it should be possible from the outset to pay compensation for pollution damage in Supplementary Fund Member States at 100% of the amount of damage agreed between the Fund and the claimant.

Admissibility of claims for compensation

To be entitled to compensation, the damage must result from oil pollution and have caused a quantifiable economic loss. The claimant must be able to show the amount of his loss or damage by producing accounting records or other appropriate evidence.

An oil pollution incident can generally give rise to claims for five types of damage:

• Property damage
• Costs of clean-up operations at sea and on shore
• Economic losses by fishermen or those engaged in mariculture
• Economic losses in the tourism sector
• Costs for reinstatement of the environment

Claims are assessed according to criteria established by the Governments of Member States. These criteria, which also apply to claims against the Supplementary Fund, are set out in the 1992 Fund’s Claims Manual, which is a practical guide on how to present claims for compensation.

The Funds, normally in co-operation with the shipowner’s insurer, usually appoint experts to monitor clean-up operations, to investigate the technical merits of claims and to make independent assessments of the losses.

Claimants ultimately lose their right to compensation under the 1992 Fund Convention unless they bring court action against the 1992 Fund within three years of the date on which the damage occurred, or make formal notification to the 1992 Fund of a court action against the shipowner or his insurer within the three-year period. Similarly, claimants lose their right to compensation from the shipowner and his insurer under the 1992 Civil Liability Convention unless they bring court action against them within three years from the date when the damage occurred. Although damage may occur some time after an incident takes place, in both cases court action must in any event be brought within six years of the date of the incident.

Detailed information on the incidents currently being dealt with by the Claims Department can be found under the incidents section and in the publication Incidents Involving the IOPC Funds. It sets out the developments in the various cases during the course of the year and the position taken by the governing bodies in respect of claims.