Maritime oil spills and leaks can be very expensive to address. It is for this reason that the Oil Pollution Act of 1990 mandates that the parties responsible for a spill pay all of the associated costs. Before operating in America’s Exclusive Economic Zone, the owners or operators of certain vessels are required to acquire a Certificate of Financial Responsibility. This guarantees their ability to meet their economic liabilities in the event of a spill.
Who Is Required to Have a COFR?
Any ship over 300 gross tons that will be piloted in the EEZ requires a COFR. Moreover, vessels of any size that will be shipping oil or transferring oil between ships in this zone also need to obtain a certificate. Owners and operators can apply for the certificate themselves or it can be done via an insurance company.
What Are the Benefits of COFR Insurance?
Acquiring a certificate can be very expensive and is often beyond the means of all but large corporations. COFR insurance can help smaller businesses guarantee their vessels. Some of the liabilities covered by this policy may be: direct response activities, environmental impact assessments and natural resource restoration.
Oil spills can be catastrophic for both the environment and a business’s bottom line. For example, in 2016, BP estimated that the costs associated with the Deepwater Horizon oil spill amounted to $61.6 billion dollars. Having a COFR insurance policy will protect both the company and its employees should a disaster occur.