693JF724R000008 SOW April 22 2024_Oil Pollution Insurance_.pdf

SOW for Oil Pollution Insurance

1.0 General

2.0 Introduction

The U.S. Department of Transportation, Maritime Administration (MARAD) requires oil pollution insurance for oil spills from MARAD -owned vessels of the Ready Reserve Force (RRF), RRF-like vessels, and School ships. Oil pollution insurance may be required, on an as needed basis, for other vessels for which MARAD has either title or custody, such as, but not necessarily limited to, vessels departing a MARAD National Defense Reserve Fleet (NDRF) site for a shipyard or ship recycling facility or Title XI vessels returned to MARAD that are located at a non-MARAD site at time of turnover to MARAD. All of these vessels may transit navigable waters worldwide, normally either by their own propulsion (i.e. self-propelled) or under tow.

Section C: Statement of Work

C.1 OBJECTIVE

1.1. The Maritime Administration (MARAD) requires the Contractor to provide MARAD with a contract (Contract), as more fully detailed in this Statement of Work (SOW), which will contractually address costs and expenses relating to an oil spill arising from and related to MARAD-owned vessels in the National Defense Reserve Fleet (NDRF). It is intended that MARAD will enter into such Contract with the Contractor that will make MARAD in privity of contract with the Contractor, consistent with the terms and conditions set forth in this SOW. Said Contract will be awarded by MARAD on a determination by MARAD as to what Contract constitutes “best value” to MARAD and the Federal Government.

1.2. The vessels to be covered by said Contract are hereinafter defined collectively as Vessels and individually as a Vessel. The Vessels are identified on Attachment J-1. MARAD may modify Attachment J-1 from time to time by adding or deleting Vessels. As of the date of this SOW, the Vessels are non-tank vessels, but MARAD reserves the right to add tank vessels in the future. Most Vessels are not operating but are maintained in a status to be ready for expedited operation. Vessels are operated as required on missions or to test for readiness. Generally, Vessels are operated on non-commercial missions.

C.2 DEFINITIONS

2.1 “ACO” refers to Administrative Contracting Officer. The “ACO” is the contracting officer who is administering contracts.

2.2 “Assureds” means those parties identified on Attachment J-2 and includes their agents, servants, officers, and employees. No party shall be an Assured under the Contract until it is properly added to Attachment J-2. MARAD may modify Attachment J-2 from time to time by adding or deleting Assureds.

2.3 “Deductible” shall be subject to a $1,000,000 deductible per incident, which shall be paid by MARAD as described in this SOW.

2.4 “Federal Entities” means Federal agencies and their instrumentalities, including, but not limited to United States Coast Guard (“USCG”), Department of Defense (“DOD”), National Oceanic and Atmospheric Administration, and the Department of Interior and Federal Trustees for sanctuaries or otherwise.

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2.5 “Hazardous Substance” means a substance or material that the Secretary of Transportation has determined is capable of posing an unreasonable risk to health, safety, and property when transported in commerce, and has designated as hazardous under section 5103 of Federal hazardous materials transportation law (49 U.S.C. § 5103).

2.6 “MARAD” means the Maritime Administration, U.S. Department of Transportation.

2.7 “NDRF” means MARAD’s National Defense Reserve Fleet.

2.8 “Oil” means liquid hydrocarbons regardless of specific gravity, of any kind or in any form, including, but not limited to, petroleum, fuel oil, crude oil, sludge, oil refuse, hydraulic oil, lube oil, and oil mixed with wastes other than dredged spoil.

2.9 “Oil Spill” includes, but is not limited to, any spilling, leaking, pumping, pouring, emitting, emptying, or dumping of Oil or any Hazardous Substance or a reasonable threat of a discharge of Oil or any Hazardous Substance from a Vessel, into or upon navigable waters, including geographically adjacent locations, either on land or water, including shoreline, that may be affected by the Oil Spill, anywhere in the world.

2.10 “PCO” refers to Procuring contracting officer. If the same individual will serve as the contracting officer for the pre-award and post-award functions then there is no distinction between PCO/ACO. If the Contracting Officer will change then the terminology PCO/ACO may become applicable.

2.11 “SMT” means Spill Management Team.

C.3 GENERAL REQUIREMENTS

3.1 At all times during the period of performance of the Contract, the Contractor shall be qualified to legally provide marine insurance within the United States.

3.2 Contractor must have a rating with A.M. Best Company of at least a B security rating as published in the latest edition of A.M. Best’s Insurance Reports. This requirement can be waived by MARAD upon a showing, in form and substance satisfactory to MARAD, that Contractor has sufficient financial resources to satisfy the terms of the Contract. Captive insurance companies are not acceptable. Where commitments by Underwriters are involved, Contractor must show that it is authorized to bind such Underwriters and such Underwriters must be shown to be subject to suit in the United States in accordance with the same terms as required of the Contractor. Foreign underwriters require MARAD acceptance after compliance with the procedures set forth in 46 C.F.R. Part 249. No Underwriter may take a line on any single risk in excess of five percent of its policyholder’s surplus.

3.3 Agents and brokers may respond to this solicitation on behalf of a potential Contractor, but only if they provide documentation demonstrating that they are authorized to bind such Contractor.

The fees of such agents and brokers are all to be paid by the Contractor. MARAD shall have no financial obligation to such agents or brokers.

3.4 Deductible: The Contract shall be subject to a $1,000,000 deductible per incident, which shall be paid by MARAD as described in this SOW.

3.5 Maximum Coverage: MARAD has not yet decided on the maximum amount of coverage

MARAD seeks in the Contract per incident. The Contract proposed shall provide pricing for coverage for different maximum amounts. Contract proposed pricing shall be given respectively at a minimum at least $50,000,000, $75,000,000, and $100,000,000 per Incident greater than the amount of the Deductible, up to respectively $51,000,000, $76,000,000 or $101,000,000 per Incident. The entitlement to recover under the Policy from Contractor shall not be limited by or subject to the tonnage liability limitations of OPA 90, such as 33 U.S.C. § 2704.

3.6 Coverage and Coverage Limited to Operation Use.

3.6.1 Vessels listed are in the NDRF and shall always be covered during the term of the policy. Most of the Vessels listed are not ready to be immediately operated.

These Vessels are maintained in a laid-up status requiring significant work to be activated. Most Vessels have little or no crew. Work needs to be performed to make these Vessels ready to operate. Vessels shall be covered under this insurance while in laid-up status, being activated, in activation, while undergoing repairs, entering, leaving drydock, and during any transit periods related to being repaired, either under the Vessel’s own power or by tow. It is the intention of MARAD that these Vessels always be covered for Oil Spills. To the best of MARAD’s knowledge, nothing about the condition of these Vessels exposes them to any undue risk of Oil Spills. MARAD is willing to consider reasonable exceptions to the foregoing requirements. Any exceptions to such coverage in the proposed Insurance should be explicitly stated.

3.6.2 If there is a savings in cost, MARAD will consider limiting coverage to its vessels only when they are in Operational Use. A vessel shall be deemed to be operated or in operational use for purposes of offering this optional limited coverage under the Insurance Policy Contract from the date and time that MARAD directs the ship manager or general agent to activate the vessel under the ship manager contract or the general agency agreement, as applicable. A vessel shall cease to be operated or in operational use for purposes of this option under a proposed Insurance Policy Contract on the date and time the ship manager or general agent completes the deactivation phase under the ship manager's contract or the general agency agreement, as applicable.

3.6.3 This insurance shall cover the Vessels for Oil Spills regardless of the negligence or other actions of the master, mariners, engineers, pilots, MARAD employees or contractors; or due to latent defects in the hull, machinery, or other parts of the Vessel.

C.4 LEGAL STATUS OF MARAD, VESSELS, SHIP MANAGERS, AND GENERAL AGENTS

4.1. MARAD is an agency of the United States Government. NDRF vessels are public vessels of the United States. See 46 U.S.C. § 57100(a). Public vessels are protected from suit by the principles of sovereign immunity.

4.2. Any lawsuit against MARAD, its general agents, ship managers, and Vessels arising out of the operation of the Vessels is governed by the principles of sovereign immunity. Such lawsuits must be brought in conformity with statutory waivers of sovereign immunity, such as the Suits in Admiralty Act, 46 U.S.C. § 30901 et seq., the Public Vessels Act, 46 U.S.C. § 31101 et seq., the Admiralty Extension Act, 46 U.S.C. § 30101, the Federal Tort Claims Act, 28 U.S.C. §§ 1291, 1346, 1402, 2401, 2402, 2411, 2412, 2671-2680, and the Clarification Act, 50 U.S.C. § 4701, among others.

4.2.1 Under the Public Vessels Act and the Suits in Admiralty Act, MARAD’s ship managers and general agents are “agents” of the United States and exclusive jurisdiction for any legal actions against such ship managers and general agents and their agents, servants, and employees is solely against the United States.

4.2.2 The Federal Tort Claims Act, the Admiralty Extension Act, and the Clarification Act, all require administrative claims be filed with MARAD before a lawsuit can be filed. See 46 C.F.R. Part 327; 46 C.F.R. Part 204.

4.2.3 The responsibility for deciding such claims is a sovereign function that will not be delegated by MARAD to the Contractor or an insurance provider. MARAD determines the validity of administrative claims.

4.3. Public vessels and the United States are not liable for their Oil Spills under the Oil Pollution Act of 1990 (OPA 90), 33 U.S.C. § 2701 et seq. Public vessels are not required to have United States Coast Guard (USCG) Certificates of Financial Responsibility Compliance. Neither the United States nor the Maritime Administration is a "responsible party" under OPA 90. Federal Entities cannot sue MARAD for any of their costs and damages, including those costs and damages arising out of Oil Spills.

4.4. All litigation against the United States acting through MARAD is required by law to be handled by the Department of Justice. Private counsel provided by an insurance provider will be acting as counsel for the United States and handling such litigation as monitored and approved by the Department of Justice. The Department of Justice will make the final decisions regarding the handling of such litigation.

4.5. Different parts of the United States may not sue each other. For example, the United States Coast Guard, which operates the Oil Pollution Insurance Fund, cannot sue MARAD for its clean-up costs or damages arising out of an oil spill from an NDRF vessel. However, MARAD has the responsibility to see that the United States Coast Guard is repaid for such costs. For other Federal Government entities having costs or damages arising from an oil spill, oil pollution insurance provider liability shall exist for such damages as if such Federal governmental entities were covered assureds with respect to such costs and damages and shall not be based on indemnification principles. Any insurance acquired must cover liabilities to such Federal Entities on a contractual basis not an indemnification basis.

C.5 CONTRACT REQUIREMENTS

5.1. The Contract must meet the following requirements:

5.1.1. The Contract shall provide coverage for losses, liabilities, risks, damages, and costs arising out of or related to Oil Spills, and shall cover MARAD, the Assureds, and the Vessels.

5.1.2. The Contract shall pay for the costs and losses arising out of the Oil Spill incurred by other Federal Entities, such as the United Coast Guard, Federal Resource Trustees, etc., without regard to MARAD’s liability to such entities as if such entities were Assureds.

5.1.3. The Contract shall include contract clauses that provide MARAD with a mechanism and opportunity, at a firm fixed price per each Vessel added or deleted from coverage under the Contractor. Such

SOW Oil Pollution Insurance firm fixed cost or savings shall be prorated for the number of days remaining in the year for which the Contract provides or does not provide coverage.

5.1.4. MARAD has the right to renew the Contract for two 24-month option periods for the new yearly charge proposed by Contractor. Contractor shall provide its proposed yearly charge by sixty (60) days prior to the expiration of the Contract, which can be modified by the Parties by negotiation.

5.1.5. The Contract created through such options, unless modified by the written agreement of the Parties, shall be in the same terms and conditions as the previous Contract, including options, save only that one option shall have been exercised.

5.1.6. Under the Contract, the Contractor shall be liable and pay for all the costs of removal and remediation arising out of and related to the Oil Spill (including, but not limited to, any legal liability under federal, state, admiralty, maritime, or common law); the legal liability of MARAD and Assureds for bodily injury and property damage (including, but not limited to, any legal liability under federal, state, admiralty, maritime or common law); the costs, charges, and expenses incurred, in defending against, investigating or adjusting any liabilities covered under the Policy with respect to MARAD and Assureds, subject to all of the terms, conditions, and limitations of such Policy. Where MARAD incurs and pays such expenses, they may be credited against the amount payable by MARAD for the Deductible.

5.1.7. The proposed Contract shall be for a fixed premium. Neither MARAD nor the Assureds shall be liable for any amount beyond the fixed premium. If a Club is involved, neither MARAD nor the Assureds shall be responsible for any club calls.

5.1.8. The proposed Contract shall hire private counsel and pay all costs for the defense of MARAD and the Assureds in the event of litigation. Private counsel hired for those purposes will be representing the United States. Such private counsel represents the United States. The conduct of litigation against MARAD is vested in the Department of Justice. The Department of Justice allows private counsel to represent the United States on the condition that the Department of Justice monitors and controls such litigation, supervising the case and reviewing and approving all pleadings and other actions relating to the handling of the case.

5.1.9. The proposed Contract shall provide that it shall be governed by Federal law. Where in accordance with Federal law, State law may be applied, the Contract shall provide for the application of a specific State law to supplement Federal law.

5.1.10. All litigation relating to the proposed Contract shall be agreed to be handled in Federal Courts.

5.1.11. The Contractor shall agree that any litigation between Contractor and MARAD shall be conducted in the United States District Courts for the Southern District of New York, the Eastern District of Virginia, or the District of Columbia.

5.1.12. Except for enumerated war risks, the proposed Contract shall provide that Vessels shall be covered worldwide with no trading restrictions.

5.1.13. The Contract proposed shall provide that the Vessels shall be always covered, regardless of whether under MARAD operational control or under the operational control of another Federal agency, or whether operating under their own power or under tow, or whether it is at sea, pier side, or at a shipyard or drydock.

5.1.14. The proposed Contract shall recognize that the Vessels are “public vessels” of the United States; that MARAD is an agency of the United States; that lawsuits arising out of Vessel operations involve issues of sovereign immunity and are subject to waivers of sovereign immunities set forth under Federal law;

and that nothing contained in the Contract between MARAD and the Contractor shall constitute a waiver of the sovereign immunity of the United States and there are no third-party beneficiaries to the Contract.

5.1.15. The proposed Contract shall recognize that waivers of sovereign immunities can involve administrative claim requirements; that such claims must be filed with and handled by MARAD; that MARAD handles such administrative claims without needing the involvement or approval of the Contractor; and that the fact that MARAD approved of a claim shall not affect the coverage of that claim under the Contract.

5.1.16. Since MARAD and the Vessels are not liable under OPA 90 for their Oil Spills, the proposed Contract shall provide that Contractor shall be liable for all MARAD and Vessel liabilities arising by law in connection with an Oil Spill, not just liabilities arising under the terms of OPA 90. Also, that the defenses and causes of action set forth in OPA 90 may not apply to an Oil Spill from a Vessel.

5.1.17. Coverage provided in the Contract shall be subject to the Deductible amount set forth in Section 2.4. However, MARAD is a federal agency of limited financial resources, and seeks a Contract under which MARAD need not pay this Deductible all at once in the event of an Oil Spill. The proposed Contract shall not have a Pay to be Paid clause or its equivalency. The Contract shall provide for the Contractor to pay for covered costs and damages before the Deductible is paid, without regard to the principles of Pay to be Paid or Indemnification. Such provision shall not relieve MARAD from paying the Deductible or repaying the Contractor for such payments where such payments would not have been legally due under the Contract.

5.1.18. The Contract proposed shall provide that where an amount is paid under said Contract, no right of subrogation exists against MARAD, other Federal Entities and Assureds.

5.1.19. The Contract shall designate an agent satisfactory to MARAD for service of process within the United States for legal actions in one of the jurisdictions set forth above. Such agent shall continue to act until such time as Contractor designates a substitute agent accepted in writing by MARAD.

5.1.20. The proposed Contract shall provide that in the event of an Oil Spill, MARAD shall provide the Contractor with the necessary notifications required under the Contract. Deficiencies in said notice shall not affect coverage under the Contract unless the notice’s deficiencies from the Contract requirements actually and materially prejudice the interests of the Contractor. Notwithstanding the foregoing, MARAD shall endeavor to strictly comply with the notice requirements of the Contract.

5.1.21. The Contract shall state that the Contractor and MARAD shall discuss and cooperate in the actions to be taken with respect to responding to and funding the Oil Spill, which will include funding the Spill Management Team (SMT) as well as MARAD’s ship managers and general agents costs specific to responding to the Oil Spill.

5.1.22. The Contract shall provide that MARAD selects its Spill Management Team.

5.1.23. MARAD shall receive credit against its Deductible obligations for all costs and damages MARAD or any other Federal agency pays in responding to the Oil Spill.

5.1.24. The Contract shall provide that MARAD shall be entitled to incur and obligate funds from clean-up costs without the approval of the Contractor. However, unless otherwise agreed by the Parties, MARAD shall document such costs and promptly provide such documentation to the Contractor within four working days of incurring such costs. Contractor shall review such documentation and provide within five working days of receipt a written response to MARAD as to whether Provider accepts that such costs can be credited against MARAD’s deductible obligation. As part of this process, MARAD can employ a third-party auditor, at MARAD’s expense, with such expense creditable against the Deductible, to provide oversight and/or maintain records with respect to such costs and damages.

5.1.25. Once MARAD has incurred costs equal to or greater than the amount of the Deductible, Contractor will pay all remaining costs or damages arising out of or related to an Oil Spill without the requirement that such costs be first paid by MARAD. No “Pay to be Paid” provision or equivalent shall apply to the payment of costs or damages after the Deductible amount has been paid.

5.1.26. The Contract proposed shall provide coverage for all costs and damages of Federal Entities arising out of or proximately caused by the Oil Spill without regard to whether MARAD would be legally liable for such costs. This requirement is written in recognition of that fact that Federal Entities, such as the USCG, cannot sue MARAD for its costs or damages arising out of or related to an Oil Spill because the Federal Government cannot sue itself. Nevertheless, MARAD has responsibility to pay such costs and damages to Federal Entities. Contractor’s obligation to pay such Federal Entities shall exist as a matter of contract without regard to the principles of indemnification or Pay to be Paid.

5.1.27. The Military Sealift Command (MSC), or the Navy On-Scene Coordinator (NOSC) for oil spill response, possesses the right to manage the Oil Spill response, if they expressly relieve MARAD of management and liability responsibility during an Oil Spill. In such cases, the Contract shall continue to remain liable to MSC and NOSC for any costs and expenses relating to an Oil Spill from the Vessels.

5.1.28. Where underwriters are involved, the Contract shall provide that it shall be the Contractor’s responsibility to ensure that all matters with respect to the Contract are conveyed to the underwriters, if any, and, where necessary, obtain underwriter approval. Underwriters shall continue to be fully liable to the extent of their commitments in the Contract unless relieved from liability in writing by MARAD.

1.0 General