Insurer battles government over $120m cleanup bill

Insurer battles government over $120m cleanup bill | Insurance Business

Insurer battles government over $120m cleanup bill
by Michael Mata

The Australian government is suing Shenzhen Energy Transport Co., the company that owns Shen Neng One, for $120m. Shen Neng One is the Chinese coal carrier that was grounded on the Great Barrier Reef for nine days in 2010 before it was floated.

On September 6, the Federal Court in Brisbane heard that up to one-and-a-half tonnes of toxic paint may have scraped off Shen Neng One and contaminated Douglas Shoal. The 225-metre long vessel carved a 2.2 kilometre-long, 400,000-square-metre scar in and around the shoal, about 120 kilometres east of Rockhampton.

Shen Neng One released traces of tributyltin (TBT), a highly toxic anti-fouling agent, into the environment when paint coating the vessel’s hull came off. TBT is a biocide that’s been banned in most parts of the world since the 1980s, though older vessels are allowed to continue operating with a top-coat to prevent the toxins from leaching into the water.

The Australian government maintains that the toxins proved lethal to the marine life on the shoal. Martin Scott, the lawyer representing the Australian government, told the court that between 750 kilograms and 1.5 tonnes of paint was estimated to have scraped off the vessel. Martin further stated that the particles needed to be removed to ensure recovery, which would be difficult and expensive.

However, representatives from Shenzhen Energy Transport Co. said that the reef would heal itself and could cope with the leakage of paint particles and oil. The representatives also called into question the testing methods which led to the detection of high levels of TBT in Douglas Shoal.

The same representatives further argued that liability lay not with the defendant, but with the vessel’s independently-employed chief officer Xuegang Wang. Wang and the ship’s master Jichang Wang both received 18-month jail sentences for gross negligence. Both were found to have handled the vessel negligently, as it had strayed more than 10 kilometres from established shipping lanes.

The insurance firm London P&I Club would be footing the $120m cleanup bill. However, the insurance firm has contested the cost, calling it “unrealistic”.