Could fracking in North Dakota's Bakken shale formation have a direct impact on New York State? Yes, but the impact isn't limited to prices at the gas pump or home energy heating bills. Instead, the fracking operations are leading to a surge in freight trains hauling crude oil along the state's rail lines to a terminal at the port of Albany, New York. Shale formations such as the Bakken produce crude oil along with natural gas during fracking operations, and some claim that Bakken crude may "more dangerous to ship by rail than crude from other areas."
If you're familiar with the harsh reality of property owner liability under the New York State Navigation Law's Oil Spill Act, this headline shouldn't raise any eyebrows. However, the holding of State of New York v. C.J. Burth Services, Inc., 79 A.D.3d 1298, 915 N.Y.S.2d 174 (N.Y. App. 3rd Dep't 2010), once again confirms the Draconian nature of strict liability for property owners in Spill Act cases.
Under New York Law, property damage is deemed to occur within the period of an occurrence-based policy, if injury-in-fact takes place during the policy period. See Continental Casualty Co. v. Rapid-American Corp., 177 A.D.2d 61 (App. Div., 1992). An insurer may only refuse to defend an action, however, where a comparison of the policy with the underlying complaint shows on its face that there is no potential for coverage. See Ruder & Finn, Inc. v. Seaboard Sur. Co., 52 N.Y.2d 663 (1981).
5. Any claim by any injured person in for the costs of cleanup and removal and direct and indirect damages based on the strict liability imposed by this section may be brought directly against the person who has discharged the petroleum, provided, however, that damages recoverable by any injured person in such a direct claim based on the strict liability imposed by this section shall be limited to the damages authorized by this section.
1. Any person who has discharged petroleum shall be strictly liable, without regard to fault, for all cleanup and removal costs and all direct and indirect damages, no matter by whom sustained, as defined in this section. In addition to cleanup and removal costs and damages, any such person who is notified of such release and who did not undertake relocation of persons residing in the area of the discharge in accordance with paragraph (c) of subdivision seven of section one hundred seventy-six of this article, shall be liable to the fund for an amount equal to two times the actual and necessary expense incurred by the fund for such relocation pursuant to section one hundred seventy-seven-a of this article. 2. The fund shall be strictly liable, without regard to fault, for all cleanup and removal costs and all direct and indirect damages, no matter by whom sustained, including, but not limited to:
3. (a) The owner or operator of a major facility or vessel which has discharged petroleum shall be strictly liable, without regard to fault, subject to the defenses enumerated in subdivision four of this section, for all cleanup and removal costs and all direct and indirect damages paid by the fund. However, the cleanup and removal costs and direct and indirect damages which may be recovered by the fund with respect to each incident shall not exceed: (i) for a tank vessel, the greater of:
(1) one thousand two hundred dollars per gross ton; or
(2) (A) in the case of a vessel greater than three thousand gross tons, ten million dollars; or (B) in the case of a vessel or three thousand gross tons or less, two million dollars;
4. (a) The only defenses that may be raised by a person responsible for a discharge of petroleum are: an act or omission caused solely by (i) war, sabotage, or governmental negligence or (ii) an act or omission of a third party other than an employee or agent of the person responsible, or a third party whose act or omission occurs in connection with a contractual relationship with the person responsible, if the person responsible establishes by a preponderance of the evidence that the person responsible (a) exercised due care with respect to the petroleum concerned, taking into consideration the characteristics of petroleum and in light of all relevant facts and circumstances; and (b) took precautions against the acts or omissions of any such third party and the consequences of those acts or omissions. These defenses shall not apply to a person responsible who refuses or fails to (a) report the discharge, or (b) provide all reasonable cooperation and assistance in cleanup and removal activities undertaken on behalf of the fund by the department. In any case where a person responsible for a discharge establishes by a preponderance of the evidence that a discharge and the resulting cleanup and removal costs were caused solely by an act or omission of one or more third parties as described above, the third party or parties shall be treated as the person or persons responsible for the purposes of determining liability under this article.(b) Nothing set forth in this subdivision shall be construed to hold a lender liable to the state as a person responsible for the discharge of petroleum at a site in the event: (i) such lender, without participating in the management of such site, holds indicia of ownership primarily to protect the lender's security interest in the site, or (ii) such lender did not participate in the management of such site prior to a foreclosure, and such lender:
4. Cleanup and removal of petroleum and actions to minimize damage from discharges shall be, to the greatest extent possible, in accordance with the National Contingency Plan for removal of oil and hazardous substances established pursuant to section 311 (d) of the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.), as amended by the Federal Oil Pollution Act of 1990 (33 U.S.C. 2701 et seq.), or revised under section 105 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. 9605). 5. The department in consultation with the attorney general shall develop a standard contract form to be used when contracting services for the cleanup and removal of a discharge.
7. (a) Nothing in this section is intended to preclude cleanup and removal by any person threatened by such discharges, who, as soon as is reasonably possible, coordinates and obtains approval for such actions with ongoing state or federal operations and appropriate state and federal authorities. Notwithstanding any other provision of law to the contrary, the liability of any contractor for such person, where such person obtains approval from appropriate state and federal authorities for such cleanup and removal, and the liability of any person providing services related to the cleanup or removal of a discharge, under contract with the department, for any injury to a person or property caused by or related to such services shall be limited to acts or omissions of the person during the course of performing such services which are shown to have been the result of negligence, gross negligence or reckless, wanton or intentional misconduct. Notwithstanding any other provisions of law, when (i) a verdict or decision in an action or claim for injury to a person or property caused by or related to such services is determined in favor of a claimant in an action involving a person performing such services and any other person or persons jointly liable, and (ii) the liability of the person performing such services is found to be fifty percent or less of the total liability assigned to all persons liable, and (iii) the liability of the person performing such services is not based on a finding of reckless disregard for the safety of others, or intentional misconduct, then the liability of the person performing such services to the claimant for loss relating to injury to property and for non-economic loss relating to injury to a person shall not exceed the equitable share of the person performing such services determined in accordance with the relative culpability of each person causing or contributing to the total liability for such losses; provided, however, that the culpable conduct of any person not a party to the action shall not be considered in determining any equitable share herein if the claimant proves that with due diligence the claimant was unable to obtain jurisdiction over such person in said action. As used in this section, the term "non-economic loss" includes, but is not limited to, pain and suffering, mental anguish, loss of consortium or other damages for non-economic loss. However, nothing in this subdivision shall be deemed to alter, modify or abrogate the liability of any person performing such services for breach of any express warranty, limited or otherwise, or an express or implied warranty under the uniform commercial code, or to an employee of such person pursuant to the workers' compensation law, or to relieve from any liability any person who is responsible for a discharge in violation of section one hundred seventy-four of this article.(b) No action taken by any person to contain or remove a discharge shall be construed as an admission of liability for said discharge. No person who gratuitously renders assistance in containing or removing a discharge shall be liable for any civil damages to third parties resulting solely from acts or omissions of such person in rendering such assistance except for acts or omissions of gross negligence or willful misconduct. In the course of cleanup and removal, no person shall discharge any detergent into the waters of this state without prior authorization of the commissioner of environmental conservation.
New York's Oil Spill Act, Article 12 of the New York Navigation Law, provides a natural and attractive starting point for people seeking to recover cleanup costs for petroleum spills. The Act's imposition of strict liability holds out the promise of avoiding litigation over events and states of mind for which little or contradictory evidence exists, or that may be vulnerable to highly subjective interpretation long after the fact. Under the Oil Spill Act, if someone's actions caused or contributed to a discharge of petroleum, he is liable for its cleanup, without regard to his state of mind or relationship to others at the time. However, the Oil Spill Act's powerful mechanism of strict liability is not available to everyone who may have been forced to pay for a cleanup of an oil spill. For instance, property owners who are unaware that a fuel oil tank on their property is leaking oil are nevertheless at fault for the spill under the Oil Spill Act, and therefore may not seek full recovery of their cleanup costs from others who may bear more responsibility for the leaky tank. For such a property owner, the only available recourse under the Oil Spill Act may be a contribution action, under which the property owner could only recover part of the total cleanup costs.