Trending
Assessing Insurance Ramifications: Baltimore's Key Bridge Accident
On March 26, 2024, at approximately 1:28 a.m., a catastrophic event unfolded as a Singapore-flagged cargo ship, the Dali, collided with the Francis Scott Key Bridge in Baltimore, Maryland. This collision resulted in a devastating collapse of the bridge, leading to multiple fatalities and potentially causing hundreds of millions of dollars in damages. The aftermath of this accident is expected to have far-reaching impacts on the economic ecosystem and transportation networks of the Port of Baltimore, particularly concerning the movement of hazardous materials.
Credit: US News
The Dali departed from the Port of Baltimore around 1 a.m. on a voyage chartered by the shipping giant Maersk. Owned by Singapore-based Grace Ocean and managed by Synergy Marine Corp, the ship's collision with the bridge remains under investigation. Reports from the Cybersecurity and Infrastructure Security Agency suggest that the ship experienced a loss of propulsion, while the National Transportation Safety Board is working to confirm whether the Dali indeed lost power before striking the bridge.
Efforts were made by the crew to deploy an anchor, though it remains unclear how much progress was made before the collision. The ship, weighing 95,000 tons and measuring 900 feet in length, was reportedly traveling at 9 mph, described as a very rapid speed for such a vessel. Pilots aboard the ship attempted to address the propulsion issue but were unsuccessful. However, their alert to Maryland officials enabled the timely stopping of traffic on the bridge, potentially averting further loss of life.
Credit: Reuters
In the aftermath of the collapse, numerous questions linger, accompanied by significant damages necessitating extensive investigation and validation. Determining negligence and identifying responsible parties will be crucial in assessing the true costs of the loss. Bloomberg News reports that the ship's owner may seek to minimize liability by invoking an obscure 1851 law used by the owners of the Titanic to limit compensation after its sinking.
The Limitation of Liability Act of 1851 allows shipowners to limit liability to the value of the vessel and any pending freight. Lawrence Brennan, an adjunct professor of law at Fordham University, suggests that the operator of the Dali may pursue legal proceedings under this law. However, other potential layers of coverage and mitigating factors exist for those implicated in the incident.
Maersk, for instance, may not bear liability as its crew was not aboard the vessel, which was operated by a charter company. Additionally, the vessel is covered by the Britannia Protection and Indemnity Club, a mutual company owned by various shipping entities, providing another layer of potential insurance coverage.
The cause of the accident will be pivotal in determining liability and potential insurance claims. Factors such as negligence, mechanical failure, fuel quality, or even a cyberattack could influence the outcome. Moreover, the jurisdiction for legal proceedings may involve both federal
and state courts, withpotential claims for bodily injury, property damage, cargo loss, business interruption, and spoilage of refrigerated products.
As investigations proceed, the vessel may remain under "arrest" in the United States, pending the resolution of claims and potential litigation. The case promises to be intriguing from both legal and claims perspectives as it unfolds in the coming months.
Reasessing the insurance implications:
-
-
Insured Losses: The collapse is expected to result in insured losses of up to $4 billion. This substantial figure includes both the damage to the bridge itself and the disruption caused to the port operations .
-
Marine Insurance Rates: The massive loss could add upward pricing pressure to marine insurance rates globally. Insurers and reinsurers will likely reassess their risk exposure and adjust premiums accordingly .
-
Coverage Disputes: Legal experts anticipate that coverage disputes will arise in waves. Initial fights may stem from supply chain disruptions and contingent business losses. These disputes will likely involve various parties, including insurers, reinsurers, and affected businesses .
-
-
Lloyd’s of London Warning:
-
Lloyd’s of London, a renowned insurance market, has already warned that the Baltimore bridge collapse will trigger one of the largest insurance losses in history. Once all claims are settled, the financial impact is likely to be multibillion dollars.
-
-
Economic Impact and Quality Assessment:
-
Beyond insurance, the disaster will cause significant economic damage. It also highlights the importance of assessing the quality and resilience of critical infrastructure in the United States .
-
In summary, the Francis Scott Key Bridge Collapse is not only a tragic event but also a complex insurance challenge. Insurers, businesses, and legal entities will grapple with the aftermath, seeking resolution while navigating the intricacies of coverage and liability.
Credit: Andrew Doyle
Trending
Who’s Paying for the Francis Scott Key Bridge Disaster?
The economic fallout stemming from the recent tragedy in Baltimore, where a cargo ship lost power and collided with a vital bridge, has continued to escalate, casting a shadow over both land and maritime transportation networks. The collapse of the Francis Scott Key Bridge, an integral segment of the I-695 roadway system, has brought significant disruptions, impeding the flow of goods to and from the bustling Port of Baltimore, a linchpin in the nation's trade landscape ranked as the 17th busiest port in the country.
The repercussions of this catastrophic event loom large, with early projections indicating that the financial toll could rank among the most staggering in maritime history. Preliminary assessments suggest that insurance claims for the monumental task of rebuilding the bridge may soar as high as $1.2 billion, a figure that excludes potential compensation for the families of the six lives lost and the myriad businesses grappling with the port's indefinite closure. Grace Ocean, the Singaporean firm behind the vessel responsible for the bridge's destruction, Dali, and its insurer face the daunting prospect of liability claims that could eclipse $4 billion, as estimated by ratings agency Morningstar DBRS.
Amid the scramble to assign accountability, the burden of these mounting costs is likely to rest heavily on the shoulders of Britannia P&I Club, the insurer for Grace Ocean. While the Danish shipping titan Maersk, which chartered the ill-fated vessel, may find itself absolved of financial responsibility due to the absence of its personnel aboard Dali, initial expenses for bridge repairs may be absorbed by Maryland's $350 million bridge insurance policy. Nonetheless, the ultimate fiscal burden is expected to fall on Britannia P&I Club, with reassurance from President Biden that federal assistance will be extended to facilitate the swift reconstruction of the bridge, mitigating further delays in the region's recovery.
Mutual insurance associations such as Britannia P&I Club play a crucial role in enabling shipowners to collectively manage risks by pooling resources to secure coverage from larger insurers for losses extending beyond the vessel itself. Britannia P&I Club, for instance, offers coverage of up to $3.1 billion per ship, with the risk distributed among approximately 80 reinsurance companies, thereby safeguarding against catastrophic losses stemming from incidents like the Dali disaster.
As the financial stakes continue to mount, a protracted legal battle looms on the horizon, pitting Grace Ocean, Britannia P&I Club, and an array of plaintiffs against each other. These include not only the families of the victims and the state of Maryland but also other entities affected by the calamity, all vying for just compensation. In a bid to mitigate its liabilities, Grace Ocean may invoke the Limitation of Liability Act, a venerable maritime statute aimed at curtailing financial risks inherent in maritime commerce, provided the company can substantiate its claim of ignorance regarding any technical deficiencies leading to the collision.
However, the road to restitution may prove arduous for some. Businesses grappling with losses incurred from the port's closure may find themselves facing uphill battles in substantiating their claims, as compensation efforts typically prioritize individuals who have suffered physical harm in such disasters, as noted by UT Austin maritime law professor Michael Sturley.
Looking ahead, the legal saga is poised to unfold over a protracted timeline, with the commencement of legal proceedings expected in Baltimore imminently. Nevertheless, the resolution of these intricate legal entanglements is likely to extend over several years, underscoring the complexity and magnitude of the challenges ahead.
From: ProgramBusiness
Credit: US SkyNews
Credit: Fast Company