The insurance implications of Baltimore's Key Bridge accident
The investigation into why the ship collided with the bridge is ongoing.
On March 26, 2024, at approximately 1:28 a.m., a Singapore-flagged cargo ship ran into the Francis Scott Key Bridge, causing a catastrophic collapse, multiple fatalities and potentially hundreds of millions of dollars in damage claims.
The accident sent vehicles plunging into the frigid water and is sure to wreak havoc on the entire Port of Baltimore’s economic ecosystem and transportation networks that relied heavily on the bridge as a corridor for moving hazardous materials.
From a claims perspective, there are a myriad of outcomes impacted by a variety of federal, state and maritime laws.
The ship, named the Dali, departed the Port of Baltimore around 1 a.m. on a voyage chartered by shipping giant Maersk. The ship was owned by Singapore-based Grace Ocean and managed by Synergy Marine Corp. The reasons why the ship struck the bridge are still under investigation.
There is a report by the Cybersecurity and Infrastructure Security Agency stating that the ship reported losing propulsion. The National Transportation Safety Board, which is investigating the crash, said that they still need to verify if the Dali lost power prior to striking the bridge.
According to CBS News, the crew made an effort to deploy an anchor but it is unclear how much progress was made before the crash. It was estimated that the 900-foot, 95,000-ton ship was traveling at 9 mph, which was described as “very rapid.”
The pilots were alerted to a problem on board and attempted to remedy the loss of propulsion. When unsuccessful, they alerted officials in Maryland giving them time to stop traffic on the bridge, perhaps saving many lives.
In the wake of the loss, there remain many questions and significant damages, which will require extensive investigation and validation. The bottom line is that negligence will have to be determined and the true loss costs sorted out to identify responsible parties.
According to Bloomberg News, the ship’s owner could potentially minimize liability by utilizing an obscure 1851 law invoked by the owners of the Titanic to limit compensation after that vessel sank.
The Limitation of Liability Act of 1851 is a federal law that allows shipowners to limit their liability to the value of the vessel after an accident, as well as any pending freight. The law was originally enacted to encourage investment in the maritime industry by providing a degree of financial protection for ship owners.
Lawrence Brennan, an adjunct professor of law at Fordham University, has suggested that the operator of the Dali will initiate legal proceedings in the United States under the 1851 law.
As for the pending claims, there are other blankets of potential coverage for losses as well as possible mitigating factors for those who may have some responsibility.
Maersk might not bear liability as the company did not have its crew on the vessel and the ship was operated by a charter company.
According to Bloomberg Intelligence, the vessel is covered by the Britannia Protection and Indemnity Club, a mutual company owned by various shipping companies. This club is among the 12 entities constituting the International Group of P&I Clubs.
A critical factor in determining any insurance claims will be the actual cause of loss. If there was negligence, then who was at fault? Was there a mechanical failure? Was there bad fuel, which would bring in other potential liable parties? Was there a cyberattack, or worse, that could potentially result in exclusions of coverage?
There may also be potential for both federal and state jurisdictions. While federal courts have jurisdiction over maritime disputes, any victims of the bridge collapse may be able to sue in state court, according to Charles Patrizia, head of an American Bar Association committee on maritime law. Under the U.S. Constitution, those injured in accidents at sea, or who have property claims, are allowed to pursue them in state court. Of note, Maryland is a contributory state that bars recovery for anyone who is 1% or more at fault for their own damages.
Patrizia said that while federal courts have jurisdiction over maritime disputes, any victims of the bridge strike could potentially seek damages under a clause of the Constitution that allows those injured in accidents at sea or who have property claims to pursue lawsuits in state court.
There will likely be a significant number of claims for not only bodily injury and property damage but also for cargo, business interruption and spoilage if any of the containers were carrying refrigerated products.
While the owners will likely try to get the vessel out of the United States, the reality is that it will probably be under “arrest” while claims are being investigated and potentially litigated.
While it is very early in the investigation, this will be a fascinating case to follow from both a legal and claims perspective.
Chris Tidball is an executive claims consultant with SecondLook. He can be reached at ctidball@2ndlook.net.
Opinions expressed here are the author’s own.
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