The collapse of Baltimore’s Francis Scott Key Bridge could match or exceed the largest-ever financial loss in the maritime industry, with expected insurance claims of $1 billion or more.
John A. Miklus, president of the American Institute of Marine Underwriters, said that the potential cost to rebuild the bridge is the main concern, making it one of the biggest and most complex marine claims he can recall.
Experts believe that the cost of rebuilding the nearly 50-year-old steel arch bridge alone could reach hundreds of millions of dollars, making the bridge collapse potentially one of the largest financial losses to date.
Over a decade ago, the Italian cruise ship Costa Concordia incident resulted in the largest financial loss to date, with the International Group of P&I Clubs paying $1.5 billion in claims after 33 people died.
Britannia, a member of the P&I Clubs that insures Dali owner Grace Ocean Private Ltd., is part of a reinsurance pool that spreads losses throughout the global insurance market, backed by well-capitalized companies with a maximum claims capability of $3.1 billion.
Miklus emphasized that the big numbers will fall on the extensive reinsurance pool, covering third-party liabilities, debris removal, loss of life, and bridge rebuilding costs.
On Monday, Grace Ocean took the expected first step in what likely will lead to years of litigation to sort out who pays for which damages and how much. The expected first step in what likely will lead to years of litigation to sort out who pays for which damages and how much was taken by Grace Ocean on Monday.
The owners of the cargo ship filed a claim in Baltimore’s U.S. District Court to clear themselves from liability or limit damages to the value of the ship plus the revenue it stood to make from its cargo.
For over a century, vessel owners doing business in the U.S. have routinely filed such petitions when faced with catastrophes that cause death, injuries, and damage, as allowed by the Limitation of Liability Act of 1851.
Experts noted that the law prevents high damage payouts from crippling maritime companies and, consequently, hampers the nation’s ability to maintain a commercial fleet.
Shortly after leaving the Port of Baltimore for a monthlong journey to Sri Lanka, the Dali experienced a reported power failure near Key Bridge and crashed into one of its main supporting piers around 1:30 a.m. on March 26. The bridge collapsed immediately, blocking the only entrance into the port with twisted debris.
Authorities quickly rescued two of the men but have only found the bodies of two others, and four members of the road crew are presumed dead.
The wreckage and efforts to retrieve the bodies have closed off ship entry and exit from the Port of Baltimore.
In a ruling on Monday, U.S. District Judge James K. Bredar stated that anyone with a claim against the companies that own and manage the Dali must submit it to the clerk’s office at the federal courthouse in Baltimore and notify the companies’ lawyers by Sept. 24. Britannia will set up a $43.7 million security fund with the court.
One of the most famous cases where a ship owner was cleared of responsibility concluded in 1916, four years after the Titanic sank on its first voyage across the Atlantic. Despite numerous claims seeking over $16 million in damages, an out-of-court agreement resulted in a settlement of $664,000.
“In return for their payments, claimants agreed to drop their claims in the United States and England and admit that the [owner] White Star Line “had no ‘privity or knowledge’ of any negligence on the Titanic,” as stated in a Library of Congress blog.
That “privity or knowledge” standard is still used by the courts to establish liability. In the case of the Dali, the judge will need to determine whether ship owners were at fault.
Although requests to limit liability are regularly submitted in cases of maritime accidents, so ship owners can consolidate claims before a judge, only 32% of requests succeed in limiting a ship owner’s liability, according to research conducted several years ago by Elena Mihos, a master’s student at Tulane University Law School, overseen by Martin Davies, director of Tulane Maritime Law Center.
“It’s relatively easy for claimants to find a way of proving unlimited liability,” Davies said in an interview. “What the liability claimants will have to demonstrate is some fault on the part of the ship owner itself.
“I do think it’s fairly unlikely that the ship owner will be able to limit its liability in the present case,” he said. “In your typical limitation suit, what happens is the claimant will make some claim that there’s some defect in the ship itself. If they can show that, then the ship owner is going to be responsible for the condition of the vessel, and then it will not be able to limit its liability.”
The vessel could be responsible for “third party” liabilities, such as the death of the bridge workers, removal of debris, and the cost to rebuild the bridge. Other liabilities could be related to loss of business or work due to the shutdown of the port, Miklus said.
“There could be other aspects of liability, and they’re all bound to make claims for lost business,” Miklus said. “Whether they’re successful or not, I don’t know, but I’m sure they’ll try.”
He mentioned that different insurance policies cover the cargo and the ship itself, which had a value of $90 million before the accident, according to Grace Ocean’s report. In some situations, cargo insurance helps with salvage expenses.
In a message on Monday, Jennifer Donelan, a spokesperson for the Office of Maryland Attorney General Anthony Brown, stated that the office is collaborating with Gov. Wes Moore’s administration and state agencies to safeguard the State's interests from the damages caused by the collapse of the Francis Scott Key Bridge.
“The Attorney General will represent the State in any legal action, including efforts to hold accountable the parties responsible for this tragedy,” Donelan declared.
However, only claims related to personal injury, death, and physical damage to property, such as the loss of the bridge, are likely to proceed, Davies remarked.
“That's all that maritime law permits,” he explained, due to restrictions established by a U.S. Supreme Court decision known as Robins Dry Dock.
According to that precedent, compensation can only be obtained for personal injury, loss of life, or physical damage to property.
“Many individuals will suffer financial losses as a result of this, but none of those claims can be successful under maritime law,” Davies stated. “I anticipate numerous people will submit claims, but the Robins Dry Dock rule clearly favors the ship in this instance.”
It is anticipated that legal proceedings will be drawn out as the costs of bridge reconstruction and other initiatives are determined.
John Woods, a maritime lawyer and partner at Clyde & Co. in New York, which specializes in international trade, transportation, and insurance, believes the ship owner might be able to limit liability under the law based on the information disclosed to date.
“There are no facts yet indicating that the ship owner was aware or should have been aware of the condition that caused the blackout on the ship and led to the loss of steering and propulsion,” he mentioned. However, “all of that is yet to be seen and will emerge during the investigation.”
“I'd say that this marks the beginning of what will be a lengthy legal dispute over who is responsible for this accident,” he said.
Baltimore Sun reporter Alex Mann contributed to this article.
