Work has begun in sorting out the mess that is Baltimore Harbour, now severed from the global shipping industry by last week’s Francis Scott Key Bridge tragedy, which will take up to two months before shipping can resume using its 50-foot channel and berths. That’s the easy part, but it will be much longer before the insurance and any legal arguments are settled.
Already insurance industry figures are describing the destruction of the bridge and the wrecking of the 95,000-tonne-plus container ship Dali as the largest-ever global marine insurance case. The previous largest was the wrecking of the Costa Concordia on the Tuscan coast in Italy in 2012 with insured losses of around US$1.5 billion.
Marine insurance will generally only respond to losses “triggered by an accident or fortuity”, so if an investigation uncovers anything untoward (let’s get Sky “News” on the case!), that will complicate things even further.
Early estimates are for losses of US$1-4 billion, but they already sound too low because they do not include the cost of rebuilding the bridge. The bridge cost around US$600 million when completed in early 1977; most early estimates suggest US$1.2 billion will be the starting figure for the rebuild. A key question for insurers is whether Washington will seek to recover the cost of rebuilding the bridge from the insurers or consumers — or both.
The Biden administration has given US$60 million to Maryland as an initial grant and said it will cover the cost of a new bridge. The Maryland state government and Washington, and employers and insurers, have a more immediate cost: who will continue to pay the 8,000 or so workers employed across Baltimore’s portside operations? Of the 8,000, there are an estimated 2,400 waterside workers (longshoremen in US parlance, familiar to anyone who managed to get through Season 2 of The Wire).
There will also be the cost of recovering and repairing the Dali, and insurance payouts to the consignors of the 4,700 containers of freight on the huge vessel — so far only 13 containers have been reported damaged, but the extent of impact inside the containers is still be established. There are also death and disablement claims on behalf of those who died or were injured in the disaster.
Insurance market Lloyd’s chair Bruce Carnegie-Brown said last week:
We’re beginning to deploy resources in anticipation of this being a very substantial claim for the industry. And for the Lloyd’s market, it’s going to take some time for the complexity of the situation to unravel … It feels like a very substantial loss, potentially the largest-ever marine insured loss, but not outside parameters that we plan for. A lot of business is going to be interrupted, supply chains are going to be interrupted by ships that are both trapped inside the port and of course, ships that were trying to gain access to the port that no longer can.
This brings into question business interruption insurance, specifically a less common form of coverage that protects against port blockage or denial of access to a port. There are already a couple of judgments in US courts that could limit business interruption claims, but it will take at least one major court case to settle that issue.
Insurance and legal commentators, who are enjoying their moment in the media spotlight as a result of the disaster, are already referring to the Titanic, whose owners used an 1851 US statute, the Limitation of Liability Act, to dramatically curb their payout to the families of victims. The statute effectively allows the owners to use the value of the ship and its contents as the total value available for compensation.
Nineteenth-century vessels couldn’t take out major infrastructure — such as existed at the time. But as the Ever Given blockage of the Suez Canal demonstrated in 2021, crew error on a large vessel — or “dirty fuel” as has been blamed in the case of the Dali — can come with a billion-dollar price tag before you even get to victims and economic impacts.
The US government prints over a trillion dollars every three months to prop up its ponzi economy and to spend on military adventurism. What’s a few extra billion to sort out this mess?
These ships have two types of fuel, diesel and fuel oil which is highly polluting low grade cheap stuff, basically the waste from the refining process of all other refinery products. They use diesel exclusively in port and fuel oil at sea. So if the diesel was crook the supplier may be in strife. There is the possibility that they were using fuel oil despite the rules and this will complicate things. There was a huge cloud of black smoke coming from the ship immediately prior to the ding.
The Engineering log will be as critical to investigators as the bridge log and recording. As I gather you are aware (but for info for other readers) bunker fuel gets managed on board by heating (in cold climate) and then put through centrifugal processor. If this wasn’t functioning properly this would affect propulsion, but the big burst of exhaust smoke suggests a ‘full astern’ manoeuvre, meaning they still had main engine.
If they had switched to using bunker fuel for generators in port that would beg the question why. Cost pressures on engineers? If so, where was the pressure coming from?
If they were still on diesel the design requirements for redundancy – backup fuel delivery and filtration – should have allowed engineers to restore supply fairly quickly. There would be at least two, possibly three, main generators, each with their own fuel filters, and a box-full of spare filters in stock. Was it just unfortunate timing of a “dead ship” (loss of electricity) that led to loss of steering command and a poor officer/crew response to get steerage control through manual back-up, or were crew drills not completed?
As with most events the public/media interest moves on fairly quickly. The big questions of the shipping industry, the model for globalisation and income shifting/tax-avoidance that others followed, will be asked if the US government seeks financial redress. I doubt their will to pursue this will last once the lobbyists get to work. I suspect the politics will be getting factories back to full capacity – first, second and third priority.
Thank you for bringing industry knowledge to the discussion.
On reading this article the Exxon Valdez disaster in 1989 sprung to mind.
According to Exxon (in a court hearing but who knows??) they had spent $2b to clean up the spill. And $1billion settling other civil claims.
Exxon was originally ordered by the court to pay another $5 billion in punitive damages in 1991. As one can imagine there were quite a few appeals back and forth but mainly appeals by Exxon. 20 years later, in 2009, damages were finally settled at $507million + interest. This was only 10% of the first judgement!
In today’s dollars the cost to Exxon and its insurers was in the vicinity of $8billion. A hefty payout which seemed to be actually paid out. Exxon were let off lightly.
But not to worry, Biden and his money printing presses will make sure no supporters are out of pocket. He may even expand the bridge by including a railway line. This fixes up the gaffe where he said a week or so ago that he remembers travelling across the bridge by train!
Forget the bridge, build a tunnel instead. Assuming the ground is suitable.
The linked article about the possibility the ship owner will file to cap its liability says it is almost certain to try that, but its chance of succeeding is not that high:
In order for limitation to be granted by a judge under the law, the vessel owner would have to establish that it was not at fault for the maritime incident and that it had no “privity or knowledge” of any negligence or conditions that led to the incident.
For example, the court might not be all that sympathetic to the owners if the ship was disabled just before the collision because the owners bought cheap and nasty sub-standard fuel oil to save a few dollars on its operating costs.
Ship owners will activate the time honoured method of bankruptcy before that happens.
Given that the ship owner is registered outside the USA there is also the question of how to enforce any liability if the owner decides not to cooperate. Plenty of corporations faced with a legal liability they do not want to pay in a particular country just walk away and stop operating in that country. The USA, however, is noted for its enthusiasm on pursuing extra-territorial claims as though its laws apply to everyone everywhere.
Re your last sentence, SSR, Assange.
Apparently the shipping giant Maersk sought to gag potential whistle-blowers, blocking them from reporting safety concerns to the US Coast Guard or other authorities (they were supposed to inform the company before blowing the whistle). Has anyone seen this reported in the Oz media? (I don’t go behind Moloch’s paywalls.)
See: https://jacobin.com/2024/03/baltimore-bridge-crash-maersk-whistleblowers
That only demonstrates how the legal issues will be complicated, as they almost always are in any big disaster. The relevant laws each apply to particular legal ‘persons’ (e.g. the owner, the employer, the operator, the client, …) but working out who exactly they are in any particular incident can be really tricky, and even when it seems obvious it often emerges that what looks like one entity is, legally, a complicated forest of linked registered companies, shell companies, wholly owned subsidiaries and so on, but only one of them will be the entity with legal obligations under each specific law. Anyway, Maersk is not the ship owner:
‘Called the Dali, the 948-foot vessel that hit the bridge is managed by Synergy Marine Group, a Singapore-based company with over 660 ships under management worldwide, according to its website. The group said the ship was operated by charter vessel company Synergy Group and chartered by Danish shipping giant Maersk at the time of the incident, which sent vehicles and people tumbling into the Patapsco River.’
It’s not even clear that SMG, the company managing chartering of the vessel, is also the owner. The owner might have hired SMG. So as well as whatever liability the USA tries to fix on the owner, there will almost certainly be various liability claims made by these companies on each other.
And indeed, SMG is not the owner of the vessel:
‘The Dali is owned by Grace Ocean Private, a Singapore-based company that provides water transportation services.’
The ship wasn’t owned or crewed by Maersk but was chartered by them and was carrying Maersk cargo. See:
https://www.cnbc.com/2024/03/26/shipping-giant-maersk-confirms-it-chartered-ship-that-collided-with-baltimore-bridge.html
What is your point? The article is about the possibility the owner of the ship will get its liability capped, under an Act that applies to ship owners. What does Maersk’s conduct matter?
It goes to the safety culture of the business on whose behalf the ship was operating, which may have implications for their expectations of their subcontractors. And indeed it goes to the safety culture of the freight shipping industry as a whole – I have heard horror stories from MUA people.
Maybe, but that’s like you getting blamed if you send a package via a courier who causes an accident while transporting it. There’s a good argument for seeing Maersk as one of the victims of this incident.