Titanic bill from Baltimore disaster might be curbed by old law from the days of sail

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.