1 April 2024 12:02 am Views - 85
Lloyd’s of London expects that the payout for the Baltimore bridge strike will be exceptionally expensive and it may even be the “largest ever marine-insured loss” - bigger perhaps than the Costa Concordia.
When the boxship Dali hit the Francis Scott Key Bridge on Tuesday morning, it killed six people, collapsed a major highway thoroughfare and blocked off access to Baltimore’s harbour.
The physical damage was massive and costly but it will be the secondary impacts to business that really start to run up the insurance bill.
“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,” Bruce Carnegie-Brown, chair of insurance giant Lloyd’s of London, told CNBC.
“It feels like a very substantial loss, potentially the largest-ever marine insured loss but not outside parameters that we plan for.”
Lloyd’s of London CEO John Neal confirmed Thursday that it is “certainly going to be one of the largest marine losses in history”.
To be the most expensive casualty ever, the Dali would have to exceed the claims for the Costa Concordia, which amounted to about US $ 2 billion by 2014 (US $ 2.6 billion in today’s dollars, accounting for recent inflation). Morningstar DBRS forecasts the total exposure for insurers from the Dali casualty at US $ 2-4 billion.
The exact price would be driven by how long the closure of the seaport lasts. The longer the closure, the greater the losses from business interruption. Baltimore normally handles about US $ 80 billion in trade a year and all but one of its terminals are closed off until the U.S. Army Corps of Engineers can clear the channel. As of yet, there is no formal timeline for that process.
As the accident occurred in the U.S., the Dali’s owner has the option of exercising the Limitation of Liability Act of 1851, which would limit their maximum exposure to no more than the post-accident value of the vessel. Though a limitation action can be contested, the act heavily favours the shipowner and is frequently invoked in American maritime litigation. It is all but certain to play a central role in the lawsuits to come, according to admiralty law experts.
“The chances of [the owner] filing a limitation action are somewhere north of 99.99 percent,” Prof. Michael Sturley of UT Austin School of Law told Business Insider.
As a rough guide to the act’s potential influence on the Baltimore Bridge case, the post-incident value of a used container ship like Dali would set the liability cap at under US $ 100 million - a small fraction of the expected insurance claims.
(The Maritime Executive)