Baltimore bridge collapse could reshape maritime insurance landscape
The Baltimore bridge collapse has highlighted the complexity of insurance coverage for maritime operations, with a variety of marine insurance coverages potentially triggered by the incident, according to Lockton. The broker noted that months after the bridge collapse, total losses from the event have not yet been quantified.
The collision between the Dali container ship and the Francis Scott Key Bridge resulted in extensive property damage, loss of life and a significant disruption of shipping and vehicular traffic in and around the Port of Baltimore. Lockton said that depending on how litigation and other events play out in the coming months and years, total losses could be as much as $4bn, or as little as $44m.
The biggest challenge stemming from the bridge collapse is the potential for third-party liability claims, said Lockton, which would be covered by the Dali’s P&I club, Britannia P&I. The estimated value of these damages is currently believed to be between $2bn and $4bn. If this proves to be accurate, it would be the largest P&I claim in history.
However, Lockton noted that two unknowns will determine whether this comes to pass. “First is whether parties that have sustained purely economic losses (and their subrogated insurers) will be able to successfully recover those claims. Under the US Supreme Court’s 1923 opinion in Robins Dry Dock v Flint and subsequent case law, a plaintiff must demonstrate a proprietary interested in damaged property in order to recover damages from economic loss. Many of the business interruption claims arising from the bridge collapse will likely not meet this standard,” said Lockton.
Second is whether the Dali’s owner can successfully cap its liability. On 1 April 2024, the Dali’s owner and her manager filed a petition in federal court in Maryland seeking to do this by availing itself of the protections afforded under the Limitation of Liability Act of 1851, also known as the Limitation Act.
Lockton explained that the Dali’s owner is seeking a cap of approximately $44m; if it succeeds, claimants to whom the shipowner is found liable would be paid their proportional share of that amount. The broker noted that to succeed in its petition, the Dali’s owner will need to prove that it lacked “privity or knowledge” of the negligence or fault that caused the incident. “For centuries, courts have struggled to apply the privity or knowledge standard, often referring to it as elusive and difficult,” said Lockton.
“At present, all reports indicate that the immediate cause of the incident was a power failure aboard the Dali moments before its collision with the bridge. If that power failure were the only causal link in the chain, the limitation petition would very likely be successful,” said Lockton. “The National Transportation Safety Board, however, noted in its preliminary report that the Dali had experienced power failures prior to the bridge collapse incident.”
Lockton added: “The outcome of the Dali owner’s limitation petition and subsequent litigation will significantly impact all parties involved, including insurers, reinsurers, and claimants. More broadly, it could reshape the landscape of maritime insurance and US admiralty law. From a legal and regulatory standpoint, a notable concern is that Congress may seek to repeal the Limitation Act or amend it to expand liability for shipowners.”
Lockton conclude: “P&I clubs may well use this uncertainty as a reason to be more cautious going into 2025 renewals. P&I club reinsurance programme limits – currently at $3.1bn – were previously thought to be more than adequate to meet the needs of the shipping community, but the potential exposure in the bridge collapse proves otherwise. Costs for the reinsurance purchased by the P&I clubs are likely to increase at the 2025 renewal, with that cost being passed along to shipowners in the P&I club system.”