Titanic law helps ship owner limit bridge collapse liability

Lawrence B. Brennan, an adjunct professor of law at Fordham University School of Law in New York and an expert on admiralty and maritime law, said he assumes the Dali’s operator will shortly begin a proceeding in the U.S. under the 1851 law, which was cited by the Titanic’s owner in a Supreme Court case more than a century ago.

The ship owner’s insurance would help the company through the legal risks. About 90% of the world’s ocean-bound cargo is insured by an arm of the International Group of Protection and Indemnity Clubs, which oversees the 12 major mutual insurance associations for ship owners.

A key to determining any insurance claims will be proving whether the accident was caused by negligence, and if so by whom, or mechanical failure, according to Bloomberg Intelligence. The ship is insured by the Britannia Protection and Indemnity Club, which is a mutual insurance association that’s owned by shipping companies. It’s one of the dozen clubs that make up the International Group of P&I Clubs.

That gives the policies related to the Dali a total insured limit of about $3 billion, a sizable sum but one that “would be very manageable for the global reinsurance market,” Bloomberg Intelligence analysts Matthew Palazola and Charles Graham said in a note.

“We are working closely with the ship manager and relevant authorities to establish the facts and to help ensure that this situation is dealt with quickly and professionally,” Britannia P&I said.

Bloomberg Intelligence also said Maersk may not be liable as the Danish company had no crew on board and the ship was operated by a charter company.

“Maritime insurance will likely cover some of the costs, yet uncertainty around the total liabilities and who will pay for them will likely weigh on Maersk’s spreads in the near term,” said Stephane Kovatchev, a credit analyst with Bloomberg Intelligence.

U.S. Constitution

While federal courts have jurisdiction over maritime disputes, any victims of the bridge strike could potentially seek damages under a clause of the U.S. Constitution that allows those injured in accidents at sea or who have property claims to pursue lawsuits in state court, said Charles A. Patrizia, who heads an American Bar Association committee on marine law.

In cases like these, businesses often sue for interruption, claiming economic losses. Those cases are rarely successful due to a law that largely limits the award of monetary damages to people who were physically injured, said Sturley, the UT Austin professor.

And what will become of the ship itself, which has been managed for Grace Ocean by Singapore-based Synergy Marine Group?

The ship’s owner may want to get it out of the U.S., but the Maryland Transportation Authority will likely seek to keep it under “arrest” while it pursues claims - and possibly until damages are resolved, said Brennan, the Fordham professor.

“The ship isn’t going anywhere for a while,” he said.

(With assistance from David Voreacos and Laura Benitez.)