Many of you might have come across the ship accident in the USA in the news. It was reported that a ship with Indian crew carrying cargo containers has struck a major bridge in Baltimore, USA resulting in an almost complete destruction of the bridge.
Major news outlets mentioned the cause of the accident as “lost propulsion”. Propulsion refers to the power transmitted from the engine so that the ship can move in the desired direction. “Lost propulsion” refers to the partial or complete inability of a boat’s engine to generate required power to steer the boat effectively. Without propulsion you would be unable to steer the boat leaving the boat adrift and at the mercy of the tidal current.
Now coming to the boat collision, the boat lost the propulsion soon after it entered the waters and rammed into the Baltimore bridge causing significant damage to the bridge and could potentially face millions of dollars in damage claims.
The crew, after understanding the lost propulsion, immediately alerted the local authorities to take precautionary measures. The local authorities were able to close the bridge and thereby reduce the property damage as well as loss of lives.
The ship company now faces many claims to be settled under multiple insurance plans such as product damage, loss of life, and loss of business due to the accident etc.
What’s on this page?
Marine Hull & Cargo Insurance:-
Marine Hull and Cargo insurance is the answer to almost all the claims arising out of the accident of the ship with the bridge. Marine Hull and Cargo insurance covers the damage to the ship, goods on board as well as third party property damage and bodily Injury.
Third Party Property Damage:
The main claim that could arise from this accident is the owner of the bridge (mostly local government) claiming for compensation from the ship company. Since the statutory (stationary) objects are not typically at fault as they are not moving, it would be the fault of the moving objects that hit them (ship in this case).
Damage claims are likely to be on the head of the ship owner and not on the agency that operates it. So the marine hull policy would settle the damages caused to the third party (bridge) in this case which could run up to multiple millions of dollars.
Bodily Injury Claims:
The other form of claims that could arise is the bodily injury claims. As per the news reports 6 workers are missing from the ship and are presumed to be dead during the collision. The families of these 6 workers could sue the ship owner for the bodily injury/ death of the workers on board.
Marine liability insurance also known as Protection and Indemnity insurance covers liabilities arising from third parties during their operations and includes bodily injury, illnesses, or even loss of life caused by the vessel operation. This cover may also be extended to cover the medical expenses and other related expenses arising out of the accidents.
Own Damage:
The other important and obvious claim is own damage claim that would arise due to the damage of the ship. The extent of damage to the ship is yet to be ascertained by the authorities for claim settlement. Nevertheless, the damage to the ship would be covered under the Marine Hull policy that covers the loss or damage to the ship due to collision, overturning, derailment of land conveyance, fire, lightning, explosion, stranding, grounding or sinking of the vessel etc.
Freight Cover:
As mentioned in news, the ship is carrying goods in containers and there could be damage to the goods as well. Goods could be of perishable nature which need to be delivered on time, but due to the accident there would likely be a delay in transporting the goods to their final destination which may result in damage to the goods on board.
The damages to the cargo would be covered under the Marine cargo insurance. Marine cargo covers the loss or damage to the cargo on board due to collision, overturning, derailment of land conveyance, fire, lightning, explosion, stranding, grounding or sinking of the vessel, contact of the ship with a structure, washing overboard , jettison and natural calamities.
Loss of Business:
The other liability that may arise from this incident is the loss of business of other ship owners. Since the ship was stranded in the waters, other ships may have to divert their route and this process may incur additional costs. In addition to this some of the ships may avoid the ports near Baltimore due to the delay and this would result in loss of income for the port authorities.
A similar incident has occured in Suez Canal when a ship named “Evergreen ” was stranded diagonally in the canal disrupting the maritime trade to a great extent. Salvage and general average could be invoked by the ship owner in this situation and settle the claim accordingly.
But……
The liability of the ship owner could be reduced in this case involving the famous “Titanic Ship Tragedy”. An 1851 law could help the ship company save thousands of millions of dollars as claim payout by capping the amount of liability. As per this law, the upper limit of liability of the shipowner could be maximum of the maximum worth of the vessel plus any profits or earnings it could have collected from carrying the freight on board.
While the case would ultimately go to the court, it would be the decision of the court to decide the liability of the shipping company in this case.
FAQs
What is the general average sacrifice in Marine insurance?
General average sacrifice is a common practice in marine insurance in which the losses are shared among all the cargo owners in such a way that a part of the cargo would be sacrificed for the greater benefit of all others.
What is Jettison in marine insurance?
Jettison is the process of throwing overboard cargo to save the vessel and cargo from damage. Jettison would also involve general average sacrifice as the cargo on the top would first be thrown to save the balance of the ship and the losses of that cargo owner would be shared among all other cargo owners.
What is the fitness of the vessel?
The fitness of the vessel refers to the ability of the ship to sail in the designated waters. A ship is designated to sail in brown waters and blue waters as per its condition and built. Brown waters refer to inland water channels such as rivers whereas blue waters refer to oceans, seas etc.
What is seaworthiness?
The seaworthiness refers to the fitness or the ability of the vessel to face the perils encountered in the sea. But the difference is that seaworthiness not only includes the fitness of the vessel but also the competency of the crew of the vessel.
Who can take marine insurance?
Any person owning a ship can take marine insurance. People who transport cargo could also take marine insurance. In general manufacturers, traders, contractors of projects, importers, exporters, logistic operators and bankers could take marine insurance.
