Legal Fight Over Destroyed Baltimore Bridge Is Likely About to Start

The first shot in the legal fight over who will pay for the damage and loss from the collapse of the Francis Scott Key Bridge will likely occur in the next few days in a Baltimore courtroom, insurance academics said.

The Singaporean owner of the cargo ship that took down the bridge is expected to invoke a law dating back to the 19th century that limits the liability of ships’ owners, according to Lawrence Brennan, a law professor at Fordham University in New York. The law is similar to one used by the Titanic’s owners after that “unsinkable” liner hit an iceberg.

This Limitation of Liability Act law caps the liability of the cargo ship’s owners—and their multiple insurers—at the value of the goods the ship was carrying and the value of the ship itself.

A representative of the ship’s owner, Grace Ocean, didn’t immediately respond to a request for comment.

The fight, maritime lawyers say, could run as long as a decade. “It will be one of the most contentious marine insurance cases in recent decades,” said Brennan, the law professor and a retired captain in the U.S. Navy.

While the lawyers fight, most claims will likely get paid by the insurers, including money for the bridge’s reconstruction. Then they will duke it out among themselves. Other claims might take longer, including those by the families of the people killed in the crash.

Other big sources of claims include the loss of revenue for the port, for the vessels now stuck inside it, and for businesses affected by the resulting supply-chain snarlups.

The bridge part of this web of claims may be the simplest to resolve. The structure cost some $60 million to build in 1977, which is around $300 million today when adjusted for inflation.

The bridge is covered by the state of Maryland’s insurance. The policy, covering property damage and business interruption for bridges and tunnels, pays up to $350 million, documents show.

The state, with its insurers in support, will likely be among many claimants that sue the Singaporean owners of the giant cargo ship that struck the bridge, seeking to recover their losses.

That ship, the Dali, has coverage through a specialized property and indemnity insurer, the Britannia P&I club. It said that it is “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 is one of a dozen protection and indemnity, or P&I, clubs, which between them insure around 90% of the world’s oceangoing tonnage. Each club, owned by shipowners, operates independently. But the clubs pool resources to buy reinsurance, allowing them to pass on much of the risk they underwrite. That reinsurance covers up to $3.1 billion per ship, according to ratings firm AM Best.

This generous reinsurance safety net is led by French insurer Axa, according to people familiar with the matter, but involves in total around 80 insurers from across the globe. That means, despite a likely eye-popping overall claim, the payout is “unlikely to be significant for individual reinsurers since it will be spread across so many,” said Brandan Holmes, an official at ratings firm Moody’s.

Not all claims springing from the incident will be covered by the ship’s insurance agreements.

The bridge collapse will likely affect the operations of scores of importers, exporters and other companies that use the port. Many will likely find the event isn’t covered by their business-interruption insurance, according to Robert Merkin, a law professor at the University of Reading.

“Only some policies will cover this—it depends on the wording,” Merkin said. Business-interruption insurance is designed primarily to cover damage to the company’s own premises, although some policies have extensions that might cover external events, such as the bridge collapse, he added.

Heather Gillers contributed to this article.

Write to Jean Eaglesham at [email protected]