Baltimore Bridge Collapse: The insurance conundrum that’s going to run into Billions!

The recent collapse of the Baltimore Bridge has been a tragic and unfortunate event which resulted in the death of six construction workers. The power outage and mechanical failure led to the Dali hitting a pillar of Baltimore's Francis Scott Key Bridge. This accident created a ripple effect locally as well as globally. The incident also serves as a stark reminder of the importance of having comprehensive insurance coverage.

The initial loss from this incident is estimated to be between three to four billion dollars, a staggering amount that highlights the potential financial impact of such unforeseen events. However, it is important to note that these are just initial estimates, and the losses may vary as claims are processed.

The Baltimore Bridge collapse serves as a wake-up call for individuals and businesses to understand the value of insurance coverage. This single incident has triggered claims from multiple parties, including the carrier, cargo owners, cargo carriers, bridge owner, car owners, and other individuals affected by the collapse. It demonstrates the potential losses that can occur and emphasises the need for comprehensive insurance coverage.

Marine Insurance

There is the damage caused to the cargo ship itself, which would typically be covered by marine hull insurance. If the ship is deemed a total loss, the insurance company and the reinsurer will be responsible for compensating the client for the entire value of the ship. Furthermore, the cargo carried by the ship may have also suffered damage, leading to claims from both the cargo owners and the carrier. These claims fall under marine cargo insurance. Moreover, there will be a considerable liability for the cargo ship owner. They are expected to provide adequate security for the goods they carry, and any failure in this regard may result in claims for losses.

Property Insurance

The collapse of the bridge itself represents a significant loss, with the cost of rebuilding estimated to be billions of dollars. The responsibility for covering this expense will likely fall on the insurance company or the state authority that insured the bridge. Additionally, the cargo ship company may face lawsuits for third-party property damage caused by the collapse. Any other property that suffered physical damage will also be claimed under property insurance policies.

Motor Insurance

The numerous cars on the bridge at the time of the collapse will also result in claims for their losses. The insurance companies covering these vehicles will need to compensate their owners. In the case of partial losses, machinery breakdown claims will also arise.

Liability Insurance

The accident may trigger third-party liability for property damage or for any bodily injury that is caused to a third party. The incident may also trigger liability that the employer has for the workers who lost their lives and were injured. The faulty product if any which is the hull or deficient services for hull maintenance may also attract a claim. This can also result in managerial liability.

Business Interruption Insurance

Business interruption is another significant consequence of this incident. The owners of the cargo, the bridge, and the ships that traverse the harbour are experiencing lost opportunities and disruptions to their operations. These costs may be covered by the insurance companies or borne by the respective owners. Baltimore is one of the busiest ports in the United States handling car shipments, major farm and construction machinery as well as coal exports. The accident disrupts global supply chains functional through the harbour.

We should also consider the principle of subrogation. The insurers of the bridge and other damaged infrastructure may try to subrogate against the insurers of the vessel, primarily pass on the cost of their claims. It is quite possible that the limit of the vessel’s insurance policies will be exceeded. In which case insurers may consider legal action against the owners to recover their costs. Likewise, when the true causes of the power failure are known the insurers of the vessel may choose to subrogate their claims cost against any manufacturer or marine engineers whose product or service is deemed to be inadequate or failed. As such, the insurance claims could get highly complex, with costly and lengthy litigation.

It is key to take note how one incident can create a ripple effect and trigger multiple insurance claims. This case highlights the complexity and breadth of the insurance coverage needed in such situations. Insurance should not be limited to just hull coverage; a holistic approach must be taken thereby benefiting an organisation with regards to its risk mitigation, crisis management and insurance requirements. Liability, property damage, loss of life, personal accident insurance, and management liability are all factors that need to be taken into consideration.

In conclusion, the Baltimore Bridge collapse underscores the importance of insurance in mitigating the financial impact of such unexpected events. It is crucial for individuals and businesses to assess their insurance needs holistically and ensure they have adequate coverage for all potential risks. Insurance is not just a financial safeguard; it is a lifeline that can provide support and stability in times of crisis.

This article is authored by Dr Sandeep Dadia, CEO and Country Head, Lockton India. All views expressed are personal.

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