Insurance Coverage and the Key Bridge Collape

In the early morning hours of March 26, 2024, Dali - a cargo ship registered in Singapore — lost power and crashed into a pillar of the Francis Scott Key Bridge in Baltimore, Maryland.  The crash caused the immediate collapse of the bridge and death of six construction workers who were performing work on the bridge at the time of the accident (two others were rescued from the water). 

In addition to the tragic loss of life caused by the crash, this disaster will undoubtedly cause catastrophic economic losses.  

The Key Bridge collapse has caused the temporary closure of the Fort McHenry Channel, the major shipping lane leading out of the Port of Baltimore, one of the busiest ports in the United States.  In 2023, the Port of Baltimore handled more than 52 million tons of international cargo collectively worth over $80 billion.  

Additionally, there are over 8,000 jobs directly associated with port operations, and tens of thousands of jobs indirectly associated with the port. Similarly, Baltimore is home to a cruise terminal that served over 400,000 passengers last year. The Key Bridge collapse will also have a tremendous impact on automobile traffic as it is estimated approximately 34,000 vehicles used the bridge each day.  It will particularly impact trucks that transport hazardous materials, which will now have to make 30 miles of detours around Baltimore because they are prohibited from using the city’s tunnels.

Although smaller, shallower channels will be opened sooner, until the wreckage from the bridge is cleaned up, the channel will operate at less than full capacity and shipping (and cruise) operations will be disrupted.  The losses expected to result from the bridge collapse are estimated to be as high as $4 billion. These losses include those stemming from the bridge itself (including the cleanup of debris and construction of a new bridge), likely liabilities for wrongful death of the six construction workers, as well as liabilities for business interruption and other expenses to the myriad businesses impacted by these disruptions. 

While the owners of Dali and the Key Bridge are two entities likely to have claims for coverage under their insurance policies, they might not be the only such entities.  Companies affected by the Key Bridge collapse — even indirectly — should conduct a prompt review of their insurance portfolio to analyze whether any of the losses they are likely to experience are covered by insurance.  Coverage that these companies could have includes the following:

•  Business Interruption Coverage: This provides coverage if a covered loss forces the insured’s business to shut down or operate at reduced capacity.  Policyholders should be aware that many, but not all, policies offering this type of coverage (most commonly property policies) require some physical damage or loss to the insured’s property which may be difficult to prove for entities other than the ship or bridge owner or the construction company that was performing work on the bridge at the time of the collision.
• Contingent Business Interruption (CBI) Coverage: Similar to business interruption coverage, this coverage reimburses lost profits and certain other expenses resulting from a customer’s or supplier’s business interruption.  Again, there may a requirement of damage to the customer’s/supplier’s property, but notably not all provisions include that requirement.
• Supply Chain Coverage: This type of coverage is similar to CBI Coverage, but its scope is generally broader.  Among other things, Supply Chain Coverage, typically found in marine or property policies, often covers multiple tiers of suppliers and also does not have a property damage requirement.
• Port Blockage Coverage: This type of coverage, often found in marine insurance policies, provides coverage for business interruption losses caused by blockages to ports.
• Ingress/Egress Coverage (Denial of Access Coverage): This pays for loss of business income when ingress to or egress from covered property is prevented due to direct physical loss or damage to property belonging to others.  The extent of this coverage, again often found in property policies, might be affected by policy language requiring the damaged property to be within a certain distance of the insured’s premises.

Companies affected by the Key Bridge collapse should conduct an immediate review of their coverage portfolio — and consider obtaining coverage counsel’s assistance to do so — in order to determine if these types of coverage, among others, might provide some avenue to make a claim to offset losses caused by this catastrophe.  Companies with potentially applicable coverage will want to inform their insurers as soon as possible, as policies typically contain requirements that policyholders provide their insurers with notice as soon as practicable.

The precise contours of what coverage, if any, will be available to those affected by the Key Bridge collapse will depend on the wording found in affected companies’ policies.  Gilbert LLP attorneys are able to assist companies with determining the scope of coverage and, where coverage potentially exists, helping policyholders to navigate the claims process.

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