The Disaster and the Aftermath

When a marine casualty strikes, it is generally deadly and appears to halt all other newsworthy events as focus centers on the emergency response, what occurred, and the ensuing aftermath. Recent and historical examples of maritime disasters having this effect include the Deepwater Horizon oil spill in 2010, the Costa Concordia grounding and partial submersion in 2012, the Ever Given running aground in the Suez Canal in 2021, the Exxon Valdez in 1989, and the most infamous shipwreck of all: the Titanic sinking in 1912. These are but a few examples of marine casualties that have had far-reaching impacts requiring sound legal advice for shipowners, operators, and insurance companies to limit their liability.

On March 26, 2024, the MV Dali, a 984-foot-long Neopanamax Singapore-flagged container vessel, owned by Grace Ocean Pte. Ltd., managed by Synergy Marine Pte. Ltd., and voyage chartered by Maersk, allided with a support column of the Francis Scott Key Bridge in the Port of Baltimore at or around 1:28 a.m. local time, while traveling approximately eight knots and with a cargo of 4,649 containers. As a result of the allision, the MV Dali suffered structural damage, the Francis Scott Key Bridge suffered a full collapse, and eight construction workers plunged into the frigid waters of the Patapsco River; two construction workers were rescued from the waters with injuries, four bodies have been recovered, and the remaining two are missing but presumed dead.

In relation to a catastrophic marine disaster such as this, what are the legal implications for the shipowners and insurers, and what claims are likely to be made?

Emergency Response and Notifications

In responding to an emergent catastrophic marine casualty such as this, the first response should be to never assume that an affected party or emergency service is on notice. Although, it is relatively obvious that the U.S. Coast Guard responded to the scene of this allision, what is not so obvious is the potential environmental pollution that could result from this incident. In line with the Oil Pollution Act of 1990 (OPA 90), one of the first steps a shipowner must take directly after performing life saving measures as required by domestic and international regulations is to notify the National Response Center to advise that there is a potential for the ship to leak petroleum products into navigable waters. The National Response Center will notify the appropriate authorities and assist with on-scene contamination and protection of the environment for potential contamination.

Once all emergency response services are put on notice of potential contamination, the shipowner must notify its Protection & Indemnity Club and all-party interests of the casualty. At the time of the allision, the MV Dali was insured by Britannia Protection & Indemnity Club, part of the 12 members of the International Group of P&I Clubs.

When the appropriate notifications have been made to the applicable parties, the insurers, shipowner, manager, and charterer must then focus on their options to limit their liability in relation to this type of casualty. The potentially liable parties must retain marine inspectors and marine engineers to descend upon the vessel at the first instance to perform in-depth inspections of the ship and its machinery, as well as to preserve potential evidence such as logbooks, computer data for alarms, and interviews of the crew. These inspections will mostly be conducted in accordance with governmental inspections from the Coast Guard’s marine inspectors and the National Transit Safety Board inspectors.

Limitation of Liability

On April 1, 2024, mere days after the incident, the shipowner and manager filed, with the U.S. District Court for the District of Maryland, for a Petition for Exoneration from or Limitation of Liability utilizing the strictly maritime principle, The Limitation of Liability Act of 1851. The Limitation of Liability Act, codified as 46 U.S.C. § 30523, allows a shipowner to petition the federal courts for a declaration within six months after receiving a written claim to limit its liability to the post-casualty value of the vessel and its pending freight. Vessel owners can limit their liability provided that the incident occurred without the privity or knowledge of the vessel’s owner. This means that, should the vessel owner be successful, the damaged parties will be limited to the post-casualty value of the vessel and its pending freight no matter how far reaching the actual damages stretch.

To take advantage of the Limitation of Liability Act, the shipowner must make a declaration in its petition for the value of the vessel at the termination of the voyage and its pending freight. In relation to the MV Dali, the shipowner and operator declared a value of $90 million, inclusive of $42.5 million for the post-casualty value of the vessel, estimated repair costs of the vessel at $28 million, costs of salvaging to the vessel at $19.5 million, and $1.17 million for the pending freight charter by Maersk at a daily rate of $32,500. When a petition is brought, the shipowner, at its option, shall deposit with the court or court-appointed trustee (for the benefit of any claimants) an amount equal to the post-casualty value of the vessel and its pending freight, or an approved amount of security fixed by the court. The MV Dali owners filed an interim stipulation of $43.67 million, the post-casualty value of the vessel and its current pending freight, minus the potential salvage and repair costs.

On April 1, the court granted the interim stipulation and issued a restraining order to enjoin all actions concerning this loss and for any claimants to file all claims associated with this loss by Sept. 24, 2024. Thus far, the city of Baltimore and American Publishing, LLC, as a proposed class action and seeking damages on behalf of local businesses, have filed claims. However, claims by local businesses for business interruption damages due to the inability to access the Port of Baltimore may be unlikely to be successful under the Robins Dry Dock Rule, which provides that persons without a proprietary interest in the property that is physically damaged have no causes of action for pure economic losses for unintentional torts.

Collision Vs. Allision

One important aspect of any maritime related litigation is the utilization of maritime specific terminology to ensure the invocation of the proper maritime specific legal rules. The first thing that needs to be recognized is that the MV Dali incident is not a “collision,” as many are calling it, but rather this incident is an “allision.” The difference is that an allision occurs when a vessel strikes a stationary object or a properly moored vessel; a collision occurs when two moving vessels strike each other. The difference legally is that, under maritime law, when an allision occurs, a prima facie case of fault is established against the moving vessel, and an inference of negligence arises.

Specifically, the Oregon Rule, a strict maritime rule, establishes a presumption of fault upon a moving vessel that allides with a properly moored vessel or other stationary structure. To rebut the inference of fault, a shipowner must argue that the allision was the fault of the stationary object, the moving vessel acted with reasonable care, or that the allision was an unavoidable accident.

In the MV Dali incident, the shipowners may attempt to argue that the bridge was not structurally sound, and it should have been able to withstand the strike. The shipowner may also claim that the crew acted reasonably in preventing this incident given that their main engines lost power in a narrow channel within close proximity to the Francis Scott Key Bridge, and their options to stop the dead-in-the-water vessel were extremely limited. They will also argue that this allision was unavoidable after losing power. Essentially, they may make an Act of God argument, which no amount of skill and seamanship could have prevented. These arguments are expected and will require a plethora of maritime expert witnesses at trial to combat the accusations that the captain and crew could have done more to prevent this incident.

General Average

Further, in an attempt to limit its costs associated with the major salvage operation, the shipowner declared “General Average.” General Average is an ancient maritime principle whereby all parties involved in the voyage share in any losses resulting from a marine casualty. For example, if a vessel enroute to its destination was overtaken by a storm that required the crew to jettison cargo containers overboard to save the vessel from sinking, the shipowner and cargo owners for the whole of the ship would share in the proportionate losses associated with the lost cargo.

General Average operates to apportion losses amongst the many parties to the maritime venture and sacrifices specific losses to preserve other property being lost and at risk of being lost. Declarations of General Average are defined in the York Antwerp Rules originally established in 1890 and amended in 1994. The rules contain multiple levels of clauses for General Average declarations and the application of General Average to specific maritime property.

A declaration of General Average has the potential to bring about further claims and litigation in attempts to avoid costs associated with the declaration. The appointed General Average adjuster will have to determine the cargo owners’ interests in the maritime venture and proportionate share for each respective cargo owner. In some cases, a ship’s cargo can be valued at more than the ship’s cost, which can leave the cargo owners paying a large portion of the costs associated with the salvage operation.

The most important aspect of this entire marine disaster will center around the loss of power to the main engines. Many questions will surround the maintenance, previous mishaps, loss of power, and the crew’s reaction to the loss of power that occurred just prior to the allision. Currently, there are a multitude of theories surrounding the incident and its causes. The one sure thing to come from this disaster is the multiple resulting lawsuits, which will most likely be held up in litigation for years to come.