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As the fallout from the tragic Baltimore bridge collapse continues, the odds are mounting that box ship Dali’s owner will declare ‘general average’ (GA), forcing cargo owners to pay for the costs of the casualty.
On Tuesday, the 9,000 teu Dali crashed into a support pylon of the Francis Scott Key Bridge, effectively blocking the entrance to the port and causing significant damage to the ship and cargo.
Marine claims consultant WK Webster said: “Having reviewed the position further, the prospect of general average being declared may now be more likely.”
GA is a maritime principle where all parties involved in a sea voyage share any losses incurred. The share a shipper will pay correlates with the share of the cargo. The shipowner, manager and charterer will also be partly liable.
Patrizia Kern, chief insurance officer at embedded cargo insurance provider Breeze, told WPO: “Thisis one of the most complex procedures in insurance.”
Insurers will need to calculate the value of all the goods onboard the vessel to work out the amount owed by each shipper.
“The big issue is to establish the value, because you don’t know what was inside each of thecontainers,” Ms Kernexplained. She added that, from historical data, this process can often take four to five years.
Indeed, MK Webster warned its customers: “It is likely to be some time before the casualty is secured and the vessel taken to a place of safety following which inspections may be possible.”
Despite several high-profile casualties in recent years, general average remains rare in shipping and something many shippers aren’t aware of, let alone be insured against.
“When you call general average, you see how many people aren’t insured, because everyone has to pay,” Ms Kern told WPO. “There’s a large chunk of cargo on ships not insured, as they think it is covered by their freight forwarders or the shipping company.”
And while there might be some coverage by a freight forwarder or carrier under its standard trading conditions (STCs), Ms Kern explained that these often covered freight per kg, as opposed to the actual value of the goods.
MK Webster said the reason GA was likely to be called was due to the sheer scale of the disaster. It said: “General average being declared may now be more likely, given the apparent significant costs that will need to be incurred to extricate the vessel from its current position and bring it to a place of safety.
“There will inevitably be significant delays to all cargo on board, but also to containers ashore awaiting shipment where inbound vessels are now unable to reach the port, and where in consequence cargo may need to be moved to alternative ports prior to shipment. Any temperature or time sensitive cargo in this situation may result in losses.”
General average costs will also likely be used to cover the bridge reconstruction and associated costs.
“Such a claim will be an accumulation of very unfortunate circumstances, and somebody will have to pay for that,” concluded Ms Kern.
