Who Will Pay for the Baltimore Bridge Collapse?

On the day the Francis Scott Key Bridge in Baltimore collapsed, President Joe Biden said the federal government would pay the “entire cost” of rebuilding it, which some suggest could run to more than $1 billion. Washington will foot the bill so the bridge and nearby port can reopen “as soon as humanly possible,” he said.

The hope is that much of the cost will be recouped from insurers, but determining who is ultimately on the hook for the deadly disaster is set to become one of the messiest and most expensive disputes of its kind. Rebuilding the bridge, repairing the cargo ship that hit it and compensating companies for the disruption at one of the nation’s busiest ports may take years to resolve.

“We’re not going to wait,” said Biden, who plans to visit Baltimore on Friday to survey the damage.

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The legal wrangling began this week when the shipowner, Grace Ocean Private Ltd., and the ship manager, Synergy Marine, both based in Singapore, filed a petition in U.S. District Court to limit their liability to $43.7 million. They cited an 1851 law that allows a shipowner to cap financial damages mostly to the value of a ship after a crash, if the owner is determined not to have been at fault.

Claims against the ship’s owner and manager must be filed to the federal court in Baltimore by Sept. 24, a judge said.

Experts in maritime law and insurance said determining liability was particularly complex because of the many parties involved, from shipowners in Asia to insurers in Europe to companies around the world that move goods in and out of Baltimore. Numerous lawsuits are expected, and the six deaths caused by the disaster add a grim layer of complications.

“You can’t just necessarily settle with one party and make it go away,” said Franziska Arnold-Dwyer, a senior lecturer in insurance law at Queen Mary University of London.

Investigators are still determining what caused such a catastrophic failure on the cargo ship, the Dali; why the massive vessel appeared to lose power and propulsion before hitting the bridge; and whether negligence was involved. The answers will have implications for who is liable for damage that may cost insurers and reinsurers up to $4 billion, according to industry experts.

“You’re looking at historic, record losses” for maritime insurers, said Sean Kevelighan, CEO of the Insurance Information Institute, a trade group. The higher estimates could exceed the roughly $1.5 billion paid out after the Costa Concordia crisis in 2012, when 32 people were killed as the cruise ship ran aground off the Italian island of Giglio.

Losses are accumulating, with the Port of Baltimore, a top destination for car shipments, largely closed. Officials said this week that they had opened a channel around the wreckage for limited traffic. A full reopening of the port is expected in late May.

Very little is known about the owner of Grace Ocean, a Japanese businessperson named Yoshimasa Abe, except that he is very wealthy.

Most of his known wealth comes from his fleet of more than 50 vessels, including container ships, bulk carriers, tankers and refrigerated cargo ships. They are owned by two Singapore-based companies, Grace Ocean Private and Argosy Pte., that Abe controls through an offshore company. VesselsValue, which compiles shipping data, estimates that those ships, including the damaged Dali, are worth a combined $2.9 billion.

Shipowners often borrow large amounts of money to buy their fleets. There is little public information about Abe’s debts, but in 2010 Grace Ocean borrowed $250 million from Mitsui & Co., a Japanese trading firm.

Abe is also the majority owner of two Chinese shipyards on islands off the coast of Ningbo, according to Sayari and WireScreen, companies that compile and analyze corporate data. Combined, the two shipyards can repair more than 200 vessels a year.

It is unusual for foreign companies to control Chinese shipyards, especially in recent years as industry consolidation in the country has favored state-owned companies, said Matthew Funaiole, who has written about Chinese shipyards for the Washington-based Center for Strategic and International Studies. “There’s really not much space for there to be foreign ownership,” he said.

Among the 68 member companies, schools and associations focused on ship repair that belong to the China Association of the National Shipbuilding Industry, a trade group, three are foreign-owned shipyards, of which Abe has a majority interest in two.

Abe did not respond to a request for an interview or answer written questions about his business. “Out of respect for the investigation and the legal process we will not be making additional public statements,” Jim Lawrence, a spokesperson for the Dali’s management company and for Grace Ocean, said in an email. He confirmed earlier that Abe owned Grace Ocean Investment Ltd., a company based in the British Virgin Islands that owns both Argosy Pte. and Grace Ocean Private.

If the shipowner is found liable, its insurer, a mutual association called Britannia P&I Club, will cover the first $10 million of claims, which could include coverage for loss of lives, debris removal, property damage and cargo damage. The Dali was carrying products including paper, U.S. soybeans destined for China and some hazardous materials, according to Concirrus, a marine insurance data provider, and DG Global, an agricultural exporter with goods on the ship.

Beyond $10 million, the 12 clubs including Britannia that make up the London-based International Group of P&I Clubs, which collectively insure about 90% of the world’s oceangoing tonnage, would share the cost of claims of up to $100 million. For claims above $100 million, dozens of reinsurers will cover costs up to roughly $3 billion.

The $3 billion figure is so widely known that it could become a target for businesses making damage claims. “There are some reinsurers expecting the worst,” said Hugo Chelton, a managing director at Howden, a reinsurance broker.

The global reinsurance industry ended last year with $670 billion in capital, according to Aon, an insurance broker. Though the bridge damage promises to be costly, it is not likely to be among the largest payouts reinsurers have faced recently. Hurricane Ian, which hit Florida in 2022, caused more than $50 billion in insured losses.

Sridhar Manyem, an analyst for AM Best, a ratings agency for insurers, said the potential losses from the bridge collapse did not seem large enough to do long-term damage to any insurers or reinsurers. “It should not affect their balance sheets,” he said.

While a significant share of the claims may be directed at the ship’s insurers, other businesses affected by the bridge and port closure could make claims on other policies to cover their losses, adding to the insured losses caused by the incident.

Scott Cowan, the president of International Longshoremen’s Association Local 333, the union representing Baltimore dockworkers, said Tuesday that nearly 2,000 workers were still doing jobs at the port, like unloading cargo that arrived before the bridge collapsed.

Cowan said union leaders had asked for help from the federal and state governments. “The longer the channel’s closed and the longer we’re out, the bigger the problem is going to be,” he said. Many jobs at the port are considered daily hire jobs rather than full-time positions, so they will last only as long as work remains to be done.

Government funds for companies whose operations have been disrupted may not be fully recouped from insurers, said Oscar Seikaly, CEO of NSI Insurance Group, an insurance broker.

In recent years, when Washington has stepped in with emergency aid after a commercial disaster, taxpayers have later largely recovered the costs, although the international scope of claims in the Baltimore bridge collapse will add complexity to the process.

Rep. Dan Meuser, R-Pa., said he was outraged that Biden had immediately offered to use federal money to pay for the bridge’s reconstruction without considering other sources of funds, including from the owners and insurers of the Dali.

“Insurance payouts could potentially cover the entire cost of rebuilding the bridge without any taxpayer dollars being spent,” he said.

Robyn Patterson, a White House spokesperson, said the responsible party or parties must be held accountable, but added, “We’re not waiting to get started on this critically important infrastructure project.”

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