Toronto, April 16, 2024
On March 26, 2024, the 9,000 TEU containership Dali crashed into a support pylon of the Francis Scott Key Bridge, causing significant damage to the ship, on-board cargo, and the bridge itself. The tragic incident also took six lives. As the maritime industry grasps with the sheer scale of destruction, questions have been raised about who will ultimately pay for damages. Cargo stakeholders affected by the incident could face massive costs, as General Average has now been declared by Singapore based Grace Ocean on the Dali, which is one of the “most complex procedures in insurance”.
General Average is a maritime principle where all parties involved in a sea voyage share any losses incurred. The shipowner, manager, and charterer will also be partly liable. Normally, a shipper’s contribution to General Average is expressed as a percentage of cargo value and applicable freight costs for the given shipment. This percentage can range from 3% to 100%. As the Dali has only just declared General Average, the percentage value they are looking for as security has yet to be confirmed.
As we always recommend, shippers who insure their cargo with “all risks” cargo insurance will have protection from declarations of General Average, to allow them to obtain their goods. A General Average Guarantee would be issued by the cargo underwriters which is an agreement to meet the insured’s liability for contribution, and in turn the cargo will be released to the shipper. Shippers who do not have cargo insurance in place with coverage for General Average will most likely have to provide the guarantee themselves with a cash deposit or bond that will cover the prorated claim. These funds will be held in trust until the case is finally resolved. The finalization of this type of claim will likely take many years to conclude and it is not uncommon for such complex cases to take up to ten years to resolve. If there are any funds remaining, they are refunded to the cargo owner. If the cash deposit is not sufficient, then the vessel owners will request a further deposit.
For more information, please call David Lychek, Director – Ocean & Air Services at (905) 882-4880, ext. 1207.
