The Francis Scott Key Bridge Collapse and the Impact on Local Businesses

The Francis Scott Key Bridge Collapse and the Impact on Local Businesses

On the morning of March 26, the nation woke to the stunning news that Baltimore’s Francis Scott Key Bridge was gone.  The entire bridge had collapsed after being struck by a massive container ship.

Beyond the tragic human toll, Tuesday’s accident will have ripple effects throughout the economy.  In 2023, the Port of Baltimore was the tenth-largest U.S. port for container imports, and the largest entry point for heavy construction and agricultural equipment.

Following the bridge collapse, all vessel traffic into and out of the port has been “suspended until further notice.” Cleanup efforts necessary to restore shipping access to the port may take months.

The net result will be significant disruptions to a supply chain already pushed to the limit by wars in Europe and the Middle East and a historic drought impacting the operation of the Panama Canal.

Businesses that are affected by shipping delays caused by the Key Bridge collapse should look immediately to their insurance programs for recovery of potential losses. Policies that may provide coverage include:

Business Interruption (BI): BI is a form of business income insurance that provides protection against revenue losses that may result directly from the shutdown of the port.  Such coverage is available when such a shutdown affects the policyholder’s business operations.  In general, the disruption must relate to physical damage or another commercial property insurance claim covered by the policyholder’s policy.

Contingent Business Interruption (CBI): CBI is a form of business income insurance that provides protection against revenue losses resulting from a third-party supplier or distributor shutdown that affects the policyholder’s ability to produce a product or provide a service. As with BI insurance, a typical requirement is physical damage or another coverage trigger.

Marine Cargo: Marine cargo insurance typically covers the owner of goods in transit against physical loss or damage. Although many marine cargo policies expressly exclude losses caused by delay, some policies do cover such losses.  Marine cargo insurance may also cover other losses caused by detours or delays in shipping, such as forwarding and warehousing expenses, or the cost of additional fees owed to the shipping company.

Supply Chain Coverage: Supply chain insurance provides coverage for loss resulting in a delay or disruption in the receipt of products, components, or services from a supplier. This coverage does not require physical loss or damage and can be triggered by a host of unexpected events such as natural disasters, industrial accidents, labor issues, production process problems, civil or military action, regulatory issues, financial issues — and closure of roads, bridges, or other transportation infrastructure.

Trade credit insurance: This type of insurance provides coverage when a customer or financing recipient fails to pay a trade debt.

Time is of the Essence

With insurance claims, there is no time like the present.  Insurance policies routinely require policyholders to give notice of claims, and even potential claims, as soon as possible.

There are many circumstances in which the timing of notice can cause a forfeiture of insurance coverage.  One example is if the policy period expires in the interval between the event giving rise to a claim and the filing of the claim.  Giving notice after the policy period can be fatal to a coverage claim under certain policy provisions.

Many policyholders prefer to wait to give notice until they fully understand the parameters of their claim.  Resist that temptation!  It is much better to give generic notice of a claim or potential claim, with the explanation that details will be provided as the extent of the loss becomes clear.

Policyholders who go that route should select wording that is as broad as possible.  In many cases, describing the event (the collapse of the bridge) and stating that you may suffer losses should be sufficient.

Even if the policyholder is accused in the future of providing notice that was not sufficiently detailed, that situation still is better than not providing notice at all.

What Should You Do Next?

If your company has suffered a loss stemming from the Francis Scott Key Bridge collapse, take immediate action to:

·         Review your policies

·         Speak with your insurance brokers

·         Notify your insurance companies

·         Carefully document your losses

·         Contact an insurance professional if questions arise concerning the scope of coverage for loss.

By Rhonda D. Orin and Cameron R. Argetsinger

Rhonda D. Orin ([email protected]) and Cameron R. Argetsinger ([email protected]) are partners in the D.C. office of Anderson Kill P.C., which has specialized for decades in assisting policyholders in securing coverage from their insurance companies.