Dali’s owner declares ‘general average’ in Key Bridge disaster. What does that mean?
The latest development in the fallout from the Francis Scott Key Bridge collapse traces its roots back millennia. It also could contribute to litigation about who’s paying for what that’s expected to take years.
The owner of the Dali, the massive cargo ship that lost power and knocked down the Key Bridge on March 26, killing six men, has declared “general average,” according to Darrell Wilson, a spokesperson for the ship’s owner, Grace Ocean Private Ltd.
General average, a maritime principle written into shipping contracts, has roots in ancient Greece and the Byzantine Empire. If a ship was in a storm, for example, and the crew needed to jettison some cargo to avoid sinking, they might throw certain goods overboard. Afterward, the ship owner and everyone who had cargo aboard would be responsible for covering that shipper’s loss — not just the unlucky owner whose possessions were sacrificed.
That’s how general average works on a small scale. On a large scale and in modern times, it can mean that cargo owners have to share in the cost of huge salvage efforts — say, pulling thousands of tons of steel off the 984-foot Dali and repairing its bow — with the ship owner.
General average applies to refloating the vessel, but not other costs, such as rebuilding the bridge. (The federal government already has pledged to clean up the mess that currently lies in the Patapsco River and fund a replacement bridge, but eventually will seek damages from responsible parties.)
The Dali owner’s declaration of general average brings another entity — cargo owners — into the complicated financial fray following the Key Bridge collapse that also has shut down Baltimore’s shipping channel, hindered the city’s economic activity and necessitated a colossal cleanup of 50,000 tons of mangled steel and concrete.
It’s unknown precisely how many millions of dollars it will cost to refloat the Dali — just one aspect of the entire salvage process — but Jonathan Spencer, principal and average adjuster with the New York-based Spencer Company, said the figure will be “pretty eye-opening.” It could require some cargo owners to pay nearly the same amount as their cargo is worth in order to retrieve it, he said.
“The values are going to be certainly among the highest that we’ve seen,” he said.
How much each entity — cargo and ship owners — would pay is proportional to their value. It’s common for cargo and the actual containers to be worth more than a ship itself so, if that is the case, cargo owners would be on the hook for more than half of the salvage cost. Similarly, an individual transporting a relatively small amount of belongings in one container would pay less than a company with dozens of containers full of valuables.
Those cargo owners, however, eventually might file lawsuits in an effort to avoid payment — a likely scenario, experts say, that would create more litigation in what already has become a litigious event. Lindsey Brock, a Florida maritime attorney, expects legal action from the cargo owners.
“A lot of it is going to rest upon what actually caused the vessel to lose power,” Brock said. “That’s going to be the determinative factor.”
It’s still being ascertained what, exactly, prompted the 248-million pound ship to lose power and then smash into a support pier, folding the bridge upon itself and into the river below. The National Transportation Safety Board is focusing on the ship’s electronic system as it analyzes what went wrong and Monday the FBI raided the ship as part of an investigation.
“If the cargo interests can demonstrate that the ship was not seaworthy, then they have a defense against paying any contributions to general average,” Spencer said.
The collapse, which made international headlines, could be the costliest maritime loss ever and litigation both pointing fingers and defending against financial responsibility has begun already. Dali’s Singapore-based owner and manager, Grace Ocean and Synergy Marine, respectively, have asked a federal judge to absolve them of liability in the incident and Baltimore City recently hired attorneys to pursue legal action against those two entities as well as Maersk, a Danish company that was chartering the ship.
Maritime disasters often create an elaborate web. In this case, a Singapore-flagged vessel built by a South Korean shipbuilder and staffed with an Indian crew, carrying cargo for both a Danish and a Swiss company, crashed into a bridge in American waters that connected Baltimore City to the rest of Maryland and the mid-Atlantic.
That Swiss organization, Mediterranean Shipping Co., shared in a news release a letter that the ship’s owner sent to Maersk. In it, a Grace Ocean executive wrote that “in the course of laden voyage, the vessel contacted Francis Scott Key Bridge in Baltimore, USA. As a result of this, ship and cargo were in a position of peril and required salvage services to free the vessel from the collapsed bridge and bring her to a place of common safety.”
“As a consequence of the above,” the letter continued, “shipowners hereby declare General Average.”
In such cases, a general average adjuster is selected by the ship’s owner to determine how much each cargo owner would be responsible for paying. Grace Ocean appointed London-based Richards Hogg Lindley, which also was the adjuster for the Ever Given when it ran aground in the Suez Canal in 2021 and the Ever Forward, which got stuck in the Chesapeake Bay for over a month in 2022.
Many cargo owners likely have insurance, which would underwrite that cost, but those that don’t will have to put up a deposit to retrieve their cargo. On a typical container ship, Spencer said, as much as one-third of the cargo might be uninsured.
In the meantime, authorities will continue the cumbersome process of slowly removing steel and containers from the Dali, whose bow is stuck in the river bottom, in an effort to refloat it. Of the more than 4,000 containers on the ship, 40 had been removed as of Tuesday with plans to remove at least 100 more.