On March 26, a containership struck the Francis Scott Key Bridge in Baltimore, Maryland, resulting in the collapse of the highway infrastructure and tragic loss of life.[i]  As communities grieve the loss of their loved ones, businesses around the world are grappling with the economic fallout, including significant supply chain disruptions.  The closure of I-695, which provides an alternate route for hazardous materials and oversized vehicles that are prohibited from going through the Baltimore Harbor Tunnel, has created a gridlock for companies with distribution warehouses nearby.[ii]  The many ships stuck at the Port of Baltimore blockage, which is the top port in the nation for automobile shipments, is likely to create a ripple effect for other ports worldwide.[iii]

Commercial insurance policies can be a valuable asset to protect against business interruption losses when a crisis destroys critical infrastructure on which businesses depend.  Carefully documenting all associated losses is critical to maximize insurance recovery.  As outlined below, businesses should review their policies now with coverage counsel to determine whether coverage exists for losses they have or will incur in connection with the Francis Scott Key Bridge collapse or other future infrastructure crises.  

In the days ahead, businesses facing losses after the Francis Scott Key Bridge collapse should not assume their losses are uninsured.  Instead, businesses should gather all their policies and consult with coverage counsel to evaluate what coverage may be available.  There are several key lines of insurance coverage for businesses to consider when faced with losses related to infrastructure crises like the Francis Scott Key Bridge collapse, many of which are “additional coverages” that are often overlooked in commercial property and business interruption policies:

• Business Interruption (BI) Insurance. Protects against the loss of revenue following an accident that damages an insured’s owned or leased property.  While most business interruption policies will not be triggered because the property damage in question occurred to the bridge, some commercial business interruption policies often contain valuable insuring agreements that do not require property damage to the business owners’ own property to trigger coverage.

• Contingent Business Interruption (CBI) Insurance. Even if your business is not directly impacted by an infrastructure catastrophe, your commercial insurance policies may provide CBI coverage for economic losses arising from supply chain disruptions, such as an inability to acquire parts or services from key suppliers or an inability to deliver your products or services to key customers.  This coverage could be valuable to businesses outside Baltimore who rely on access to customers or suppliers in the Baltimore area.

• Port Blockage / Denial of Access Insurance. Another form of BI coverage, port blockage and denial of access coverage protects against losses when ships are unable to gain access to a port.

• Marine Cargo. This is typically a standalone policy that protects goods shipped by water from physical loss or damage. 
• Loss of Attraction Coverage.  This coverage may respond when physical damage occurs within a defined radius of an insured location, resulting in a loss of revenues.

• Ingress/Egress Coverage. Covers loss of business income caused by physical damage to property of others that prevents ingress/egress to your business.

• Service Interruption Coverage. Covers any loss or expense caused by interruption of utility services resulting from damage to a utility’s property.

• Civil Authority Coverage. Protects businesses from losses resulting from a government order restricting access to a business’s property or closing roadways, bridges, or ports that prevent access to your business.

Even if your company is unsure of the full extent of its losses, businesses should promptly locate all available insurance policies, assess the potential coverages available, and promptly notify potentially responsible insurers to maximize the recovery available under your company’s insurance program.

Before making a claim, businesses should meet with coverage counsel to review their policies. Issues to consider before making a claim include:

• Business Interruption Loss without Property Damage.  For businesses involved in shipping and logistics, it will be important to analyze your insurance policy to determine whether any provisions provide coverage for losses arising from delays or increased costs due to failed infrastructure or other catastrophes, and to determine how those coverages interact with policy exclusions where there are arguably multiple causes of a loss.  Case law concerning concurrent causation questions varies across jurisdictions, so it is critical to understand causation issues as you prepare a claim and communicate with your insurer.

• Sub-Limits and Deductibles. Most policies contain varying sub-limits and deductibles or self-insured retentions depending on the cause of the loss and the type of coverage implicated.  For business interruption claims, these provisions are often defined in relation to a set number of days or hours.  It is important to understand these limitations before making a claim.

• Loss Valuation Issues. Many policies contain specific formulas for calculating losses (i.e., gross revenues, gross profits, etc.), and understanding these formulas can have a dramatic impact on the value of an insured loss.  For complex losses, policyholders should seek the advice of a forensic accountant before submitting a proof of loss.

When submitting an insurance claim for losses in connection with the Francis Scott Key Bridge collapse, there are several essential steps to maximize the value of their insurance assets.

• Prompt Notice. Policies often require policyholders to notify the insurer “immediately,” “as soon as possible,” or “as soon as practicable” after the insured becomes aware of a potential claim.  The consequences of failure to comply with notice provisions may be severe and could ultimately preclude coverage.  Even if your business is uncertain whether it has sustained covered losses, it should notify its insurers of any possible losses out of an abundance of caution.

• Collect and Preserve Evidence of Losses. It is important to record all costs, expenses, and damages for which you might seek coverage.  For example, to maximize business interruption coverage, businesses should document their losses by maintaining proof of business performance prior to, during, and following the bridge collapse.  Many policies also cover claim preparation costs and other expenses associated with claim-related activities.  All such expenses should be tracked.

• Be Careful About Internal and External Communications Regarding the Loss. Businesses should be careful when communicating with brokers and insurers concerning losses.  If litigation over insurance coverage becomes necessary, insurers may gain access to internal communications such as emails and memoranda regarding a business’s coverage claim.  How a loss is characterized in such communications may be used to deny coverage.  Involving coverage counsel in these communications may ensure that they are protected as privileged in the event of litigation over coverage.  Businesses also should identify a single point of contact or spokesperson for all communications with insurers.

• Coordinate Mitigation Efforts with Insurer. While it is important to mitigate losses, keeping your insurer in the loop about these efforts where possible will minimize the chance that the insurer will apply hindsight knowledge to second-guess the reasonableness of the mitigation procedures that a business puts in place.

• Proof of Loss / Suit Limitations.  Many policies require policyholders to submit a proof of loss within as little as 60 or 90 days of a loss, and other policies may require policyholders to file suit within one year of a loss to recover any unpaid losses.  Courts in some jurisdictions will enforce these timing restrictions.  Policyholders should pay attention to these deadlines and seek extensions when necessary for complex claims.

• Engage Coverage Counsel. Claims from the Francis Scott Key Bridge collapse are complex and may contain potential coverage defeating traps. Experienced coverage counsel is critical and will work with your brokers to ensure that you can maximize the insurance recovery for your loss.

Even for businesses not impacted by the Francis Scott Key Bridge collapse, many of the same principles apply to coverage for natural and man-made disasters alike.  The greater frequency and severity of recent natural disasters, coupled with the increased potential for localized natural disasters to disrupt supply chains in today’s globalized economy, increase the likelihood that businesses may incur significant business interruption losses in the future.  To minimize the risk of future losses and to avoid gaps in coverage, all businesses should carefully review their insurance programs with experienced brokers and legal counsel to ensure coverages are adequate in the event of a catastrophic loss.

[i] Costas Paris et al., Baltimore Bridge Collapses After Being Hit by Cargo Ship, Six Presumed Dead, The Wall Street Journal (Mar. 26, 2024, 8:29 PM), https://www.wsj.com/us-news/baltimore-bridge-francis-scott-key-collapse-ship-6649dd14?st=jw0k24i47gqs8sw&reflink=desktopwebshare_permalink.

[ii] Brendan Murray, Baltimore Bridge Disaster to Test Trucking, Port Flexibility Yet Again, Bloomberg (March 26, 2024, 8:08 AM), https://www.bloomberg.com/news/newsletters/2024-03-26/baltimore-key-bridge-collapse-the-supply-chain-impact-on-ports-trucks-ships?utm_source=website&utm_medium=share&utm_campaign=copy.

[iii] Rachel Lerman et al., See How the Key Bridge Collapse Will Disrupt the Supply of Cars, Coal and Tofu, The Washington Post (March 27, 2024, 8:15 AM), https://www.washingtonpost.com/business/2024/03/27/baltimore-port-economy-disruption-bridge-collapse/.