- Richard Kamppari Baker
MV Ever Given - Suez Traffic Jam
At 7.40am on 23 March the 400-metre, 224,000-tonne container vessel the MV Ever Given became grounded in the Canal, wedged between both banks, blocking the shipping lane. At the time of writing the authorities are still working to free the ship.
Even when the vessel is floated, with the build-up of ships, there are massive supply chain issues for shippers, forwarders, and carriers. This has created an enormous traffic jam of 400 vessels with many holding perishable cargo or livestock.
Nearly 19,000 ships passed through the canal in 2020, according to the Suez Canal Authority. With an average of 51.5 ships per day, it is inevitable that there will be delays of some weeks before the passage opens for the jam of ships. There’s also damage to the canal itself which may require urgent repair to the part of the bank removed in an attempt to free the Ever Given, which will also result in further delays.
It is still too early to determine the exact financial impact and how long the blockage will last as this is dependent on several factors such as logistical challenges, weather, and accessibility.
Insurance companies estimate this incident will cost approximately USD1 billion with Hull and P&I insurers bearing the brunt, but the uninsured losses will far exceed this. Some estimate the financial loss could be as much as USD5 billion a week. It was first reported the Ever Given ran aground when it lost steering in high winds, but now information suggests there may have been human error. If this is the case, it may give rise for an argument for legal action from shippers on board the Ever Given to seek compensation.
For the shippers with cargo on board other vessels grouped around the northern and southern entrances to the canal, this may not be so successful. The potential loss scenarios could include loss of any perishable goods in cargo, business interruption and loss of revenue, as a result of this blockage. Shoei Kisen of Japan, the vessel’s owners, could now face a barrage of insurance claims from both the Suez Canal Authority and from other vessels.
If you have any cargo likely to be hampered by the delay, we recommend you notify your liability insurers immediately. Insurers will assist in your defense should claims arise, also giving them the opportunity to attend any joint survey to further protect you.
Most carriers are exempt from delay arising from an incident outside of their control making any compensation unlikely. However, we recommend you manage expectations and do not commit to any arrangement without first consulting your insurers.
If the merchant has cargo insurance they should notify their insurance provider immediately. Whilst delay is generally excluded, when cargo is on deck for prolonged periods of time, there are often various inevitable mishaps. These may need to be investigated and it is important to review the merits of each case individually.
For more information, please contact Richard Kamppari Baker.
This article was first published in its entirety by World Insurance.