On March 6, 2018, the container ship Maersk Honam caught fire in the Arabian Sea, enroute to Suez from Singapore. For months, cargo owners awaited news about the fate of their goods as the ship remained at sea amidst efforts to extinguish and contain the fire. Maersk Honam finally berthed at the port of Jebel Ali, UAE, on May 22.
For many reasons, this incident captured the attention of the maritime community. Here’s what happened and the aftermath as we know it today:
Maersk Honam was transporting 7,860 containers, some of which contained hazardous cargo and raised questions over whether the delay was caused by arguments over salvage or whether the ship was too hot to berth. It took salvors over five weeks to control the blaze (although hotspots continued to burn) and tugs slowly pulled the damaged ship to anchor at Jebel Ali for offloading, inspection, and repairs. Five crew members lost their lives in the disaster and the cause of the fire is still under investigation.
The MV Maersk Honam on fire in the Arabian Sea, March 8, 2018. Photo: Indian Coast Guard
Losses & General Average
It was determined almost immediately that fire and water damage caused a total loss of cargo in three holds of the ship, and Maersk declared general average (GA) on the vessel on March 9, 2018. As laws of general average state, losses (including transfer, port, and salvage costs) are shared proportionally between all parties involved in the maritime venture.
As reported by gCaptain, Richards Hogg Lindley is the appointed adjuster that “set the salvage security in the amount of 42.5% of the CIF (cost, insurance and freight) value of the cargo, with an additional 11.5% required as GA security.” The final calculation of GA for Maersk Honam will take years to complete.
Consequences For Cargo Owners
June marked the release of the first cargo containers, after three months of fire containment efforts. Assessments showed that a portion of the cargo will have insufficient insurance to cover the GA claim. Additionally, insured cargo owners may have challenges over acceptable security levels. Uninsured cargo owners face much greater consequences—they must provide a cash deposit based on the C&F value of their property in order for their cargo to be released. If the cargo is not released, this could result in potential uninsured business delays, lost income, and additional expenses such as legal fees.
The encompassing coverage of an all-risk cargo policy, including coverage for ocean-vessel conveyances, provides broad protection and peace of mind for companies that import or export goods via ocean vessels and may find themselves in a GA situation like the Maersk Honam.