Carnival covers Concordia claims
On Friday 13 January, the 4,000-passenger Costa Concordia cruise liner crashed into shallow rocks off the small Italian island of Giglio, ripping a hole in her hull and causing her to list violently before capsizing. Mandy Aitchison reports
On Friday 13 January, the 4,000-passenger Costa Concordia cruise liner crashed into shallow rocks off the small Italian island of Giglio, ripping a hole in her hull and causing her to list violently before capsizing. Mandy Aitchison reports
Costa Crociere, the operator of the liner, is owned by Carnival Cruises, which saw its share price drop dramatically after the accident and subsequent criticism of the actions of the ship’s captain and crew. It is thought that the captain, Francesco Schettino, was sailing too close to the land in a nautical attempt at a ‘fly past’, as he wished to acknowledge someone living on the island.
Schettino was arrested soon after the accident on suspicion of manslaughter and abandoning ship, under which charges he could spend several years in jail. Schettino has denied any wrongdoing, claiming that the rocks the ship hit were not on the chart he was using to navigate, and that he was in fact one of the last to leave the ship. He told reporters: “What happened is that while we were moving with a tourist navigation system, as you can see by the rip (in the ship) there was a lateral rock projection. Even though we were sailing along the coast with the tourist navigation system, I firmly believe that the rocks were not detected as the ship was not heading forward but sideways as if underwater there was this rock projection. I don’t know if it was detected or not, but on the nautical chart it was marked just as water at some 100-150 metres from the rocks and we were about 300 metres from the shore, more or less. We shouldn’t have had this contact.”
Costa Cruises chief executive officer Pier Luigi Foschi told a news conference in Genoa: “The company will be close to the captain and will provide him with all the necessary assistance, but we need to acknowledge the facts and we cannot deny human error.” Foschi said Costa’s ships have their routes programmed and alarms sound when they go off course. “This route was put in correctly,” he said. “The fact that it left from this course is due solely to a manoeuvre by the commander that was unapproved, unauthorised and unknown to Costa.”
The ship was carrying Italian, Spanish, German, French, British and US passengers when the accident occurred. Nearly all of the passengers and crew were evacuated from the ship – some in the lifeboats; but once the ship had listed past 20 degrees, the lifeboats on one side were unusable, leaving many other passengers swimming to the nearby shore. Other passengers were airlifted to safety by Italian Coast Guard and Fire Service helicopters.
The death toll on the cruise ship was unclear for some days after the accident, but as ITIJ went to print, it was confirmed at 16 people, including a Peruvian crew member and two French passengers. Also, at least 16 were still unaccounted for, and 30 people were injured, some seriously. Two Korean honeymooners were found in their cabin by the Italian Fire Service 30 hours after the evacuation; they were airlifted from the ship via helicopter, as was the ship’s purser, who had fallen and broken his leg whilst trying to reach more people inside the ship.
Carnival Cruises said the vessel would be out of service until at least the end of November, costing the company in the region of US$90 million. Industry analysts have said that the shipwreck could cost Carnival up to 10 per cent of its profit margin in 2012, and added that it couldn’t have come at a worse time of year – one third of the company’s cruises are booked between January and March.
Micky Arison, chairman and chief executive of Carnival, said: “We are deeply saddened by this tragic event and our hearts go out to everyone affected by the grounding of the Costa Concordia and especially to the families and loved ones of those who lost their lives.”
Costa, in line with other cruise companies, insists that their passengers take out travel insurance for their trip. For UK customers, Costa’s website, which does not appear to have been updated with regards to the insurance pages since 2010, states: “Costa Cruise Lines UK Limited has negotiated a specially formulated travel insurance, which is underwritten by certain syndicates at Lloyds.” The cover provided by Costa includes up to £3,000 for reimbursement for unused travel and accommodation costs and up to £25,000 that is payable in the event of death or permanent total disablement. The policy states: “The death benefit is limited to £10,000 or £2,500 for persons under 18 years of age, or under 23 years of age if in full-time education. Maximum accumulation limit is £250,000.”
For US passengers, Costa Cruises offers Carefree Travel Protection, which is underwritten by Stonebridge Casualty Insurance Company, an AEGON company, based in Ohio. The policy information available online says: “If your baggage or personal property is lost or damaged, you will be reimbursed US$1,500.” The medical expense coverage limit is also low at just $10,000. Assistance for US Costa customers is provided by On Call International.
Travel insurers, though, may not see the level of claims some first thought. On 19 January, Costa Cruises confirmed that it was ‘contacting all the guests involved in the sad accident to assure itself of their return home and their state of health, and to confirm to them the return of [the cost of] the cruise and all expenses connected to it’.
The ship was insured for c405 million (US$513 million) by a group of insurers including XL, RSA and Generali, with specialist marine insurers providing the extra necessary cover for injury claims, of which there will be several. Reuters reported that a spokesman for RSA said the company’s exposure to the accident was below c10 million, while a Generali spokesperson said the firm’s exposure was ‘small’. Germany’s Allianz confirmed that it too was involved as an insurer for the ship and cautioned any resolution would not be quick: “It usually takes months – and in case of liability claims – probably years of investigation to completely settle large marine claims.” Hannover Re said that it expects a damage claim of at least c10 million from the incident.
According to Guy Carpenter, for potential injury claims, Standard Club said it was one of several P&I (protection and indemnity) clubs providing cover for the Costa Concordia. P&I clubs typically pick up liability claims triggered by shipping disasters. Individual P&I losses exceeding a certain threshold are pooled between the biggest P&I clubs, who in turn buy reinsurance in the event of losses exceeding a set ceiling.
The UK P&I club explains: “P&I is insurance in respect of third-party liabilities and expenses arising from owning ships or operating ships as principals.” It further added: “The world of the P&I clubs – the marine liability insurers who together insure 95 per cent of the world’s ocean-going ships – is little known. It is they who handle and pay for the major casualties – and the thousands of less well publicised but hugely expensive accidents and claims that occur frequently in shipping.”
Ben Cohen, an analyst at Collins Stewart in London, commented: “The overall size of the loss in terms of premium in the marine market is going to be quite considerable, it’s going to put the market into loss almost before the year has begun. Marine losses tend to be very well spread and quite heavily reinsured as well.”
Looking to the future of the cruise industry, it has been noted that while the event was tragic and frightening for those on the ship, such events are few and far between. Nonetheless, Koji Sekimizu, secretary general of the International Maritime Organisation, said that the body ‘must not take this accident lightly’, adding: “We should seriously consider the lessons to be learnt and, if necessary, re-examine the regulations on the safety of large passenger ships.”
It was confirmed at the end of January that Italian consumer association Codacons is one of several organisations that is filing a law suit against Costa Cruises on behalf of the passengers of the Costa Concordia. In addition, there are two US-based law firms that have also confirmed their intention to file a class-action lawsuit in the US, with the aim of securing US$160,000 for each passenger onboard the stricken vessel. Mitchell Proner, a lawyer with one of the US firms, Proner & Proner, said: “Along with Codacons, we have formed an association and our firms are collectively going to be filing a suit in Miami … on behalf of all the victims of the Costa Concordia disaster.” Proner said that his firm would be seeking compensation from the cruise line for continued medical care, loss of earnings and psychological impact. He told the BBC that currently he had 110 claimants, some of whom would be seeking to sue Costa Cruises for several times the minimum amount stated above.
Marco Ramadoria, president of Codacons, said so far that offers of compensation from the cruise line had been insufficient: “They are offering to refund the cost of the ticket as if you had missed a plane and lost your luggage. You cannot compare the two.” Costa was originally offering passengers €11,000 each in compensation for their traumatic experience, which Codacons has urged passengers not to accept. Costa’s offer was the result of negotiations with other consumer groups, who claim to be representing the 3,206 passengers who did not suffer any physical harm as a result of the disaster.
In response to the notification of the class action suits, Costa stated: “The company understands those concerns and will respond in due course, but for now, it wants to concentrate on dealing with the immediate tragedy. As an initial gesture, it has already sent letter to all those passengers onboard asking them to detail their expenses and any costs they might have incurred so reimbursements can be made.”
There are disagreements, though, as to whether or not the US class action suits could be brought against Costa Cruises, as it has been reported that when buying a cruise from Costa, customers are asked to sign a waiver that states that any litigation resulting from the cruise would have to be pursued in Italy. Proner believes, though, that this rule could be circumvented: “The US has a long tradition of protecting rights and not only is Costa owned by an American company, but they have brought themselves into our stream of commerce. There were 120 Americans on board and they will demand access to their rights.”