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President Joe Biden<\/a> said the federal government should pay to rebuild the Francis Scott Key Bridge<\/a> in Baltimore, but any efforts to recover some\u2014or all\u2014of those funds from the company that owns the ship that took down the bridge could yield a lengthy legal battle.<\/p>\n The Limitation of Liability Act of 1851<\/a>, according to a law professor who spoke to Fortune<\/em>, could afford some protections to Singapore-based Grace Ocean, which owns the Dali, which struck the bridge<\/a> around 1:30 am ET on Tuesday<\/a> and collapsed it in mere seconds<\/a>.<\/p>\n \u201cI expect the ship owner will commence a proceeding in a federal U.S. District Court in Maryland, under the 1851 Limitation of Liability Act, to limit its liability to the post-casualty value of the ship,\u201d said Lawrence Brennan<\/a>, a professor of admiralty and international maritime law at Fordham.<\/p>\n If Grace Ocean seeks such protections, Brennan explained, the company would need to file a petition in federal court and post a bond equivalent to the firm\u2019s valuation of the ship. If the judge approves the petition, the owners of the Dali would only have to pay an amount equal to what the ship is valued at\u2014which is calculated after the crash. Such a sum would be billions less than actual damages.<\/p>\n \u201cThe statute is antique,\u201d Brennan continued. \u201cIt was designed for sailing ships, and not steel ships. So it has lots of issues, but there\u2019s a long history [of cases] and it\u2019s still valid law in the United States.\u201d<\/p>\n That said, Brennan also believes that it\u2019s most likely the company will seek a pretrial settlement, although Grace Ocean could face additional liabilities under federal admiralty and environmental laws tied to other damages and cleaning up pollution in the harbor. (Grace Ocean couldn\u2019t be immediately reached for comment.)<\/p>\n Although most companies do seek settlements in such cases, perhaps the most famous maritime catastrophe did make it to court: After the sinking of the Titanic in 1912, Oceanic Steam Navigator, which owned the ship,\u00a0requested the protections<\/a>\u00a0of the 1851 law. Although the courts noted that Britain\u2019s regulations were different than those of the U.S., the Second Circuit of the Courts of Appeals granted the protections.<\/p>\n Whatever legal process does unfold, discovery will be especially important as this wasn\u2019t the first major incident<\/a> involving the Dali, which in 2016 crashed in the Port of Antwerp in Belgium.<\/p>\n Additionally, since Tuesday\u2019s crash occurred caused after the ship lost power<\/a>, there will be more scrutiny on a June 2023 inspection by Tokyo MoU while the ship was docked in San Antonio, Chile, which discovered deficiencies in the \u201cpropulsion and auxiliary machinery.\u201d<\/a> However, a standard examination by the Coast Guard in September didn\u2019t mention those deficiencies.<\/p>\n In previous incidents involving massive shipping vessels, what\u2019s known as General Average<\/a>\u2014that any losses are shared among all stakeholders, such as shippers, cargo providers, etc.\u2014has been applied. Brennan said it\u2019s unlikely such a scenario unfolds with the Dali because of the ship\u2019s apparent mechanical problems, meaning the cargo providers could push for stronger claims.<\/p>\n \u201cThe ship owner has a duty to exercise due diligence to ensure the seaworthiness of the ship,\u201d Brennan added. \u201cIf they don\u2019t do that, they\u2019re not going to recover either.\u201d<\/p>\n<\/div>\n\nSubscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up<\/a> for free.<\/div>\n