Stolt-Nielsen Sets Aside $155M After Losing MSC Flaminia Appeal
More than a decade after the fire aboard the MSC Flaminia and five years after a U.S. court assigned blame to the chemical manufacturer and freight forwarder, a U.S. Appeals Court affirmed the decision. At the time, the court’s ruling was seen as a landmark ruling for handling responsibility in the shipping industry highlighting the consequential results of even unintentional acts. A decade later, mis-declared and incorrectly packed cargoes remain one of the biggest problems for the shipping industry.
Norwegian shipping and logistics company Stolt-Nielsen, a leader in bulk-liquid logistics, issued a statement saying, “The company is disappointed by the decision of the Court of Appeals upholding the lower courts 2018 decision. The company is currently assessing the legal and financial implications of the court's decision, which included a dissenting opinion, and is considering further appeals and mitigations.”
The U.S. Southern District of New York Court in 2018 assigned fault for the devastating fire aboard the MSC Flaminia in July 2012 to the manufacturer and freight forwarder of the hazardous cargo. The court in 2018 ruled that the fire and subsequent explosion were the results of a runaway chemical reaction saying that the manufacturer was aware of the chemical’s ability to generate large amounts of heat if exposed to high temperatures for a prolonged period.
The casualty began on July 14, 2012, as the MSC Flaminia was underway from New Orleans to Antwerp and smoke began emanating from the ship’s number 4 hold. The crew treated it as evidence of a container fire and released CO2 to suppress it. A seven-person fire team was then sent to prepare firehoses alongside the hatch, and while they were attempting to set up the firefighting hoses an explosion occurred. Three crewmembers were killed including one that was missing, two were severely injured, the vessel was damaged, and most of the cargo containers aft of Hold 4 were destroyed.
The MSC Flaminia was at the time a large container vessel of 85,500 dwt with a crew of 25 people on board. The vessel had a capacity of 6,750 TEU. She was more than 1,000 nautical miles from land in the middle of the Atlantic when the fire occurred. The crew was forced to abandon ship and was rescued by other vessels that came to their aid.
Stolt Tank Containers had 29 tank containers onboard the ship, three of which were stowed in the number 4 cargo hold. On May 29, 2013, the vessel’s owner, manager, and operator filed counter and crossclaims against Stolt Tank Containers and Deltech, the shipper of the three tank containers stowed in cargo hold number 4, alleging that these tank containers were the cause of the fire and that Stolt Tank Containers did not adequately warn of the inherently dangerous nature of the cargo. The 2018 decision assigned 45 percent of the fault to Stolt and 55 percent to Deltech. The court ruled that shipowner Conti, vessel operator NSB, and ocean carrier MSC, were not at fault and bore no liability.
Stolt-Nielsen reported today, July 3, that the Court of Appeals has affirmed by two to one, in all material respects the ruling on liability from 2018 by the U.S. District Court for the Southern District of New York regarding the 2012 incident on board the MSC Flaminia. The company reports that potential liability for the full award is being assessed but that it has liquidity in place to fund its potential liability and remains in a financially strong position.
While the company is still exploring further appeals, it reports it will record a loss provision of $155 million related to the ruling in its second quarter financials, due to be reported on July 6, 2023. They projected an impact on the company’s net profit for the quarter of approximately $115 million, net of tax.
The U.S. court decision set a precedent that continues to impact casualty cases. At the time, experts advised that shippers needed to re-access their approach to insurance and handling dangerous cargoes. More than a decade later similar cases are in the courts for example with the claims resulting from the 2021 loss of the X-Press Pearl off Sri Lanka. The casualty was also linked to leaking chemicals that resulted in a runaway fire that destroyed the new vessel. Trade associations continue to highlight the dangers of mis-declared cargo and advocate for stricter regulations and inspections to reduce the dangers.