A ship carrying $400 million worth of luxury cars is on fire in the middle of the Atlantic. Who pays the bill? : Risk & Insurance

A ship fire that destroyed luxury vehicles raises the question: what insurance will cover these losses?

A ship carrying millions of dollars worth of luxury cars caught fire and ran aground in the middle of the ocean.

fire, which started on February 16burned for days before rescue teams were able to board and tow the vessel to safety, reported the Wall Street Journal. All 22 crew members aboard the vessel were rescued and uninjured.

The luxury vehicles were en route from a Volkswagen plant in Germany to Davisville, Rhode Island, The Guardian reported.

From there they would likely have traveled to their owners, many of whom ordered the vehicles months ago. Brands that are part of the Volkswagen Group and were on board the ship include Porsche, Audi, Bentley and Lamborghini.

Now, the owners of the vehicles on board the ship may wonder if they will have to pay for this loss? Or will Volkswagen foot the bill?

Personal or commercial insurance: who is responsible for the Felicity As Fire?

Car owners can breathe a sigh of relief. Customers technically do not own the cars until delivery, so their personal auto insurance will not be incurred.

Instead, commercial insurance policies held by automakers and freight companies will have to pay more than $4 million in losses. About $438 million worth of goods were on the ship, according to an estimate by insurance experts from the Russell Group.

Of these, $401 million were cars, none of which are likely to be salvageable. Now that the ship has been abandoned, the fire will likely jump from vehicle to vehicle, potentially gutting every car. The cause of the fire has not yet been confirmed, but lithium-ion batteries inside the cars are likely contributing to the persistent fire.

Although insurance policies can step in to cover lost cargo, they cannot magically generate new vehicles to replace those lost at sea. Vehicle owners can benefit from feedback on past cases of cargo shipwrecks with cars on board to understand how Volkswagen will handle the situation.

Since 2002, at least eight major incidents involving vehicle carrier vessels have taken place, Autoweek reported. One of these incidents, the capsizing of the vessel on golden ray in 2019, shows precedent for Volkswagen’s potential response.

When a number of porches fell into the golden ray capsizing, the company reproduced the cars of the order as they were intended. The company plans to take a similar action for cars lost in the Felicity As Fire.

“We are already working to replace each car affected by this incident,” Porsche spokesman Marcus Kabel said. told Bloomberg. “The cars will be as close to their original ordered specifications as possible.”

Bentley also confirmed to Bloomberg that they intend to replace all 189 of its vehicles that were on board.

A supply chain nightmare

Manufacturers may be willing to redo all lost vehicles, but some owners may not want to wait several more months for their cars.

Automakers around the world have struggled to source semiconductors, a problem that has led to months-long delays in new cars.

“These figures have once again shown the precariousness of global supply chains. The incident comes at a bad time for global automakers [that] are in the midst of a semiconductor supply chain crisis, causing further delays for new cars. An event like this will do little to inspire consumer confidence,” Russell Group’s Suki Basi said in a press release.

“Using our ALPS Scenario Factory, we have identified that the Volkswagen brand and its subsidiaries do indeed have significant exposure to this event, numbering in the millions.”

This is not the first freighter accidents have caused supply chain issues in recent memory. Last March, the freighter the never given became lodged in the Suez Canal, creating supply chain chaos for weeks after the ship was dislodged. &

Courtney DuChene is Associate Editor at Risk & Insurance. She can be reached at [email protected]

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