Chemical company not “strictly liable” in ship fire case
Chemical company not “strictly liable” in ship fire case
A federal appeals court has ordered further court proceedings in the litigation growing out of a spectacular explosion and fire that destroyed the containership DG Harmony off the coast of Brazil in 1998.
On Monday, the U.S. Second Circuit Court of Appeals in New York affirmed a district court judge’s factual finding in October 2005 that a chemical made by PPG Industries caused the explosion and that the company breached its warning duty about the hazardous cargo.
But the appeals court reversed other findings by District Court Judge Denny Chin that said PPG was strictly liable under the Carriage of Goods by Sea Act and liable under a general negligence theory.
It remanded the case back to Chin, who will now have to conduct further proceedings on whether warnings would have prevented the casualty. Chin has scheduled a meeting for this Thursday.
About $20 million of cargo was lost in the accident, which also destroyed the DG Harmony after a fire that lasted three days. The 1,800-TEU ship was declared a total loss when it was determined that the cost of repairs would be $18 million when the ship had been purchased for $16.4 million.
At the time the ship was in a service between the East coasts of the United States and South America on a service jointly operated by Cho Yang, Di Gregorio, Senator Line, Pan-American, Zim and Hanjin.
Cargo interests are said to have settled with the carriers and the owner of the ship for about $7 million.
Anthony Pruzinsky, an attorney representing cargo interests in the case, said while he is still evaluating the Second Circuit’s decision, what Chin decides next could be critical in determining whether shippers are able to recover further compensation for their destroyed cargo from PPG.
The chemical that Chin said caused the explosion and fire was calcium hypochlorite (hydrated), commonly called calhypo. It is commonly used as a disinfectant to treat, for example, swimming pools and drinking water.
The chemical has been involved in a number of explosions and fires in warehouses or vessels, including a fire and explosion that destroyed the Contship France in October 1997, about a year before the Harmony fire.
The chemical has a tendency to decompose at elevated temperatures.
In some cases, including the Contship case, calhypo made by PPG was involved in these accidents; in other cases, they involve produce made by other chemical manufacturers.
John Currie, principal of the Queensbury, N.Y.-based hazardous materials consulting firm Currie Associates, said that while some shipping companies continue to transport calhypo, others no longer do so because of difficulty in obtaining insurance.
Some carriers are also said to be reluctant to move the cargo unless it is refrigerated.
Stanley McDermott III, an attorney with the law firm DLA Piper, which represented PPG, said the appeals court decision ratifies what the court held the year before in the Contship France case, that there is no strict liability when a flammable product such as calhypo is stored in the vicinity of a heat source on the ship.
On the DG Harmony, the cargo was stored near a bunker tank that was heated to make the fuel pumpable.
The Second Circuit said in the case of the DG Harmony, “the ship-owning interests may not have known ‘the precise characteristics of the cargo,’ but they knew that calhypo was an unstable substance that became vulnerable to combustion when heated. Despite this knowledge, the ship-owning interests exposed the calhypo to the general condition — heat — that induces such combustion. As a result, although they may prevail on a negligence theory, the ship-owning interests ‘cannot prevail on strict liability.’ “
In his original decision, Chin said the chemical was “unreasonably dangerous” when it left PPG’s control, and that the company had failed to give adequate warnings. He said the chemical was “shipped out by truck approximately 36 hours after the calhypo was manufactured, under circumstances that did not permit it to cool down.” Chin also said PPG should have done tests to see if the way it was densely packaging calhypo was making it more hazardous.
McDermott said that even though Chin found PPG breached the duty to warn, “the issue will be did that have any true adverse consequence. That is the issue the district judge will have to focus on.”
He noted that the shipowner had received a warning about the chemical from the mutual marine underwriter the Swedish Club.
“The district judge, I think, when evaluating the consequences of the breach of duty is going to have to focus on what the warning might have said,” he said. The warning from the Swedish Club may have been “the type of warning PPG might have been expected to give.” ' Chris Dupin