Hong Kong Ferry Tragedy Leaves 38 Dead. Confusion Remains on Compensation Claims
China’s 8 day “golden week” national holiday is one of Hong Kong’s biggest holiday periods of the year, when tourists, predominantly from the mainland, swarm into Hong Kong, more than doubling the city’s population of seven million. It all centers around National Day, held on the 1st of October, celebrating the founding of the People’s Republic of China. Golden week in Hong Kong is marked by a flood of mainland shoppers, a massive fireworks display over Victoria Harbour, and long queues for public transport throughout the region.
This year however, Hong Kong has been left reeling after a catastrophic collision between a commuter ferry, the Sea Smooth, and a Hong Kong Electric Co. owned ferry, the Lamma IV. The tragic event resulted in the sinking of the Lamma IV and a death toll of 38, including five children.
Hong Kong Electric Co., one of Hong Kong’s two electricity suppliers, operates a wind farm and coal fired power station on Lamma Island. On Monday, employees and their relatives had been treated to a tour of the company’s facilities and dinner at the power station, before boarding the Lamma IV to view the spectacular National Day fireworks display in Victoria Harbour.
The Lamma IV, carrying over 120 passengers, was only 5 minutes into its journey from Lamma Island to Victoria Harbour when it collided with the Sea Smooth at about 20:30. The Sea Smooth, a scheduled commuter ferry owned by Hong Kong & Kowloon Ferry Holdings Ltd, had approximately 100 passengers and crew on board.
The Lamma IV was struck on its port side towards the stern of the boat, the force of the impact knocking passengers into the water and tearing a hole deep enough to rupture two watertight compartments in the rear of the vessel. This allowed the stern to fill with water and sink within minutes, leaving only the front section out of the water.
The Sea Smooth, a twin hulled vessel, suffered some damage to its port bow, but was able to make it safely to shore. Lamma resident Clare Kirkman, who was returning home from Hong Kong island aboard the public ferry, described the panic and confusion immediately following the collision, “People at the front started screaming and saying there was water coming in, and the boat was tilting to the side. Nobody had a clue what we had hit. There was complete panic. Nobody explained anything. The crew was terrible, useless.” Several passengers aboard the Sea Smooth were injured during the collision, but no serious injuries were reported.
Aboard the Lamma IV, things were dramatically different. A boatload of excited families and friends on their way to enjoy a fireworks display suddenly found themselves in a deathtrap, as massive damage to the 27 metre long vessel caused the stern of the boat to start sinking very rapidly, trapping passengers inside the vessel as it floated with its bow pointing straight up in the air. “There was not enough time to put on a lifejacket, not time to fasten it. We tried to hold onto something above but we had no luck and we slipped,” one emotional survivor told reporters. The boat sank in less than ten minutes, and passengers had to wait more than 20 minutes for help to arrive on the scene. Some passengers were trapped inside the Lamma IV and had to break windows to get to the surface.The major rescue operation involved teams of divers, helicopters and boats. Many were pulled from the sea, including 30 who had already drowned. Survivors were transported by boat to Hong Kong Island, where ambulances were waiting to take them to hospital.
In all, 38 people, including five children, died in this disaster. More than 100 people were taken to hospital, with nine suffering serious injuries or in critical condition, although at least 66 have been discharged so far. The crash is the worst maritime disaster in Hong Kong since 1971, when a ferry traveling between Hong Kong and Macau sank in a typhoon, leaving 88 dead.
Despite having one of the world’s busiest shipping lanes, Hong Kong has an excellent safety record which only makes this disaster even more unexpected and shocking. Accidents of this magnitude are so rare, in fact, that police chief Tsang Wai-hung has said that the suspects “did not exercise the care required of them by law to ensure the safety of the vessels they were operating and the people on board”. Human error as the chief cause of this accident seems to be a logical conclusion, given the high safety standards. More clarity will surely come during the course of investigations promised by the government.
These kinds of unexpected disasters are exactly what insurance is meant to cover. While insurance cannot bring back the lives that have been lost, it can most definitely help by dealing with the financial burden of such a catastrophic event. Both vessels are insured by the Shipowners Club, a marine liability insurer based in Singapore. Mike Hammond, claims manager at the Shipowners Club, has confirmed that two Hong Kong law firms have been retained to help handle legal and insurance issues relating to the accident. They will have their work cut out for them, having to untangle the complicated legal scenario.
At this time there is still a lot of speculation regarding what exactly happened, but eyewitness accounts and investigations by local media have helped to build an initial picture of the actions of the crew immediately before, during, and after the collision.
Current reports from the local media suggest that the crew of the Hong Kong Electric vessel, the Lamma IV, may have been negligent insofar as they did not ensure children were wearing life jackets, and failed to keep an accurate passenger manifest, which has made it almost impossible for authorities ascertain how many people are still unaccounted for.
The Sea Smooth, on the other hand, was reported to be travelling at excessive speed and the crew appears to have failed to ensure that they passed within a safe distance of the Lamma IV. It is also possible that the Sea Smooth had not kept to its usual course, sailing closer to the headland than normal in order to clear the island more quickly. Some eyewitnesses allege that the Sea Smooth did not remain at the scene to offer assistance to the stricken Lamma IV, as per standard maritime protocol. It can be argued that had it provided assistance at the scene, the death toll could have been much lower.
Determining liability in this disaster will certainly be a lengthy and involved process. Once is has become clear what exactly happened, the Shipowners Club, as insurer, will build a very specific chain of events, in order to determine which events were the the cause of each liability. Insurance policies have very specific exceptions and limitations, and any liability caused by an excepted event, directly or indirectly, will usually not be covered. Due to the possible negligence of the crews, it is entirely possible that Hong Kong & Kowloon Ferry Holdings Ltd or Hong Kong Electric will end up shouldering a large part of the financial burden themselves, as Paul Law Siu-hung, the president of the International Professional Insurance Consulting Association explains, “(Insurers) won’t compensate for something that could have been under control.”
One possible scenario, for example, would be that both parties are found to be equally responsible for the initial collision, but that the actions of the captain of the Sea Smooth, when he left the scene directly after the collision without lending assistance to the sinking Lamma IV, were the main cause of the resulting loss of life. This would mean that liability for injuries and damage sustained during the collision would be shared by the two companies, and any liability arising out of the deaths as a result of drowning would be assigned to Hong Kong & Kowloon Ferry Holdings Ltd. This is but one of a myriad of possible scenarios, with any number of possible findings.
One thing is certain, this disaster is going to cost some of the parties a lot of money. If one considers the loss of future income, hospital bills, inevitable legal action and compensation for physical and mental suffering, as well as possible penalties and fines, it becomes clear that the numbers are going to be astronomical.
In the area of compensation, Hong Kong Electric faces much higher possible claims than Hong Kong & Kowloon Ferry Holdings, because passengers on the Lamma IV were not fare paying passengers but had won their places on the trip in a lottery. Fare paying passengers have a compensation limit imposed as a condition of carriage of about HKD4 million under International Maritime Organization statutes. However, according to the IMO statutes, the limit does not apply if it is found that the loss resulted from “personal act or omission, committed with the intent to cause such a loss, or recklessly and with knowledge that such loss would probably result”. If investigations show that the crew of the Sea Smooth acted recklessly, it would open the floodgates for a slew of huge compensation claims, or at least divert some of the financial liability from Hong Kong Electric.
In a gesture of solidarity, Cheung Kong, which owns Hong Kong Electric, has said it will pay HKD 200,000 (US$25,800) to each family who lost somebody in the accident. Hong Kong Electric also said the company had been accompanying families to hospitals and was arranging counseling sessions.
Some passengers of the Sea Smooth, despite the lack of any serious injury, will undoubtedly file compensation claims, and most probably for emotional suffering. While it would be hard to quantify the payout, we can expect Hong Kong & Kowloon Ferry Holdings to try and reach an out of court settlement with the claimants as a group, since they would all have suffered similarly. A large factor in determining the payout received will be the way the crew helped the passengers deal with the accident at the time. Inaction or panic by the crew could definitely have increased trauma suffered by the passengers and also the loss of face suffered by the operators of the ferry.
The Lamma IV case is an entirely different matter. A massive death toll and large number of hospitalizations will give rise to a huge set of claims, all inflated by the emotional trauma and suffering caused by the disaster. It is clear that there are going to be record setting payouts, probably making the HKD4 million limit seem like small change. What is still to be resolved, is who is going to foot the bill.
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