There are a few isolated states that do not, in one way oranother, depend on a river, canal, or harbor as part of theirtransportation infrastructure. There is virtually no navigation onthe Colorado or Rio Grande Rivers in New Mexico, Arizona, Nevada,Utah or Colorado, and regular steamboat service doesn't get as farup the Missouri to Montana as it once did; however, for most otherstates their rivers, harbors and barge canals are vital.

On that recent trip discussed earlier in this series, onedestination was the old Erie Canal and its often side-by-sidecompanion, the New York State Barge Canal. On that same trip, wecrossed seven other remnants of New York canals that once served asthe state's key means of transport before railroads. My wife and Iwatched large boats lifted through canal locks, saw barges on theHudson, crossed canals in Massachusetts, Rhode Island, Ohio, andConnecticut, and visited a number of Pennsylvania and Marylandcanals, some of which are now national parks. In Indiana, we made adonation of books to the Wabash & Erie Canal Park in Delphi.The Illinois State Barge Canal is often in the news, not related toshipping, but because of large foreign carp that migrate up theMississippi and Illinois River and then enter the Great Lakes,devastating local game fish. 

Vital Shipping Lanes
Drought nearly closedthe Mississippi to navigation last summer; only a very wetHurricane Isaac in September refloated marooned tugs and barges.The nation's river systems are vitally important shipping lanes,including the Ohio/Missouri/Illinois/Arkansas/Tennessee Rivers andtheir navigable tributaries, along with the Susquehanna, James, St.John, Sacramento, Hudson, Columbia and other river systems thatsupply cheap transport of coal, grain and other products to andfrom up-stream cities. Perhaps the most important of these systemsis the Great Lakes and the St. Lawrence Seaway—the North Coast—withall its city harbors in both Canada and the U.S., from Duluth andChicago to Buffalo and Rochester. These lakes and their connectingrivers and canals (the Sault Ste. Marie, the Welland, and so on)are vital to landlocked cities otherwise limited to landtransportation such as road and rail. 

Consider the major U.S. harbors used for internationaltransport, shipping U. S. raw materials to other nations andhandling intermodal shipments to and from foreign ports. Were thePorts of Los Angeles (San Pedro and Long Beach), San Francisco Bay,Portland and Seattle unavailable, Asian goods would cost far more,being transported through the Panama Canal to Gulf or Atlanticharbors. 

Unfair Competition
There is an element of unfairness, however, in the way ourtransportation infrastructure functions. While the relationshipbetween intermodal harbors and railroads is symbiotic—neither couldsurvive without the other—the same is not true for the internalwater transportation systems of rivers and barge canals.

The 234-mile Tennessee-Tombigbee Waterway between the TennesseeRiver just east of Corinth, Mississippi, connecting with theTombigbee River near Demopolis, Alabama, to reach the Mobile Bay ismaintained by the U.S. Army Corps of Engineers, but competes withat least four parallel railroad routes.

The railroads must maintain their own track, bridges, andright-of-ways, in addition to not only paying fuel tax for theirexpensive locomotives but also property taxes, while the bargelines using these and other federally maintained waterways pay onlya few lock charges and fuel tax for their fairly economical tugs.The railroads must also build and operate the lift bridges thatallow commercial navigation. 

Even in river systems that are navigable only for shortdistances, such as the Cuyahoga, Calumet, Sacramento, Piscataqua,or Patapsco, the Corps of Engineers keeps the rivers open forshipping at taxpayer (not user) cost.

Major harbors are constantly in need of dredging, again courtesyof the Army, and places such as Mobile, Tampa Bay, Miami, NewOrleans, or the Potomac could not be used were it not for the siltbeing constantly removed. There is no insurance policy that coverssilt build-up removal. The Coast Guard monitors shipping safety;the U.S. Merchant Marine Academy at Kings Point, New York, turnsout the ship captains just as West Point turns out secondlieutenants. Meanwhile, the railroads have to provide their owntraining to Federal Railroad Administration standards and maintaintheir own bridges and right-of-ways at their own expense. As withthe airlines, few of which have ever been known to build their ownairports or operate their own FAA, there seems to be some inequityhere.

Ongoing Maintenance
If the key to risk control is loss prevention, then the key to lossprevention is constant maintenance. Canals, harbors and waterwaysrequire constant care. New silt is being continually deposited bythe rivers that flow into the waterway. Locks and the mechanismsthat operate them must be constantly monitored, repaired orreplaced. As we watched a ship pass up the New York Barge Canal,the gates of the lock had to close with exact preciseness. Anyleakage would quickly become a hole, and any hole a deluge thatwould render the lock useless. The principles of canal lockconstruction are ancient: Britain, Ireland and Europe have hadcanals for centuries, and the Chinese built the Grand Canal southof Beijing in the Fifth Century B.C.; it is the longest in theworld. It, too, is still in use and therefore must undergocontinual maintenance. 

Although most canal locks are stone, not allstone is created equal. Some limestone is strong and will resistthe constant moisture of a canal; other stone will soon erode andcollapse, requiring rebuilding, which is not easy in an activewaterway. This is part of what doomed the Wabash & Erie Canal,along with the building of the Wabash Railroad. Sandstone is alsoused in many waterways, or as breakfronts for harborprotection. 

Rivers and waterways are used for a variety of purposes besidesnavigation and recreation; when the Ashland Oil tank on thetributary to the Monongahela River burst and oil began flowing downthe Ohio River, cities all the way from Pittsburgh to Cairo had tomonitor their water intake systems to check for pollution. Theclean-up cost millions, the type of direct and indirect disasterthat can easily happen on a waterway. As a former Clevelander, Itend to bristle when I hear jokes about how polluted the CuyahogaRiver was—in fact so polluted that it had caught fire severaltimes. Well, I checked. The Cleveland Fire Department maintains afire boat just beyond what is called Collision Bend on the river,but as there are now fewer steel mills, refineries and chemicalplants on the river, there is also less pollution. Some cities havesmog, the combination of smoke and fog; Cleveland had smawl: acombination of smoke and smell—all those boat andrailroad-delivered ores, chemicals, sulfur and coal that poweredCleveland's booming industries.

Maintaining the Ships
While state and federal governments maintain the barge canals,harbors, and waterways, the users of those systems must managetheir own risks. There is a hill above the San Pedro ship terminalwhere one can park and watch as shiploads of containers areunloaded by cranes onto railroad flatcars of the Union Pacific andBurlington Northern Santa Fe (BNSF) railroads for their journeyseast and north. It takes awhile to unload a ship, but several a dayundergo unloading both there and at Long Beach, the docks in SanFrancisco Bay, Portland and Seattle (not to mention Vancouver andPrince Rupert in Canada). Similar scenes are found along Gulf Coastand Atlantic ports, but the container ships are joined by othertypes of vessels as well, including oil tankers, ore boats, cruiseships, coastal freighters—virtually every type of vessel that keepsAmerican commerce strong. 

The loading and unloading of equipment for each type of cargo isdifferent. To load or unload a tanker, often the tanker must remainoutside the harbor, with long hoses or pipelines to transport theliquids. Whereas at other locations, they can dock right next tothe massive tanks or elevators that hold whatever the product beingshipped might be, which could be lumber, chemicals, grain, coal(metallurgical coal is one of the major exports shipped fromNorfolk, for example), or some distilled product. 

As a youth I often watched trainloads of coal unloaded on a rackin Lorain, Ohio, where the car would roll out onto a curved trackand, at a certain point, the vents at the bottom of the car wouldopen with the coal flowing down a chute into the boat's hold; thenthe car would roll backwards and another would take its place. Asone part of the boat's hold would fill, the boat would move forwardor backward so that the coal would be evenly distributed. 

In the Great Lakes, cargo vessels are called “boats;” on theocean, they are “ships.” Some Great Lakes boats were hundreds offeet long—and it was navigating the 360-degree elbow in theCuyahoga that gave rise to the “Collision Bend” nickname—a nameused by Les Roberts in one of his mystery novels about Cleveland.Iron ore was unloaded by what were known as “grasshopper cranes,” agiant scoop on a steel arm that bent about 90 degrees and couldreach down into the hold of the boat and dig out the ore. All ofthis infrastructure required maintenance and, of course, riskmanagement. 

An Enduring Mystique
The mystique of ships and boats, harbors, warehouses, andlighthouses is understandable. Like the old song, a ship represents'faraway places with strange sounding names,' although in the 21stcentury most shipping involves a simple back and forth between oneport, such as the Persian Gulf and another, such as Texas City,month after month. Cruise ships may vary their itineraries, butcargo tends to be market-controlled, with regularity. Deviation ishazardous, as the captain of the Costa Concordia that crashed onthe rocks off an Italian island discovered a year ago, killing morethan 30 passengers. How about that for a claim? A multi-milliondollar vessel, lost income, injured and dead passengers, andhundreds of international maritime attorneys trying to figure it allout.

Perils of the Sea…
The 17th century Lloyd's policy covered a vessel and its cargo forthe “adventures and perils … of the seas, fires, assailing thieves,pirates, rovers, jettisons, barratry of the Master and Mariners,and all other like losses….” The fear of sea monsters (other thansubmarines in time of war) may be less today, but pirates andassailing thieves, fires and storms are still very real causes ofloss to ships. The historic loss series in Claims over the decadeshave told of the explosions of ships in Halifax and Texas City, theSultana and of the Titanic, as well as fires that remain a threatat sea. Few major harbors are without their fire boats, and fireand explosion is as big a threat to small craft as anygale. 

Imagine receiving a claim like Concordia, a pirated oil tankeror a millionaire's yacht off Somalia. Where would an adjuster start? The marinepolicy on a sinking vessel may contain some of that 17th centurywording, but it also contains both written and understood warrants(“warranted free” means “excluded”) and conditions that affect thehull, the freight and the P&I (Protection and Indemnity)—thethird party liability. That bit about the captain “going down withthe ship”? Well, perhaps Concordia's captain should have. It's partof the “sue and labor” condition: as long as the captain is aboardthe salvors are not in control. A few insurers and theirreinsurers—or ship owners—may be seeing red ink for 2012 as aresult. 

Review of the policies and contracts must come first in the lossof a ship. Then the international maritime law must be reviewed.The investigation must be accurate and expedited. All that isrequired before the loss can be assessed. Average adjusters willassess the hull damage. The rest is routine investigation,evaluation and negotiation, as in any claim.

Water transportation is ancient, but it is also extremelymodern, and claims adjusters need to be prepared to handle suchclaims, whether they involve a bass boat with an out-board motor oran oil tanker with a multi-million dollar cargo.

Ken Brownlee, CPCU, is a former adjuster and risk manager basedin Atlanta, Ga. He now authors and edits claim-adjustingtextbooks.