Navy, Shipyards Settle Dispute that Delayed Submarine Orders

The U.S. Navy has settled an insurance dispute with two key shipbuilding companies that has delayed the ordering of two Virginia-class submarines, according to people familiar with the matter.

The dispute centered on who should pay if a Tomahawk cruise missile were to accidentally explode during construction, damaging or destroying a nuclear-powered submarine worth more than $3 billion. For years, the Navy had indemnified the yards—Electric Boat, which is owned by General Dynamics, and Newport News Shipbuilding, a division of HII—essentially providing the insurance that the yards found difficult to obtain from a private insurer.

But in 2018, the Navy decided the arrangement heaped too much risk on the service, and ceased to offer indemnification. The service asked the shipyards to find private insurance, but they declined. In February 2022, the Navy suspended plans to order long-lead parts for two Virginia-class attack submarines. “Under the current law, Secretary of the Navy Carlos Del Toro makes the final decision on indemnification for Navy and Marine Corps contracts,” USNI News wrote in December.