In January 1915, after a little more than one year of service, Washingtonian collided with the schooner Elizabeth Palmer off the Delaware coast and sank in ten minutes with the loss of her $1,000,000 cargo of 10,000 long tons (10,200 t) of raw Hawaiian sugar.

The construction was financed by Maryland Steel with a credit plan that called for a five percent down payment in cash and nine monthly installments for the balance.

This loss of access (the Panama Canal was not yet open until later that year) caused American-Hawaiian to return to its historic route of sailing around South America via the Strait of Magellan in late April.

[13] During the US occupation, the Washingtonian was chartered by the US Navy Department to serve as a non-commissioned refrigerator and supply ship for the US naval fleet off Mexico.

[16] Washingtonian sailed from Los Angeles in early October with a load of California products—including canned and dried fruits, beans, and wine—for New York City and Boston.

[7] At 3:30 a.m. on 26 January, some 20 nautical miles (37 km) from Fenwick Island, Delaware, the American schooner Elizabeth Palmer[Note 2] was under full sail at 8 knots (15 km/h) on a southwest by south course.

Less than a mile (2 km) away, Elizabeth Palmer, with her jib boom and the top of her foremast stripped away by the impact, began taking on water through her split seams.

[7] Washingtonian's 39 survivors and all 13 crew members from Elizabeth Palmer were picked up about an hour after the collision by the passenger liner Hamilton of the Old Dominion Line, which arrived at New York the next day.

[18][Note 3] Contemporary news reports in The New York Times and The Wall Street Journal both told of the collision's impact on the sugar market.

Further affecting the situation was World War I, then ongoing in Europe,[Note 4] which had reduced the tonnage of shipping available to transport commodities like sugar.