At 0200 hours on 19 January, while 150 miles from Cape Hatteras, North Carolina in position 35.00N 72.30W , two explosions awoke the passengers and crew. About twenty minutes after being torpedoed by German U-66 (Korvkpt. Richard Zapp/Knight's Cross), the ship sank. The torpedoes had destroyed six of the life boats. The remaining boats were overloaded and many people struggled in the water before drowning.

The Master, Capt. H. O. Giffen, 85 crew, one gunner, and 164 passengers were lost. The Chief Officer, 21 crew and 49 passengers were rescued after 5 days in an open boat by the U.S. ship Coamo and landed at Puerto Rico. The Chief Officer, P. A. Kelly was awarded the MBE and the Lloyds War Medal for bravery at sea.

The HMS Lady Hawkins, featured
 on a stamp from Montserrat.

Coamo was later torpedoed on December 9, 1942 and sank with the loss of 133 passengers and crew.

The U-66 was sunk on May 6, 1944 by the destroyer escort USS Buckley.  There were 36 survivors, but 24 of the crew died.

In the last months of the war, (by then) Fregattenkapitän Richard Zapp took command of the Marine Regiment Zapp and defended the U-boat base at La Rochelle right up to the end of the war, which he survived, in May 1945. He then spent more than two years in French captivity. He died in 1964.

Korvkpt. Zapp with Knight's Cross.