Defeating Limitation of Liability
in Maritime Law, Part 2
From the February issue of 2006 Trial Magazine, the magazine of The Association of Trial Lawyers of America. Posted with permission of Trial Magazine.
Limitation of liability was invoked in the loss of RMS Titanic, which in April 1912 struck an iceberg and sank, taking more than 1,500 lives. In the wrongful death and injury lawsuits that followed, Supreme Court Justice Oliver Wendell Holmes held that the Titanic’s British owner should be allowed to limit liability to the ship’s postcasualty value, which amounted to about $92,000 for a cluster of its remaining lifeboats. Read more below...
Defeating Limitation of Liability in Maritime Law, Part 2
Liability cannot be limited if the environmental incident was caused by gross negligence, willful misconduct, or theviolation of applicable federal safety, construction, or operating regulations. Also, if the responsible party fails orrefuses to report the incident, provide reasonable cooperation and assistance, or comply with an order under §1321(c)or (e) of OPA 90 or the Intervention on the High Seas Act,14 limitation of liability would be denied.
A shipowner also cannot limit liability for crew wages, maintenance, and cure. Maintenance and cure cover a seaman’sliving and medical expenses, respectively, and constitute economic damages. Therefore, a seaman does not need todemonstrate the negligence of the employer or the unseaworthiness of the vessel to qualify for them.Owner’s complaint
According to the Federal Rules of Civil Procedure,15 a vessel owner may file a complaint to limit liability in theappropriate district court no later than six months after receiving a written claim of loss. The complaint should includethe date and place of the incident, the vessel’s current location and value, the amount of freight received andrecoverable, and the amount of all demands by injured parties.16
The complaint may be filed in any district where the vessel has been attached, arrested, or sued or, if not in a suit, inany district where the vessel is physically present. If the vessel sank in any navigable water, any district may benamed.17
The shipowner may also invoke limitation by pleading it as an affirmative defense in his or her answer to a lawsuit.18By invoking limitation with a complaint rather than waiting to answer, however, the shipowner exercises control overvenue (although venue can be transferred by the plaintiff’s motion). Another benefit to the shipowner of invokinglimitation with a complaint is that it consolidates all claims stemming from a marine casualty. The court then entersan injunction barring claimants from pursuing their claims outside the limitation action.19
For merchant mariners and commercial fishermen, the Saving to Suitors Clause20 favors the plaintiff who acts first.Commercial mariners recognized as “seamen”21 enjoy special remedies under the Jones Act.22 A Jones Act casebrought in state court is generally not removable to federal court because of the Saving to Suitors Clause. However, adefendant shipowner can file a motion to remove the case to federal court.
If the shipowner acts first and files a limitation complaint, the case goes to federal court. By moving first and filing alawsuit in state court, the plaintiff can preempt the shipowner from selecting venue. If the shipowner doesn’t actwithin six months of receiving written notice of the claim, the plaintiff is free to initiate an action in the forum of hisor her choice.
When the defendant shipowner files the complaint for limitation of, or exoneration from, liability, he or she shouldexpect it to be challenged by the plaintiff’s motion to lift the limitation stay. Before the district court will dissolve theinjunction, the plaintiff must stipulate that the value of the limitation fund equals the combined value of the vesseland its cargo; waive the right to claim res judicata based on any judgment rendered against the vessel owner outsideof the limitation proceedings; and concede the district court’s exclusive jurisdiction to determine limitation of liability.23
As the Titanic and Morro Castle cases showed, the value of a severely damaged ship can be meager. Even with the act’s amendments, insurance carriers are protected from large wrongful death and injury claims. And because theproceeds of hull insurance do not enter the limitation fund—even though owners are compensated for their losses—that money remains out of the reach of marine casualty victims.
Sink or swimTo defeat limitation of liability, either as a complaint or an affirmative defense, the plaintiff attorney mustdemonstrate the vessel owner’s privity and knowledge of negligent operations or dangerous conditions that resulted inthe loss. This can include the owner’s knowledge that personnel failed to follow prudent practices or standardoperating procedures—that is, they failed to comply with necessary training, properly qualify officers and crew forstanding watch, properly verify backgrounds of crew members, or take action after learning of alcohol or drug abuse.
The focus is on the shipowner’s knowledge, actual or imputed, of negligent conduct. If the shipowner had no reason toknow of the crew’s negligence—for example, an errant navigational error—liability could be limited. The shipownerhas the burden of demonstrating that he or she did not have privity or knowledge of the negligence orunseaworthiness giving rise to the loss.
If a shipowner argues that he or she exercised proper care in discovering conditions that rendered a vesselunseaworthy, the ship’s records and logs will help verify that claim. If Coast Guard inspections reveal, for instance,boiler safety valves that failed to lift during tests, emergency-fire-pump diesel engines that failed to start on demand,watertight doors that failed to operate remotely, or lifeboat davits that failed to descend, the shipowner will find itdifficult to argue that he or she did not have knowledge of these problems.
Similarly, in a case involving crew fatigue, relevant evidence would include time sheets, watch schedules, and medicalrecords. If a claimant could show that excessive overtime, absence of relief personnel, or known medical conditionsled to crew fatigue, the owner would be responsible.In fighting liability limits, do not overlook the limitation fund. If you represent a seriously injured claimant and theship is valued at $15,000, the $420 per ton allowance in the Loss of Life Amendments would apply. For a 10,000-tonship, the fund would be $4.2 million.
Case lawOne recent case testing the scope of liability limits was brought by a cruise ship passenger who was injured whileoperating a Jet Ski when she was struck by another Jet Ski.24 Both vehicles had been rented from the cruise line.The injured passenger argued that the cruise line failed to properly train and supervise the operators, allowed toomany vessels to operate in a restricted area, failed to enforce safety rules, and failed to check operators forintoxication.25
Continue to Part Three - Defeating Limitation of Liability in Maritime Law, Tim Akpinar - Prepared for the Association of Trial Lawyers of America
A shipowner also cannot limit liability for crew wages, maintenance, and cure. Maintenance and cure cover a seaman’sliving and medical expenses, respectively, and constitute economic damages. Therefore, a seaman does not need todemonstrate the negligence of the employer or the unseaworthiness of the vessel to qualify for them.Owner’s complaint
According to the Federal Rules of Civil Procedure,15 a vessel owner may file a complaint to limit liability in theappropriate district court no later than six months after receiving a written claim of loss. The complaint should includethe date and place of the incident, the vessel’s current location and value, the amount of freight received andrecoverable, and the amount of all demands by injured parties.16
The complaint may be filed in any district where the vessel has been attached, arrested, or sued or, if not in a suit, inany district where the vessel is physically present. If the vessel sank in any navigable water, any district may benamed.17
The shipowner may also invoke limitation by pleading it as an affirmative defense in his or her answer to a lawsuit.18By invoking limitation with a complaint rather than waiting to answer, however, the shipowner exercises control overvenue (although venue can be transferred by the plaintiff’s motion). Another benefit to the shipowner of invokinglimitation with a complaint is that it consolidates all claims stemming from a marine casualty. The court then entersan injunction barring claimants from pursuing their claims outside the limitation action.19
For merchant mariners and commercial fishermen, the Saving to Suitors Clause20 favors the plaintiff who acts first.Commercial mariners recognized as “seamen”21 enjoy special remedies under the Jones Act.22 A Jones Act casebrought in state court is generally not removable to federal court because of the Saving to Suitors Clause. However, adefendant shipowner can file a motion to remove the case to federal court.
If the shipowner acts first and files a limitation complaint, the case goes to federal court. By moving first and filing alawsuit in state court, the plaintiff can preempt the shipowner from selecting venue. If the shipowner doesn’t actwithin six months of receiving written notice of the claim, the plaintiff is free to initiate an action in the forum of hisor her choice.
When the defendant shipowner files the complaint for limitation of, or exoneration from, liability, he or she shouldexpect it to be challenged by the plaintiff’s motion to lift the limitation stay. Before the district court will dissolve theinjunction, the plaintiff must stipulate that the value of the limitation fund equals the combined value of the vesseland its cargo; waive the right to claim res judicata based on any judgment rendered against the vessel owner outsideof the limitation proceedings; and concede the district court’s exclusive jurisdiction to determine limitation of liability.23
As the Titanic and Morro Castle cases showed, the value of a severely damaged ship can be meager. Even with the act’s amendments, insurance carriers are protected from large wrongful death and injury claims. And because theproceeds of hull insurance do not enter the limitation fund—even though owners are compensated for their losses—that money remains out of the reach of marine casualty victims.
Sink or swimTo defeat limitation of liability, either as a complaint or an affirmative defense, the plaintiff attorney mustdemonstrate the vessel owner’s privity and knowledge of negligent operations or dangerous conditions that resulted inthe loss. This can include the owner’s knowledge that personnel failed to follow prudent practices or standardoperating procedures—that is, they failed to comply with necessary training, properly qualify officers and crew forstanding watch, properly verify backgrounds of crew members, or take action after learning of alcohol or drug abuse.
The focus is on the shipowner’s knowledge, actual or imputed, of negligent conduct. If the shipowner had no reason toknow of the crew’s negligence—for example, an errant navigational error—liability could be limited. The shipownerhas the burden of demonstrating that he or she did not have privity or knowledge of the negligence orunseaworthiness giving rise to the loss.
If a shipowner argues that he or she exercised proper care in discovering conditions that rendered a vesselunseaworthy, the ship’s records and logs will help verify that claim. If Coast Guard inspections reveal, for instance,boiler safety valves that failed to lift during tests, emergency-fire-pump diesel engines that failed to start on demand,watertight doors that failed to operate remotely, or lifeboat davits that failed to descend, the shipowner will find itdifficult to argue that he or she did not have knowledge of these problems.
Similarly, in a case involving crew fatigue, relevant evidence would include time sheets, watch schedules, and medicalrecords. If a claimant could show that excessive overtime, absence of relief personnel, or known medical conditionsled to crew fatigue, the owner would be responsible.In fighting liability limits, do not overlook the limitation fund. If you represent a seriously injured claimant and theship is valued at $15,000, the $420 per ton allowance in the Loss of Life Amendments would apply. For a 10,000-tonship, the fund would be $4.2 million.
Case lawOne recent case testing the scope of liability limits was brought by a cruise ship passenger who was injured whileoperating a Jet Ski when she was struck by another Jet Ski.24 Both vehicles had been rented from the cruise line.The injured passenger argued that the cruise line failed to properly train and supervise the operators, allowed toomany vessels to operate in a restricted area, failed to enforce safety rules, and failed to check operators forintoxication.25
Continue to Part Three - Defeating Limitation of Liability in Maritime Law, Tim Akpinar - Prepared for the Association of Trial Lawyers of America