Defeating Limitation of Liability
in Maritime Law...
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 the 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...
Before a Staten Island ferry struck a pier on October 15, 2003, killing 11 people and injuring more than 60, most of the passengers were unaware of an arcane concept of maritime law known as limitation of liability. They soon saw how a law meant to protect shipowners during the age of sail was invoked to prevent them from achieving a full and fair recovery for their losses.
Under the Limitation of Shipowners’ Liability Act of 1851,1 a shipowner may limit liability for losses from negligence or unseaworthiness arising without his or her privity (participation and involvement) and knowledge. Liability is limited for loss of life, personal injury, and loss of or damage to cargo. The act can also limit liability to the value of the vessel or the shipowner’s interest in the vessel and revenues earned from carrying passengers and cargo.2
After an investigation revealed that the pilot in the Staten Island ferry crash had passed out at the helm, the city of New York, citing the act, filed a complaint seeking to limit its liability to $14.4 million, the postcasualty value of the ferry.3 However, the National Transportation Safety Board introduced a formidable barrier to limiting liability when it blamed the accident on the city’s poor oversight of its ferry fleet and its failure to provide the fleet with effective safety measures.4
When the law was enacted, there was a compelling reason to limit liability. Going to sea was a venture filled with peril and uncertainty. Wrongful death, personal injury, and cargo damage claims from a sinking or catastrophic fire could expose a shipowner to liability far greater than the value of the vessel. This could discourage vessel owners and investors from engaging in maritime commerce.
The law limits liability for things a shipowner cannot control, such as the negligent actions of an officer on the other side of the world. It also limits liability for unseaworthy conditions of which the owner could not reasonably know.5 6
The Titanic case demonstrated that U.S. courts would allow a foreign steamship line to invoke American limitation law. Almost a century later, the issue raises concerns that owners of foreign liquid-natural-gas vessels could be protected from liability following a catastrophic explosion in a U.S. port.
The act was amended in 1935 as a result of another maritime tragedy, the loss of the Morro Castle. The liner caught fire off the New Jersey coast on September 9, 1935, and foundered on the beaches off Asbury Park. One hundred thirty-seven passengers and crew died.
The success of the owners in limiting their liability to the $20,000 residual value of the ship’s charred remains prompted passage of the Loss of Life Amendments.7 Applying to seagoing vessels only, the amendments provided that if the salvage value of the vessel was insufficient to satisfy wrongful death and injury claims, a limitation fund of $60 per ton salvaged would be established. The limitation fund was increased in 1984 to $420 per ton.
Limitation of liability has even been applied in boating accidents. For instance, a boat owner raised limitation of liability when his recreational boat caught fire at a Lake Michigan marina. The fire spread and damaged several of the surrounding vessels.8
When the owner attempted to limit liability to the $800 salvage value of the boat, the federal trial court dismissed his petition, finding that it lacked jurisdiction to hear the case. The circuit court affirmed, but the U.S. Supreme Court reversed and remanded back to the trial court, finding that maritime jurisdiction is appropriate “when a ‘potential hazard to maritime commerce arises out of activity that bears a substantial relationship to traditional maritime activity.’”9
This means that if the steering cable snaps on a worthless outboard skiff, causing it to crash into a blameless vessel, the owner of the skiff may limit a paralyzed passenger’s award to the $150 scrap value of the wrecked skiff. This concept has even been extended to personal watercraft, with the Eleventh Circuit limiting recovery for injuries caused by a Jet Ski accident.10
The act does not apply to every maritime mishap. The act cannot be invoked in environmental casualties involving the Oil Pollution Act of 1990 (OPA 90),11 Rivers and Harbors Appropriation Act,12 or Wreck Act.13 However, OPA 90 establishes its own limitation guidelines, providing that with respect to each incident, the liability of a responsibleparty shall not exceed:
(1) for a tank vessel, the greater of $1,200 per gross ton; - or in the case of a vessel greater than 3,000 gross tons, $10,000,000; - or in the case of a vessel of 3,000 gross tons or less, $2,000,000;
(2) for any other vessel, $600 per gross tons or $500,000, whichever is greater.
Liability cannot be limited if the environmental incident was caused by gross negligence, willful misconduct, or the violation of applicable federal safety, construction, or operating regulations. Also, if the responsible party fails or refuses 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. Continuation - Defeating Limitation of Liability in Maritime Law, Part Two by Tim AkpinarPrepared for the Association of Trial Lawyers of America
Under the Limitation of Shipowners’ Liability Act of 1851,1 a shipowner may limit liability for losses from negligence or unseaworthiness arising without his or her privity (participation and involvement) and knowledge. Liability is limited for loss of life, personal injury, and loss of or damage to cargo. The act can also limit liability to the value of the vessel or the shipowner’s interest in the vessel and revenues earned from carrying passengers and cargo.2
After an investigation revealed that the pilot in the Staten Island ferry crash had passed out at the helm, the city of New York, citing the act, filed a complaint seeking to limit its liability to $14.4 million, the postcasualty value of the ferry.3 However, the National Transportation Safety Board introduced a formidable barrier to limiting liability when it blamed the accident on the city’s poor oversight of its ferry fleet and its failure to provide the fleet with effective safety measures.4
When the law was enacted, there was a compelling reason to limit liability. Going to sea was a venture filled with peril and uncertainty. Wrongful death, personal injury, and cargo damage claims from a sinking or catastrophic fire could expose a shipowner to liability far greater than the value of the vessel. This could discourage vessel owners and investors from engaging in maritime commerce.
The law limits liability for things a shipowner cannot control, such as the negligent actions of an officer on the other side of the world. It also limits liability for unseaworthy conditions of which the owner could not reasonably know.5 6
The Titanic case demonstrated that U.S. courts would allow a foreign steamship line to invoke American limitation law. Almost a century later, the issue raises concerns that owners of foreign liquid-natural-gas vessels could be protected from liability following a catastrophic explosion in a U.S. port.
The act was amended in 1935 as a result of another maritime tragedy, the loss of the Morro Castle. The liner caught fire off the New Jersey coast on September 9, 1935, and foundered on the beaches off Asbury Park. One hundred thirty-seven passengers and crew died.
The success of the owners in limiting their liability to the $20,000 residual value of the ship’s charred remains prompted passage of the Loss of Life Amendments.7 Applying to seagoing vessels only, the amendments provided that if the salvage value of the vessel was insufficient to satisfy wrongful death and injury claims, a limitation fund of $60 per ton salvaged would be established. The limitation fund was increased in 1984 to $420 per ton.
Limitation of liability has even been applied in boating accidents. For instance, a boat owner raised limitation of liability when his recreational boat caught fire at a Lake Michigan marina. The fire spread and damaged several of the surrounding vessels.8
When the owner attempted to limit liability to the $800 salvage value of the boat, the federal trial court dismissed his petition, finding that it lacked jurisdiction to hear the case. The circuit court affirmed, but the U.S. Supreme Court reversed and remanded back to the trial court, finding that maritime jurisdiction is appropriate “when a ‘potential hazard to maritime commerce arises out of activity that bears a substantial relationship to traditional maritime activity.’”9
This means that if the steering cable snaps on a worthless outboard skiff, causing it to crash into a blameless vessel, the owner of the skiff may limit a paralyzed passenger’s award to the $150 scrap value of the wrecked skiff. This concept has even been extended to personal watercraft, with the Eleventh Circuit limiting recovery for injuries caused by a Jet Ski accident.10
The act does not apply to every maritime mishap. The act cannot be invoked in environmental casualties involving the Oil Pollution Act of 1990 (OPA 90),11 Rivers and Harbors Appropriation Act,12 or Wreck Act.13 However, OPA 90 establishes its own limitation guidelines, providing that with respect to each incident, the liability of a responsibleparty shall not exceed:
(1) for a tank vessel, the greater of $1,200 per gross ton; - or in the case of a vessel greater than 3,000 gross tons, $10,000,000; - or in the case of a vessel of 3,000 gross tons or less, $2,000,000;
(2) for any other vessel, $600 per gross tons or $500,000, whichever is greater.
Liability cannot be limited if the environmental incident was caused by gross negligence, willful misconduct, or the violation of applicable federal safety, construction, or operating regulations. Also, if the responsible party fails or refuses 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. Continuation - Defeating Limitation of Liability in Maritime Law, Part Two by Tim AkpinarPrepared for the Association of Trial Lawyers of America