One of the most ancient and powerful aspects of admiralty and maritime law is a shipowner’s right to seek exoneration from and/or limitation of liability to reduce exposure for a marine casualty. A petition seeking exoneration from and/or limitation of liability is generally filed following any significant maritime casualty where there is a potential for multiple claimants. For example, in a instance where jet ski or personal watercraft catches fire while moored in a marina housing 100 boats where the fire spreads damaging each vessel and also causes significant damage to the marina, the owners of the a jet ski would likely file a petition in the United States District Court asking the court to require all injured parties to bring their claims in the location selected by the jet ski owner, to exonerate the jet ski owner, and failing that, to limit the jet ski owner’s liability to the post casualty value of the jet ski.
As you can see, the limitation of liability laws can be very powerful. Fortunately, there are ways to break the shipowner’s efforts to exonerate itself and/or limit its liability. For over 25 years, the attorneys at McLeod Brock have represented individuals and business clients in limitation of liability actions acting for the shipowner and for the claimant depending on the casualty and needs of the individual client. The attorneys at McLeod Brock PLLC have frequently lectured on the topic of limitation of liability and have authored the Limitation of Liability Chapter in the Florida Maritime Law and Practice Manual.
The Limitation of Shipowners’ Liability Act (“LSLA”), 46 U.S.C. §§30501 et seq., in conjunction with Fed.R.Civ.P.Supp. F, provides a shipowner with an opportunity unique to maritime law to petition the United States District Court, requesting that the shipowner be exonerated from liability or, failing complete exoneration, that the shipowner’s liability be limited to the post-casualty value of the vessel, plus any pending freight. The limitation mechanism further provides the shipowner with an opportunity to require all claimants to file their claims in an expedited period of time in a single federal proceeding, thereby avoiding the risk of defending multiple claims arising from a single casualty in multiple jurisdictions.
The concept of limitation of liability is believed to have originated in the Mediterranean during the Middle Ages and became increasingly utilized in the sixteenth and seventeenth centuries as international commerce began to flourish. Investing in maritime ventures was risky and expensive, and the doctrine of limitation of liability enabled a vessel owner to commit funds to maritime enterprises without being exposed to unlimited damages. The concept moved into England in the 18th century to increase the number of ships in the English merchant fleet and encourage investment in shipping and trade.
The United States Congress originally enacted the Limitation of Shipowners’ Liability Act to encourage investment in the domestic commercial shipping industry and to enable domestic commercial interests to compete with their international counterparts. The Act has often been criticized as unclear and anachronistic.
The only parties entitled to limitation of liability are vessel owners or owners pro hac vice. Although the LSLA does not specifically define “owner,” courts have held that the definition of “owner” should be nontechnical and liberally construed to cover one likely to be subjected to shipowner liability due to its relationship to the vessel. The terms “owner pro hac vice,” “bareboat charterer,” and “demise charterer” are essentially synonymous, and the LSLA deems as “owner,” a charterer “that mans, supplies, and navigates” the vessel at his own expense or by his own procurement.
The LSLA applies to both American and foreign vessels. It should, therefore, apply to any limitation action filed in the United States when there is a nexus between the owner or the cause of action and the United States.
Typically, the shipowner in a limitation action will petition the court for exoneration from or limitation of liability. The determination of whether a shipowner is entitled to limitation employs a two-step process. The claimants have the threshold burden of establishing the cause of loss and the liability of the shipowner. If liability is not found, the shipowner’s petition seeking exoneration will be granted and the proceeding is over. If, however, liability is found, the shipowner then has the burden of proving its lack of privity with or knowledge of the condition or negligence responsible for the loss. If the court determines that the shipowner lacks the requisite privity or knowledge, the shipowner’s petition for limitation of liability will be granted, and the claimants’ recovery will be restricted to the limitation fund consisting of the post-casualty value of the vessel and any pending freight. If the court determines that the shipowner has the requisite privity or knowledge, the petition seeking limitation of liability will be denied, and the claimants will be able to proceed against the shipowner to seek the recovery of any damages proximately caused that are otherwise legally available.
The procedure involved to file a petition seeking exoneration from and/or limitation of liability or to answer and present a claim in such an action is complex and unique to admiralty and maritime law. For over 25 years, the attorneys at McLeod Brock have counseled and represented individuals, insurers, and business clients regarding the merits of filing limitation of liability actions and the available defenses. The attorneys at McLeod Brock PLLC have frequently lectured on the topic of limitation of liability and have authored the Limitation of Liability Chapter in the Florida Maritime Law and Practice Manual