Maritime Law: Limitation On Liability Act

When a maritime worker is injured during the course of his or her employment, a personal injury claim is the best means to obtain fair and just compensation for that injury. Sometimes, when a personal injury claim is filed under maritime law, injured parties are surprised and dismayed to learn that — in response to his or her claim or lawsuit — the vessel owner filed a Limitation of Liability lawsuit, also known as a limitation suit. These lawsuits can be devastating to the injured party if his or her maritime personal injury lawyer does not have a firm understanding of the Limitation of Liability Act (the “Limitation Act”), 32 CFR 536.123.

At Gilman & Bedigian, we know this Act and we know how to respond appropriately to it. If you have been injured while working in the maritime industry, contact Gilman & Bedigian today. We use a comprehensive approach to maritime personal injury claims and are not caught off guard if a defendant files a Limitation of Liability claim. Our trial attorneys are prepared to immediately defend against a limitation lawsuit so that progress in our own personal injury claim is minimally affected.

The Limitation of Liability Act

In cases of a maritime personal injury or wrongful death claims, the Limitation Act allows vessel owners to limit or restrict liability owed to the injured parties to the value of the vessel. The Limitation Act dates back to 1851, when it was enacted to protect the American shipping industry and its shipowners from lawsuits, that at the time, well exceeded the value of the personal injury cases’ worth. At that time, communication capabilities were not available as they are today, thus, if a vessel was involved in a maritime casualty, it was difficult to determine exactly what happened, when it happened, why it happened, and who was wholly or partly responsible for it. Those concerns no longer exist in the technologically advanced world in which we live, yet the Limitation Act still stands as current law.

What vessels are included?

The Limitation Act applies to all seagoing and non-seagoing vessels used to navigate the ocean as well as inland lakes and rivers. These vessels now include canal boats, barges, and lighters in addition to the larger cargo ships and other types of ships used on the high seas.

Recently, in 2005, the U.S. Supreme Court expanded the meaning of “vessel” to include — for purposes of the Limitation Act — pleasure craft, jets skis and houseboats. See Stewart v. Dutra Const. Co., 543 U.S. 481, 125 S.Ct. 1118 (2005).

Who can file a Limitation Act claim?

The owners of the above-mentioned vessels are able to file a Limitation Act but only in cases where accidents resulted in personal injuries or other losses, and those accidents occurred on navigable waters of the United States. If the accident happened on a waterway not considered to be navigable, the vessel owner cannot file a Limitation suit.

Generally speaking, an owner of a vessel is entitled to limit liability, and according to Court interpretation, “owner” can include parties in addition to the registered owner of the vessel so long as he or she exercises control or dominion over the vessel. Owners include:

• Persons with legal title to the vessel.
• President and sole shareholder of the vessel owning company.
• United States as owner pro hac vice of Coast Guard auxiliary boats, which become “public vessels” when assigned to government service.
• Owners of the vessel at the time of the casualty but who sold the vessel by the time of litigation.
• Charterers who “…navigate such vessel at his own expense, or by his own procurement shall be deemed the owner of such vessel.”

Those who do not qualify to make a claim under the Limitation Act include those, like vessel managers, who do not exercise sufficient control over the vessel to be considered an owner pro hac vice.

When is an owner prohibited from filing a Limitation Act claim?

An owner of a vessel cannot file a Limitation suit simply because a claim for personal injuries or wrongful death has been filed against him or her. There are two personal injury claims that are not subject to the limitation of liability:

• Wages owed to seamen; and
• Maintenance and cure benefits for an injured seaman.

Additionally, the Limitation of Liability Act addresses only vessel owners, therefore, only seamen and select few other maritime workers who are injured during the course of his or her employment while on a water vessel are subject to the limitations that this kind of lawsuit provides for vessel owners. All other maritime injury and wrongful death claims that arise out of accidents not on a water vessel but within the maritime industry will not be impacted by the limitations this Act imposes on personal injury claims.

Procedures to Limit Liability

There are two ways the vessel owner can attempt to limit liability for personal injury or wrongful death claims: (1) the owner can assert the Limitation Act offensively by commencing a limitation proceeding in a federal district court; or (2) the owner can assert the Limitation Act defensively by raising limitation as an affirmative defense in either a state or federal court proceeding. If the former is the method used, then the claims are consolidated into a single federal forum. Thus, if your personal injury or wrongful death claim was in a state court, strategically filed there for the purpose of better benefits and a jury trial, then your strategy can be turned upside if you are forced to consolidate your claim under federal jurisdiction.

In order for the limitation proceeding to commence, the vessel owner must file the claim in a proper venue and must do so within the Statute of Limitations.

Proper Venue

The only court that has jurisdiction over a Limitation proceeding is a federal district court in admiralty. If the claim is filed in an improper venue, then the court has discretion to (1) dismiss the limitation proceeding; or (2) transfer it to a district court in admiralty where is could have and/or should have been filed originally.

If the claim is filed in an improper venue, the claimant with the personal injury or wrongful death suit can also use the improper filing as a defense to the limitation proceeding.

Statute of Limitations & Written Notices

Timely filing of a limitation of liability claim is six months from the time the vessel owner received written notice that you — the personal injury or wrongful death claimant — filed your claim.

Your written notice must inform the vessel owner (1) the details of the incident or accident; and (2) the vessel owner appears to be or is considered to be the responsible party for the damage in question. There are two tests that can determine if the you — the injured plaintiff — provided proper written notice:

1. Notice is sufficient if (1) the vessel owner was informed of the actual or potential claim; (2) that the claim may exceed the value of the vessel and pending freight; and (3) the claim is subject to limitation.
2. Notice is sufficient if (1) it demands a right; (2) blames the vessel owner for any damage or lose; and (3) calls upon the vessel owner to provide all that is due to the claimant.

If the limitation claim is not filed within six months, then three consequences may result (1) the limitation proceeding will be dismissed; (2) the order to require consolidation of claims in one federal forum may be lifted; and/or (3) the stay precluding multiple actions may be lifted.

Disadvantages of Limitation Act for Injured Parties

There are two specific advantages to vessel owners who file a limitation claim, and these advantages are disadvantages to you, the injured party. The two disadvantages are: (1) the concursus; and (2) denial of the right to a jury trial.

The Concursus

Once a limitation claim is filed, the court will issue a stay of all proceedings against the vessel owner for claims originating from the same incident. The stay will stay in place until the outcome of the limitation proceeding. All claims will be consolidated for litigation in a single proceeding, and there will be a period of time set — known as a monition period — so that all claimants can file their claims in the single limitation proceeding. The purpose of the concursus is twofold: (1) it allows assets to be combined; and (2) it prioritizes the claims according to which ones exceed the value of the vessel. At the time a limitation claim is brought, the vessel owner must provide funds that cover the value of the vessel, known as the limitation fund. The concursus is necessary because claimants would otherwise be competing for larger portions of a limited fund where the limitation fund is insufficient to pay all potential claims. If the vessel owner is able to limit his or her liability, the competing claimants will be limited to their pro rata shares, which is likely not to cover the total damages each claimant has.

Denial of the Right to a Jury Trial

Because a limitation proceeding is a case in admiralty, there is no right to a jury trial. Therefore, if your claim was made under state jurisdiction, your right to a jury trial will effectively be denied. The “saving to suits” clause, however, saves the claimant all other remedies to which the claimant is otherwise entitled, such as a jury trial under state jurisdiction. Therefore, to reconcile the notion that a limitation proceeding is a case in admiralty, and therefore, does not permit trial, and the “saving to suits” notion, courts provide exceptions to the federal court’s exclusive admiralty jurisdiction. Generally, there means, federal judges will decide on liability and then revert the case back to the state court so that the issue of damages can be litigated and, ultimately, decided by a jury.

The Burden of Proof & Limitation Proceedings

There are specific burdens of proof that arise out of a limitation proceeding. This unique burden of proof occurs between the vessel owner and the claimant(s). The relationship between their respective burdens of proof is as follows:

• Claimants’ has the onus to demonstrate that the personal injuries or wrongful death was caused by the negligence or vessel unseaworthiness; the claimant must establish liability to him or her by the vessel owner. Once the claimant satisfies his or her burden of proof, the onus shifts to the vessel owner.
• The vessel owner must prove lack of privity or knowledge. Privity and knowledge are established where the means of obtaining knowledge exists, or where reasonable inspection would have led to the requisite knowledge. Therefore, if the vessel owner can prove that the injury or loss occurred without his or her knowledge or privity, the claimant’s source for recovery shrinks and will likely become inadequate.

Privity and knowledge are imprecise terms, and a court can often give or take on what it deems acceptable terms according to if the vessel owner is a corporation or an individual. Individual owners are usually given more leniency. They are not required to supervise the vessel at sea or in port, and if they hired personnel to do the same, the vessel owners will not be held accountable for the hired personnel’s negligence. There are, of course, exceptions to this general finding. Corporations, on the other hand, are held to a higher bar and, as such, face a more difficult time disproving its knowledge or privity in the event of your injury or loss.

Because the amount of your compensation depends on the vessel owner proving your injury occurred without his or her knowledge or privity, your attorney must be resourceful and thoughtful to uncover evidence of the vessel owners knowledge, and therefore, be able to defend successfully against a limitation claim.

Resourceful Maritime Personal Injury Trial Lawyers in Maryland

Working on a water vessel in the maritime industry is one of the most hostile and dangerous conditions a person can occupy. If you or a loved one is injured during the course of your work, you may be shocked to realized that the vessel owner has filed a Limitation of Liability claim against your that could drastically affect attainment of just and fair compensation. Gilman & Bedigian trial attorneys are ready to counter such claims, to defend your rights, and to ensure you obtain the compensation you deserve. Contact us online or call our law office at (800) 529-6162 for a free consultation. And remember: you do not pay us until we help you secure a successful claim or lawsuit in your favor.