Divided maritime bar agrees Limitation Act here to stay

By Pat Murphy, BridgeTower Media Newswires

BOSTON — While those who defend personal injury claims arising from maritime accidents see the Limitation of Liability Act as essential in protecting the country’s shipping industry, many plaintiffs’ lawyers have a visceral antipathy toward what they view as an outdated law.

“[It] protected seamen to the extent they could bring an action against the vessel, but it protected the vessel owner to the extent that it limited the recovery to value of the vessel and the goods that it carried,” says Joseph M. Orlando Jr., a plaintiffs’ attorney in Gloucester, Massachusetts. “But now, we’re in an environment where corporations that own a vessel have insurance. The Limitation Act is not protecting the vessel owner anymore; it’s protecting the insurance companies.”

South Chatham, Massachusetts, attorney David J. Farrell Jr. doesn’t understand how an outright repeal of the Limitation Act could possibly be a good thing.

“You can’t gut the 1851 statute and put nothing else in its place,” says Farrell, who represents defendants in his maritime law practice.

James T. Murphy, of North Kingstown, Rhode Island, says he has long felt that the Limitation Act was “anachronistic” because it fails to include protection and indemnity insurance policy limits in the limitation fund.

“The statute needs to be modernized and brought up to date,” Murphy says. “The whole point of the act was to protect American shipping — to place American shipping on a par with British, French and Spanish shipping. That’s important, but sometimes that protection runs counter to the administration of justice.”

No appetite for change?

In 2010, the Maritime Law Association of the United States passed a resolution in favor of Congress adopting the 1976 International Convention on Limitation of Liability for Maritime Claims.

The convention provides for limitation of ship owner liability conditioned on the owner establishing a guaranteed fund in amounts greater than what would be available under the Limitation Act following a casualty that left minimal vessel value.

But the consensus of maritime attorneys seems to be that Congress currently doesn’t have the appetite for gutting the 152-year-old Limitation Act.

Farrell, the immediate past president of the MLA who emphasizes that he’s expressing his personal views and not those of the association, points out that in recent years various marine disasters have provided opportunities for Congress to remake the Limitation Act, yet legislators failed to act.

“They certainly had the opportunity to do it after the [2010] Deepwater Horizon Gulf oil spill, and they didn’t do it,” Farrell says.

While Farrell is in favor of Congress adopting the 1976 International Convention, he questions whether that will happen.

“Congress has a hard time agreeing on whether the sky is blue,” he says.

For more than 20 years, Boston attorney Carolyn M. Latti has worked through the American Association of Justice and other organizations in an attempt to repeal the Limitation Act.

According to Latti, Congress doesn’t have the “appetite” for repealing the statute. In fact, she says there is “plenty” of opposition to amending the law in any meaningful way.

“The law is used by boat owners as a weapon to limit their liability and to prevent claims from being filed,” Latti says.

In an ideal world, Orlando says, the Limitation Act would be repealed.

“But I don’t expect Congress to repeal it altogether,” he says.

Maritime injury lawyer John K. Fulweiler likewise doesn’t see a repeal in the cards.

“The marine insurance industry loves the Limitation of Liability Act. They see it as a great way to avoid having to expose their policy,” says Fulweiler, who practices in Newport, Rhode Island. “The act doesn’t need to be repealed. You could just pass an amendment to make it fairer by saying that the insurance policy covering the vessel should be included in the limitation fund.”

But Boston defense attorney Samuel P. Blatchley disagrees that including insurance in the limitation fund would be the panacea some plaintiffs’ lawyers believe.

“It’s already hard enough to get marine insurance,” says Blatchley, who represents vessel owners, operators and insurers. “If we get rid of the Limitation Act in total, what plaintiffs’ lawyers will then be left with are uninsured vessels.”

A “savvy” owner places its vessel under a single company, with the vessel as that company’s only asset, he adds.

“If that vessel sinks and there’s no insurance, the plaintiff’s lawyer will be left with no other avenue of recovery unless he can pierce the corporate veil,” Blatchley says.

A member of the Maritime Law Association’s board, Blatchley, too, says he speaks only for himself, not the MLA. He predicts that repeal of the Limitation Act would create a crisis in terms of the availability of maritime insurance.

“You see insurance companies getting out of the business of marine insurance,” Blatchley says. “If you take away the Limitation of Liability Act, it would be devastating.”

Everyone’s a critic

In a March 17 decision, U.S. District Court Judge Nancy Torreson in Maine allowed the claim of James Dotson to go forward over a vessel owner’s objection under the Limitation Act that Dotson failed to file within the deadline set by the court. Dotson alleged that he suffered injuries coming to the rescue of the passenger schooner Emily E, which had foundered on July 30, 2021, during a cruise on the Kennebec River.

Dotson, who is represented by Orlando, filed his claim on Dec. 27, 2022. The owner and operator of the schooner, the Maine Maritime Museum, sought to bar Dotson’s claim because his filing was well past the Nov. 15, 2021, deadline set by the court in the museum’s action seeking limitation of damages under the statute.

“I don’t know of one four-month statute of limitations on the planet,” Orlando says. “Under maritime law, the petitioner in a limitations case can seek to narrow the claimant’s statute of limitations to a handful of months. That’s incredible.”

But Torreson denied the museum’s motion to dismiss, concluding the vessel owner had failed to provide sufficient notice to potential claimants in conformity with her orders.

In handing down her ruling in In re: Complaint of the Maine Maritime Museum, Torreson concluded with a parting shot at the Limitation Act.

“I am aware of no other area of the law wherein a potential tortfeasor can race into court to force the people it may have injured to file their claims within months of an incident upon pain of losing all right to do so,” Torreson wrote. “The Limitation of Liability Act has been roundly criticized, and while I do not seek to wade into those waters, it is easy to see why many consider it an inequitable throwback to an earlier time.”

Limitation Act

Under 46 U.S.C. §183(a), the “liability of the owner of any vessel … for any loss, damage, or injury by collision … without the privity or knowledge of such owner or owners, shall not … exceed the amount or value of the interest of such owner in such vessel, and her freight then pending.”

With respect to the issue of privity, subsection §183(e) states: “In respect of loss of life or bodily injury the privity or knowledge of the master of a seagoing vessel or of the superintendent or managing agent of the owner thereof, at or prior to the commencement of each voyage, shall be deemed conclusively the privity or knowledge of the owner of such vessel.”

According to Blatchley, it would be a mistake to discount the opportunity afforded by the statute for an injury claimant to prove privity or knowledge.

“For example, if there was a broken hatch that someone fell through and the owner knew or should have known about that broken hatch, they wouldn’t be able to limit their liability for that incident,” Blatchley explains.

While Orlando doesn’t think Congress will do away with the Limitation Act, he says there are reasonable amendments that could be made to better protect the rights of claimants.

“The notice requirements could certainly be more onerous on the petitioner [ship owner], and they should be,” Orlando says. “You’re talking about precluding someone’s right to bring an [injury] claim.”

But Fulweiler doesn’t see the insurance industry budging in its opposition to reform.

“In my opinion, marine insurers don’t care one whit about injured claimants,” Fulweiler says.

‘Small passenger vessel’ exemption

Congress has amended the Limitation Act three times since the law’s passage in 1851. President Joe Biden signed the latest amendment into law on Dec. 23, 2022. Congress enacted the Small Passenger Vessel Act as an add-on to an omnibus national defense appropriations bill.

The Small Passenger Vessel Act requires owners of “small passenger vessels” to be exposed to liability for maritime accidents, regardless of the value of the boat. The amendment accomplishes that by creating an exception to the Limitation Act under 46 U.S.C. 502(b) for any “covered small passenger vessel.”

Section 501 defines covered small passenger vessel as including a vessel carrying “not more than 49 passengers on an overnight domestic voyage” and “not more than 150 passengers on any voyage that is not an overnight domestic voyage.” Covered vessel also includes any wooden vessel constructed prior to March 11, 1996, “carrying at least 1 passenger for hire.”

The amendment also increased from six months to two years the period during which those injured in accidents can file a claim.

“The statute prohibits small passenger vessel owners from contractually limiting the time period for giving notice of a claim or bringing a claim for personal injury or death to not less than two years,” Blatchley says. “For example, most ferries in the area have a one-year limitation to bring suit [printed] on the back of their tickets. The [SPVA] says you can no longer do that.”

While the SPVA is certainly an important reform in terms of expanding an injury claimant’s right to a remedy, attorneys don’t see the amendment as signaling a new willingness on the part of Congress to repeal or revise the fundamental pillars of the Limitation Act.

“I’ve worked with groups in Washington to try to change it,” Latti says. “But every time this is brought up, there is opposition from the insurance industry.”

Legislators advocated for passage of the SPVA in response to the sinking of the dive boat Conception off the coast of California. The 2019 tragedy took the lives of 33 passengers and one crewmember.

“I’m thrilled that now people who are hurt on a recreational vessel have a claim,” Latti says. “But you still have this arcane law that applies to everything else.”

Meanwhile, Fulweiler can only dream of comprehensive reform.

“Admiralty law is all about equity,” he says. “The fact that you have this act that produces inequitable outcomes seems contrary to admiralty law’s very intent to produce equitable results.”