Injuries during offshore and maritime operations happen all too often. In some instances, such as with the catastrophic loss of life from the explosion and sinking of the Deepwater Horizon, many people will be injured and they, or their loved ones, will have significant claims against a vessel owner.
The fear that such accidents could possible occur may be so great that a potential vessel owner will simply not get involved in the maritime industry. On the other hand, it would be highly unfair if people who were injured or lost loved ones in a maritime accident should not be fully compensated for their losses.
Although it is viewed by many as an outdated tool and been criticized as unfair, the law allows vessel owners to bring a limitation of liability action to limit their damages for serious personal injuries.
What is a Limitation of Liability Action?
A limitation of liability action is a procedural device that allows a vessel owner to limit its liability to the value of the vessel and the pending freight at the end of the voyage.
What if the Vessel Sinks Because of the Accident?
In many instances, this will be a great benefit to the vessel owner because the value of the vessel after the accident will be its salvage value. This amount should be much lower than if the vessel had returned to port.
However, this result can be incredibly unfair if lives are lost in the accident. Congress understood this problem and passed the “Loss of Life Amendments.” Now, if lives are lost in a vessel accident involving a “seagoing vessel,” the plaintiffs can recover from the general limitation fund and if that is not enough to cover their claims, they can recover from a separate fund created for them. The amount in this fund is computed by multiplying the weight times $420/ton and then deducting the general limitation fund amount.
What if Multiple Ships are Involved in the Accident?
In some instances, the vessel owner may have to surrender all ships involved in an accident, if they are commonly owned and engaged in a single enterprise under a single command. This is called the “flotilla doctrine.”
How Long Does a Vessel Owner Have to Bring a Limitation Action?
A vessel owner has 6 months from the time of receiving notice of a claim to bring a limitation action. But, he may still use limitation of liability as a defense if he is sued because of the injuries.
Are There Any Other Exceptions to When Limitation of Liability Applies?
Yes. A ship owner can only take advantage of a limitation action if he did not have privity or knowledge of the negligence. This means that the owner must have participated in the negligence that caused the injury.
Determining this knowledge can be extremely complicated, particularly when dealing with vessel owners who are corporations or businesses.