Why Does the Limitation of Liability Act Exist?
The Limitation of Liability Act was initially created to protect ship owners from financial ruin. The act was fashioned in a historical period where the shipping and maritime industries were much riskier than they are today. As ships faced catastrophes like unpredictable weather, pirates, attacks by foreign nations, fatal illness, and other serious hazards at sea, legislatures feared that lawsuits from injured crew or upset merchants would hamstring the American shipbuilding and shipping industries.
To mitigate the high risks shippers and ship owners faced on every voyage, the Limitation of Liability Act was created. Under the Limitation of Liability Act, a shipowner would be able to limit their total financial liability to the value of their ship. If, say, a crew needed to offload cargo during a storm in order to save themselves, the merchant who owned that cargo would only be able to sue the ship owner up to the total value of the ship. Keep in mind that in 1851, a ship owner had no way of communicating with his vessel or captain; whatever happened at sea was ultimately not the owner's fault. It protected shippers, made international trade more profitable and less risky, and ultimately helped America prosper and grow.
However, in recent decades the law has been used in a way totally unintended by its authors: protecting large corporations from being held accountable for their negligence. See, in 1851, the American maritime landscape didn't have the resources we have today. They didn't have weather forecast equipment; we do. They didn't have satellite GPS; we do. They didn't have long-range communication equipment that keeps ship owners in contact with their vessels at all times; we do. With all of those resources in place, the only disasters that take place at sea are ones caused by gross negligence or poor safety practices on the part of the owner.
Because the Limitation of Liability Act still exists, however, corporations with 21st-century technology can insulate themselves from financial responsibility by using a law written for small shipowners from over 150 years ago.
Modern Uses of the Limitation of Liability Act of 1851
In October 2015, TOTE Maritime's vessel El Faro steamed straight into a hurricane despite having a history of engine failure. As a result, the ship sank and all 33 crew members were killed. Recorded conversations between the captain and TOTE Maritime revealed that the captain had wanted to go around the storm on a slower route, but investigators questioned whether TOTE had pressured the captain into taking the faster, more dangerous route. Other records showed that TOTE's vessels had a history of sudden power loss, and the El Faro in particular had 23 documented deficiencies with the U.S. Coast Guard. Experts believe the El Faro lost power in the middle of the hurricane, which eventually destroyed the ship.
Shortly after the news broke that the El Faro was gone, TOTE Maritime quickly filed a lawsuit under the Limitation of Liability Act of 1851. Filing for protection under limited liability was essentially their way of saying they weren't going to attempt to make things right with the spouses and children left behind by their negligence. It was also their way of forcing every grieving family member to either bring their case to court immediately or waive their right to bring it at all.
While TOTE was insisting that their ship was only worth a small amount (thus limiting each family's total potential compensation to a pittance), they filed an insurance claim with their insurer for the ship. The value they claimed in their own insurance filing was higher than the value they claimed under the Limitation of Liability Act; in essence, they were hoping to profit from the destruction of their own vessel and the loss of 33 lives. Each person's life was worth far more than their vessel, but that didn't matter. That's what the Limitation of Liability Act of 1851 does today—it reduces a person's life to a fraction of the value of a sunken ship.
Truth Aquatics, The Limitation of Liability Act & the 2019 California Boat Fire
In perhaps one of the most egregious misuses of the Limitation of Liability Act, a company called Truth Aquatics sued their own surviving crew and the families of 34 victims after a California dive boat fire left dozens dead in September 2019. A dive boat named The Conception was doing a tour off the coast of Santa Cruz Island when the it caught fire early Labor Day morning. The captain and 4 crew members attempted to rescue the 34 people sleeping below deck, but the fire kept them from getting to them. In a recorded call between the Coast Guard and the crew, the Coast Guard asked if there were fire extinguishers aboard, but there's no audible answer. The remains of 25 people were found the next day, and the remaining 9 passengers were presumed dead.
Truth Aquatics Inc. filed the limited liability claim just 4 days after the tragic loss of 34 lives and the injury of 2 crew members, forcing dozens of grieving people to hire lawyers when they should have been mourning.
Experts in maritime law, while acknowledging that the move was strategically common in the industry, called it "heartless" and cruel to file so soon after so many lives were lost.
Arnold & Itkin's History of Beating the "Limited Liability" Defense
Our understanding of the Limitation of Liability Act is more than theory; our firm has beaten this defense in court multiple times. In 2010, BP attempted to hide behind the 1851 law after their unsafe practices led to the Deepwater Horizon explosion. Our firm represented one-third of the crew in holding BP accountable for their negligence. Because we were able to beat the "Limited Liability" defense, our clients were able to get enough money to pay for their medical care, lost income, and long-term needs. Turn to us when only the best will do.
In the El Faro case, our law firm held out the longest in our battle to get to the truth of what happened. Because we were persistent in our challenge to the Limited Liability defense, we were able to get our clients far more compensation than the company had initially offered, and far more financial security than anyone else settled for.
How the Limitation of Liability Act Will Affect Pending Litigation
A limitation action involves a stay of all other pending litigation and also a consolidation, or "concursus," of all claims into one proceeding. This is done to gather assets and prioritize claims in the event that the value of the vessel and its freight are not adequate to cover all compensation. If the shipowner succeeds in limiting liability, the claimants will be limited to their pro rata shares, a proportion of compensation that has been calculated by several determining factors. This is concerning, especially for the families who are dependent on the worker's salary.
Talk to Arnold & Itkin About How Our Lawyers Can Help: (888) 493-1629
Our years of experience have given us an in-depth understanding of the Limitation of Liability Act and how it plays out in real life situations. We know how it will apply in your scenario and when a shipowner may attempt to limit their legal accountability after an offshore accident. We can help prove the owner of your vessel had full or partial knowledge of the unsafe working conditions that caused your accident. Without this proof, your chance for recovery shrinks and may be inadequate to cover your losses, especially if multiple claimants are involved.
Make the right decision for your future. Contact Arnold & Itkin now at (888) 493-1629 to start receiving the strong legal support you need to win the maximum amount of compensation in your offshore injury claim.
