Nov 9, 2018

The Limitation of Liability Act: A Vessel Owner’s First Line of Defense

The Limitation of Liability Act is a federal law that allows a vessel owner to limit claims for such things as personal injury and wrongful death arising from vessel operations to the post-casualty value of the vessel plus “pending freight.” In other words, under the LLA, a lawsuit claimant’s recoverable damages become capped at the value of the vessel itself, assuming its owner can prove prior lack of knowledge of the problem that caused the incident.

Found at 46 U.S.C. Sections 30501-30512, LLA protection applies to owners of numerous types of vessels including the following:

  • Seagoing vessels
  • Vessels operating on lakes, rivers and in inland navigation
  • Commercial ships
  • Cruise ships
  • Canal boats
  • Ferries
  • Tugs
  • Barges
  • Tankers
  • Lighters
  • Recreational crafts such as house boats, yachts, sailboats, rowboats, jet skis, etc.

LLA Exceptions

The only exception to LLA protection is if a vessel owner had “privity of knowledge” as to the incident. This means that if a claimant can prove the owner knew or should have known of the vessel’s unseaworthiness or the negligent or wrongful act(s) that caused the incident, LLA coverage will be denied. In addition, a vessel owner remains liable for the following:

  • Current and past-due wages owed to seamen
  • Maintenance and cure benefits for any injured seamen under the Jones Act
  • Cargo damage caused by a change or deviation from the agreed-upon methods of delivery in the contract of carriage
  • Return of unearned freight
  • Payment used under personal contracts of the owner such as salvage, towage, vessel repair, supplies, and services contracts
  • Ship and vessel mortgages
  • Environmental claims under the Clean Water Act and Oil Pollution Act of 1990

LLA Definitions

As with most laws, the Limitation of Liability Act contains its own definitions. Two of the most important are those defining the meaning of “owner” and of “pending freight.”

“Owner” includes the following three classifications:

  1. The vessel’s actual owner
  2. A charterer that mans, supplies, and navigates a vessel at the charterer’s own expense or by the charterer’s own procurement
  3. A leaseholder who obtains possession, control, and command of a vessel

“Pending freight” refers to the vessel’s earnings from the trip and includes both passenger fares and freight charges.

Claims Subject to Limitation

The types of claims subject to LLA limitation are numerous, but generally fall into one of the following three categories:

  1. Embezzlement, loss or destruction of property, goods or merchandise shipped or put on board the vessel
  2. Loss, damage, injury or death caused by collision
  3. Any act, loss, damage or forfeiture done, occasioned, or incurred without the owner’s privity or knowledge

Assertion of LLA Protection

Vessel owners can raise the Limitation of Liability Act as a defense if sued by an accident victim. They also have the option of filing a federal district court complaint within six months after receiving written notice of claim from a claimant. In these complaints, owners not only seek a decision regarding LLA applicability, but also sue the people making the damage claim against them, consolidating all claims into this one suit.

Thereafter, owners must create an account with the court, depositing monies to cover the amount of their ownership interest in the vessel and its pending freight, plus any additional amounts the court may fix from time to time as necessary. Once owners file their complaint and deposit the required funds with the court, any and all claims and proceedings pending against them related to this particular matter must cease.

Should an owner’s court fund be insufficient to pay all the claims, the claimants ultimately receive payments in proportion to their respective losses. In the case of personal injury and wrongful death claimants, these people receive additional amounts in proportion to their respective losses which come out of the court-mandated portion of the fund.

Whenever you need help resolving a maritime issue or dispute, contact the maritime team at Deutsch Kerrigan. Our attorneys have been involved in Limitation of Liability Act litigation in New Orleans and on the Mississippi Gulf Coast for over 60 years. We are ready to help you achieve your goals.

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