Following the Francis Scott Key Bridge allision on March 26, 2024, two U.S. House of Representatives members introduced the Justice for Victims of Foreign Vessel Accidents Act (Bill), which would retroactively increase the liability for foreign-flagged vessels to up to 10 times the dollar value of the vessel and its cargo. This Bill proposes that the current liability threshold for American-flagged vessels would remain unchanged. Notably, the vessel involved in the bridge allision is a foreign-flagged vessel, and its owners filed a petition with the U.S. District Court for the District of Maryland to limit liability for the surrounding damage.
The Limitation of Liability Act of 1851 (Act), 46 U.S. Code § 30523, insulated vessel owners' losses from events beyond their control to the value of the vessel at the conclusion of the voyage plus any freight, no matter the actual damages caused by the accident. The original Act was silent on whether the limitation of liability extended to foreign-flagged vessels, yet courts extended those protections to foreign-flagged vessels anyway. Congress later amended the Act and plainly made it applicable to foreign vessel owners. Today, courts hold that a party cannot recover in excess of the Act unless the party establishes the acts of negligence or conditions of unseaworthiness leading to its damages. Typically, if a party seeking to "break" the limitation establishes negligence or conditions of unseaworthiness, then the party seeking limitation must establish that it had no knowledge or privity of those same acts of negligence or conditions of unseaworthiness.
While it is too early to know the implications of the Bill being introduced – and it is not viable to achieve passage in this Congress during an election season – it is useful to be reminded of the implications of limitation actions by considering a recent court ruling in Texas federal court. On Aug. 1, 2024, the U.S. District Court for the Southern District of Texas examined a vessel allision occurring in the Port of Houston involving a foreign-flagged vessel. There, the foreign-flagged vessel was alleged to have made an incorrect turn, which resulted in the allision with a dock, causing upwards of $25 million in damages to the dock.
Because the scope of damages have major implications for determining whether to seek to challenge a limitation petition, it is important to appreciate the scope of damages and the likelihood of recovery. The dock at issue was of such unique nature that the court determined it a total loss – a classification typically reserved for sunken vessels or decimated structures – despite the fact that, at the time of the hearing, the dock was operational. The dock at issue had two support systems providing both vertical and lateral support. The allision displaced the dock such that the dock no longer sat on top of its vertical support piles, placing the dock at risk of toppling over. Due to the existing support structures underneath the dock, it was argued that there was insufficient space for the dock owner to place new foundation piles necessary to provide the dock with long-term vertical support. It was determined that the dock could not be repaired to its pre-allision condition given the lack of space for new vertical supports. The dock owner considered other options – rebuilding the dock in its present location, installing a temporary dock or rebuilding the dock in a new location – and ultimately landed on the latter option. The costs of rebuilding the dock in a new location, however, totaled approximately $25 million, with about $11 million spent on repairs at the time of the limitation hearing. Although the trial court ultimately found that the $25 million replacement dock was subject to depreciation and worth less than the price tag indicated, the vessel owners could have been subject to amount in excess of the liability limitation.
Following a trial, the trial court judge first needed to assess the liability issues to determine if the shipowner should be held responsible for the actions of the crew at the time of the allision. The court reviewed the vessel's logs and heard testimony from several members of the vessel's crew, and ultimately determined that the crew violated Congressional regulations related to fatigue management. This violation invoked a longstanding burden shifting presumption for causation onto the parties seeking limitation. The presumption, named after a 1983 U.S. Supreme Court decision, The Pennsylvania, provides that when a vessel is shown to have breached a statute or regulation intended to prevent an accident, the vessel owner carries the burden of showing that the breach could not have been a proximate cause of the accident and damages sustained.
The court reiterated that The Pennsylvania rule was not intended to impose liability on a vessel owner for all allisions, regardless of how speculative, improbable or remote. Further, the trial court found that the captain of the vessel had worked in excess of the hours allowable under the regulations. However, at the time of the allision, the captain had been relieved by his second captain, and the captain's presence would not have prevented the accident as it was caused by a navigational error on part of the helmsman. As such, the court determined that there was no causal connection between the captain's fatigue and the allision. The court also highlighted that while an improperly trained crew could constitute an unseaworthy condition, the crew members were properly certified, trained and experienced.
Although the court dispelled the plaintiffs' claims of negligence and unseaworthiness, it opined that the helmsman received a proper helm order, and his improper execution was merely a navigational error for which the parties seeking limitation had no privity or knowledge. In so doing, the court upheld the Act's applicability for the limitation petitioners and found that the plaintiffs could not recover in excess of $18.9 million based on the vessel's value and the value of the vessel's impending freight at the time of the allision.
While the proposed Bill was introduced only a month ago, it has garnered a good deal of attention in the shipping industry – and for good reason. It has far-reaching implications and is as relevant today as it was in 1851. The recent ruling of the trial court in the Southern District of Texas shows the implications plainly.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.