Amendments To The Limitation Act: Small Passenger Vessels Are Restricted From Limiting Their Liability For Marine Casualties

• Published date: 02 January 2024
• Subject Matter: Litigation, Mediation & Arbitration, Transport, Marine/ Shipping, Personal Injury, Professional Negligence
• Law Firm: Lane Powell
• Author: Ms Katie Matison and Matthew Stoloff

Limitation is an Ancient Legal Principle

The concept of allowing a shipowner to limit liability for marine casualties has existed in some form for seafaring nations since Roman times and was frequently utilized in the 16th and 17th centuries. Limitation of liability has been an important federal remedy and procedural vehicle in the United States for more than 170 years. Significantly, recent amendments to the statutory provisions eliminated the eligibility of owners of certain small passenger vessels to seek to limit liability for a marine casualty.¹ The amendments categorize a small passenger vessel as a vessel less than 100 gross tons (i) carrying no more than 49 passengers on an overnight domestic voyage or (ii) 150 passengers or less on an overnight non-domestic voyage. The amendments recodified the Limitation Act in 46 U.S.C. ' 30521 - 30530.

The Basic Legal Framework of the Limitation Act

In 1851, Congress enacted the Limitation of Shipowners' Liability Act ("Limitation Act") for the underlying purpose to "encourage ship-building and to induce capitalists to invest money in this branch of industry."² There is a general consensus among legal scholars that the sinking of the Lexington in 1848, which caused substantial loss of life and destruction of cargo, motivated Congress to enact the Limitation Act to place the United States on equal footing with other maritime nations.³ The United States Supreme Court ignored the provisions of the contract of affreightment and held the shipowner of the Lexington liable for the loss of cargo specie.⁴

The Limitation Act grants only a shipowner'or a bareboat charterer (also known as a demise charterer)'the right to seek limitation and does not apply to either a time charterer or voyage charterer.⁵ Accordingly a shipowner'or bareboat charterer'without negligence, may either be exonerated from liability for a loss or alternatively allowed to limit its liability to third party claimants to a limitation fund equivalent to the post-casualty value of the vessel and the pending freight.⁶ The claims subject to limitation are defined within 46 U.S.C. ' 30524. The Limitation Act does not allow a shipowner to limit liability for Coast Guard fines or oil pollution under The Oil Pollution Act of 1990, 33 U.S.C. ' 2701 - 2761.

Federal courts have exclusive jurisdiction to adjudicate claims under the Limitation Act. The benefit of a proceeding under the Limitation Act is to compel all claimants to assert their claims against the...