The recent tragedy involving the Mobile Offshore Drilling Unit Deepwater Horizon has shed a very bright and very public light on a much and often litigated 159-year old law previously known to very few outside of the maritime industry—the Shipowner’s Limitation of Liability Act, (“the Limitation Act”), 46 U.S.C. § 30505 (formerly 46 U.S.C. § 183). What the Limitation Act does is entitle a vessel owner to limit its liability after a maritime incident or casualty to the post casualty value of the vessel and its pending freight, which may be zero if the vessel is a total loss, except when the loss occurred due to the vessel owner’s “privity or knowledge.” Privity or knowledge is found to exist where the acts of negligence or unseaworthiness that caused the casualty were known or should have been known to the vessel owner.

In addition to limiting a vessel owner’s liability, the Limitation Act also has several procedural benefits in that it allows the vessel owner in some instances to force all claims involving a vessel casualty to be litigated in a single Federal forum, often of the vessel owner’s choosing. Additionally, claimants in a vessel casualty can also benefit to some extent in that they have some security for their claims in a limitation proceeding because the vessel owner must either deposit the claimed value of the post-casualty vessel at issue in the registry of the Court or post a bond for such amount with the Court.Continue Reading Is the Limitation of Liability Act Going to Sink with the Deepwater Horizon?