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The Limitation of Liability Act-A Strategy Under Siege

The Limitation of Liability Act (LLA) gives a vessel owner the opportunity to limit his liability to the value of the vessel along with its cargo and freight as of the date of the occurrence. Essentially, a ship owner, by invoking the Act, may avoid paying out more than his ship and its contents are worth at the time of the incident in question. In addition, the LLA allows a maritime defendant to choose a convenient forum as well as to consolidate multiple claims into a single court proceeding.

Invocation of the LLA usually occurs when a maritime defendant faces significant exposure to liability. The LLA is usually pled as a defense in state or federal court. A vessel owner facing serious liability may even invoke the LLA in an offensive manner by preemptively filing a complaint for limitation of liability in federal district court. However, the ship owner is limited to the following forum choices:

            -Where the vessel has been attached or arrested;

            -Where the vessel is currently located;

            -In the forum where a plaintiff has already alleged harm by filing suit; or

            -In any federal district court, so long as no plaintiff has yet filed suit.

When a maritime defendant chooses to invoke the Act, the court will enjoin any and all claims against the defendant and require the claims to be filed in the same court that is handling the limitation of liability petition. This means that a plaintiff would be barred from filing his claim in state court.

The Limitation of Liability Act, while still a weapon in the maritime defense arsenal, has been considerably weakened by federal courts over the years. This has been accomplished by narrowing the scope of the Act’s protections available to a vessel owner, as well as by giving a plaintiff every opportunity to defeat a ship owner’s attempt to limit liability. The reasons for this are many but it is important to know that the LLA was instituted during the middle of the 19^th century in order to make American maritime industry more competitive with the rest of the world.

This limitation of liability in the face of a maritime claim served its purpose by encouraging investment in American offshore industry. Now that corporations own the majority of commercial ships, shareholders are generally insulated from personal liability. Also, the risk can be further reduced through insurance and other means. As such, the importance of the Limitation of Liability Act has faded considerably.

If you or someone you love has been injured offshore, contact the experienced Texas maritime lawyers at the Fitts Zehl Law Firm by phone at (800) 99-FITTS or by email at info@fittszehl.com. We represent clients throughout the Gulf Coast region including: Houma, Gulfport, Houston and Galveston. We handle any and all maritime, Jones Act or Longshore and Harbor Workers’ claims.       

Fitts Zehl was recently named 1 of 5 “Power Lawyers and Law Firms of 2009.