Limitation of Liability

One of the most unusual aspects of admiralty law is that under certain circumstances shipowners and other eligible persons may limit their liability in the event of a casualty involving their vessel to the post casualty value of the vessel and pending freight (money already earned by the vessel). To be successful, however, the person seeking to limit their liability had neither privity nor knowledge of a circumstance causing the casualty. For example, if two container ships collided, the and the owners were not aboard or in control, the owners would likely assert their right to limit liability. If the vessel is on the ocean floor, its value could well amount to $0. If people were injured or killed in the sinking, a commercial owner will also be required to constitute a personal injury fund equal to $420 per ton, for payment to the personal injury claimants. In a serious case, this may save vessel owners a great deal of money.

With regard to recreational vessels, all recreational vessel owners may petition the court to limit their liability and they will never be forced to establish a personal injury fund. This includes personal watercraft, which represent a large number of accidents on US waterways. The availability of such a remedy can be a great boon to small vessel owners: to injured persons, however, it can seem to work great injustice. Sophisticated counsel will be aware of the pros and cons of such a remedy, as well as the possible defenses to its filing. For instance, if he or she elects to limit liability, an owner must file the petition very quickly after they receive notice of potential claims against them. For this reason, if you are a boat owner and you think that there may be a claim made against you, a vessel you own, or a vessel that you chartered, do not wait until you are sued before seeking the advice of counsel. Delay may mean that you forfeit a very important right.