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Deep Water Horizon Oil Rig Disaster Focuses Need to Repeal Limitation of Liability Act

The owners of the Deepwater Horizon Oil Rig, Transocean Ltd, have filed a Petition For Limitation of Liability in the United States District Court for the Southern District of Texas. If the Petition for Limitation of Liability is successful, Transocean may be able to limit their liability for the casualty to just 26.7 million dollars. The Petition is based upon a law passed by Congress in 1851 and was designed to promote investment in cargo sailing ships.

The policy rationales behind the Act have been repeatedly called into question by maritime legal experts for the past 30-40 years. The national focus of the potential billions of dollars in environmental damage the oil rig disaster is leading to needed close scrutiny by Congress of the continued viability of the Limitation of Liability Act. One bill in the House of Representative and another in the Senate have been introduced to repeal the Limitation of Liability Act. This repeal and/or revision of the Limitation of Liability Act is long overdue.

Circumstances have changed dramatically in the last 150 years since the passage of the Limitation of Liability Act. Unlike in 1851,vessel owners are today able to procure liability insurance to protect themselves from damage claims for casualties caused by a vessel's unseaworthiness or negligence. Similarly, modern maritime law allows vessel owners to limit their liability for cargo losses through bills of lading and contracts with ship owners, thus the historic purposes behind the original Limitation of Liability Act no longer exists.

The Limitation of Liability Act comes into play in the Deepwater Horizon oil rig disaster because the Deepwater Horizon is a floating platform, capable of navigation, giving it legal status similar to that of a ship. Most of the injured oil workers aboard the oil rig will be classified under Federal Maritime Law as Jones Act seamen for compensation for injuries or death claims. Under the Limitation of Liability Act, an owner of a vessel may be entitled to limit its liability for damages to the value of the vessel immediately after casualty. Because the Deepwater Horizon has sunk, it has virtually no value. The 26.7 million dollar limitation figure is based upon a calculation of the oil then pending for sale from the oil rig. To be entitled to limit their liability, Transocean must prove that the oil rig disaster was the result of events outside of their "privity and knowledge."

The Limitation of Liability Act has been disfavored by American maritime courts for the past fifty years. Injured parties have been permitted to defeat limitation of liability claims by proving constructive knowledge of a condition that presented an unreasonable risk of harm. In cases involving ownership of a vessel by a corporate owner such as Transocean, the knowledge of management personnel is imputed to the vessel owner. Furthermore, Transocean will be charged not only with what they actually knew but rather what a reasonably prudent vessel owner should have discovered through reasonable inspection. A vessel owner cannot avoid liability through a head in the sand approach to safety concerns.

Emerging evidence reported in the news leads to the conclusion that it will be highly unlikely that Transpocean would be successful in a bid to limit their liability. Although in modern times the Limitation of Liability Act has rarely shielded a vessel owner from paying compensatory damages, the Act may be imposed for tactical purposes. The Act permits the vessel owners to require all damage claimants to come together in a concursus before one court thus avoiding defending what could be thousands of suits in multiple jurisdictions.

Typically, in a Limitation of Liability case, liability and negligence are tried separately from damages. However, once the Limitation of Liability Act is defeated, damage claimants may petition the Court to pursue their claims in State Court with a right to a jury trial. By filing a Limitation of Liability Petition, the statute of limitations may be shortened for the filing of damage claims; the time for filing claims will be set by the Court. In the case of the Deepwater Horizon, not all of the damages have yet been incurred, and the Court is likely to provide a large window for filing of claims. The Limitation of Liability Act can add years to the time it takes to get compensated for injuries and dramatically increase the costs of litigation.

Stacey & Jacobsen, PLLC is one of the nation's most experienced maritime law firms in handling Limitation of Liability Act claims. Claims for limitation of liability have frequently been made in cases involving owners and their insurance companies attempting to escape damages and death claims involving crewmen on fishing vessels that have sunk in Alaska. Stacey & Jacobsen, PLLC was able to overcome the Limitation of Liability Act defenses in claims involving the sinkings of the Alaska fishing vessels Aleutian Enterprise (9 crewmen lost); Arctic Rose (15 crewmen lost); Katmai (7 crewmen lost); and Alaska Ranger (5 crewmen lost). The Limitation of Liability Act remains a challenging legal hurdle to overcome, particularly in cases involving spontaneous acts of negligence of lower level workers and claims involving latent defects in equipment that reasonable inspection and testing could not have discovered. It is important to remember that as far as Jones Act seamen wrongful death and injured seamen claims are concerned, the employers owe seamen a non delegable duty to provide them with a safe place to work.

If you have been injured at sea, please contact an experienced maritime law attorney at Stacey & Jacobsen today for a free initial consultation and case evaluation.

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