In the case of the DALI, the cap sought is approximately $44 million and if the DALI interests are successful, claimants to whom the shipowner is found liable would be paid their proportional share of that amount. Many of the claims outlined above –particularly the high value claims involving personal injury/ death, general average/ salvage costs, damage to the bridge and other recoverable economic losses - would be subject to such limitation.
In addition to potentially capping a vessel owner’s liability, the filing of a Limitation of Liability petition consolidates all claims in a single federal forum (i.e. a single multi- party lawsuit). Once all parties have appeared, the court will then move the case forward to determine whether the shipowner is entitled to limit their liability or whether the ship owner is responsible for the full value of all claims arising out of the incident. As noted above, the delta in the DALI matter is astonishing given the limitation amount resting at $44 million and potential liabilities topping out at approximately $4 billion.
The key question will be whether the Dali owners will be successful in their efforts to limit their liability. The primary hurdle they will need to clear is proving the owner lacked “privity or knowledge” or the negligence or fault that caused the incident. In the context of US admiralty law, "privity” refers to a legal relationship or connection between parties – meaning the relationship between a shipowner and the person or entity responsible for the act or omission that caused the maritime incident. ”Knowledge” in this context refers to the shipowner's awareness or understanding of the circumstances that led to the incident. This can include knowledge of any unseaworthy conditions of the vessel, negligence of the crew, or other factors contributing to the incident. For corporate shipowners, courts generally impute the privity or knowledge of high-ranking corporate officials onto a corporate shipowner, such as land based executives, as well as the privity or knowledge of the master or the
owner’s superintendent or managing agent, at or before the beginning of each voyage.
Despite our simple summary of privity or knowledge, this area of law is far from straightforward. U.S. courts have struggled for literally centuries to apply the privity or knowledge standard, calling it “somewhat elusive” and “difficult to apply” in a consistent manner. As such, U.S. courts will typically look at the specific facts of the case, including such factors as crew competency and efforts made by the owner and crew to remedy defects in the vessel that are discoverable through reasonable diligence. Navigational mistakes or other errors caused by an otherwise competent crew, or latent defects in the ship, typically are not deemed to be within the shipowner’s privity or knowledge. Even so, legal decisions in this area are far from consistent or predicable, with the trend in U.S. courts toward holding shipowners seeking to limit liability to an extremely high standard.
At present, all reports indicate that the immediate cause of the incident was a power failure aboard the DALI moments before the allision. If that power failure were the only causal link in the chain, the limitation petition of the owner of the DALI would undoubtedly be successful. However, previous power failures noted by the NTSB in their Preliminary Report could complicate the owner's limitation petition, potentially unravelling their defence and leaving them and their insurer (Britannia P&I) liable for the full value of recoverable claims.
Conclusion
The outcome of the limitation petition and subsequent litigation will significantly impact all parties involved, including insurers, reinsurers, and claimants, potentially reshaping the landscape of maritime insurance and U.S. admiralty law. Regardless of the ultimate determination, the legal process will undoubtedly drag on and thus the payout of third-party claims could take years. The incident also underscores the importance of P&I insurance and the P&I Club group pooling and reinsurance system, which will be the focus of an upcoming Lockton PL Ferrari publication. The incident also highlights the importance of proactive risk management and comprehensive insurance planning to mitigate risks from unforeseen maritime incidents.
This article has been compiled by insurance specialist Lockton and is republished here with our thanks.
See the Lockton website at
https://bit.ly/3KNvgiM View from the cargo
vessel Dali, which struck and collapsed the Francis Scott Key Bridge on
March 26, 2024. (Photo: Peter Knudson/NTSB)
100 | ISSUE 109 | SEP 2024 | THE REPORT
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