Limitation of Liability Act

The Limitation of Liability Act was first passed into law in 1851. It is designed to limit the liability of the owner of a vessel if an injury or loss is alleged to have occurred because that vessel was operated with negligence. A liability, claim, or debt, under the law, cannot exceed the value of the ship and its freight. Vessel owners can limit their liability for damage to property, goods, or merchandise placed on the ship or that are being transported. They can also do so for any losses, injuries, or damage caused by a collision and that involve personal injury/death, salvage costs, and cargo losses.

However, the Act does not allow owners to limit liability related to wages owed, maintenance and cure benefits, personal contracts, return of unearned freight, and environmental claims made under clean water and oil pollution law. It does give owners the opportunity to prove they didn’t know there was an issue that led to, for example, the loss of a customer’s cargo. The Act helps protect owners in case the vessel is operated incompetently, and they are not aware of that fact. Although a victim of an accident aboard a seafaring vessel may sustain losses greater than its value, a ship owner must prove they had no knowledge of problems that triggered such an incident from which the liability originated.

How the Law Is Used

The Limitation of Liability Act can be used in a federal district court, to determine if a vessel and owner are liable for the alleged damages. It also helps determine the value of a plaintiff’s damages and if liability can be limited to the vessel’s/freight’s value. How the limitation fund is disbursed to claimants is a factor as well. Another means to limit liability is to use the Act as a defense in a state or federal court.

Under the law’s statute of limitations, there are six months to begin a legal proceeding, from when written notice of a claim is received by the vessel owner. The notice must state the claim may exceed the post-casualty value of the ship and its freight. Details of the claim and incident must be stated, according to court decisions, and the notice must state the owner seems responsible for the alleged damage.

It is up to the owner to file a limitation complaint for proceedings to begin. It covers the basis under which the complainant has a right to limit their liability, and the facts a court needs to decide what to limit it to. The complaint should also provide details on the voyage, the amount of all demands, pending actions and proceedings, and the value of the vessel after the voyage and whether it sustained damage or was lost or abandoned. The value of a shipwreck may also be stated, as may be that of recovered freight.

Limitations proceedings do not have a right to jury trial. Ship owners are also required to set up a limitation fund to deposit directly with the court or a court-appointed trustee.

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