Insurers in Florida Keys Boat Crash Likely to File a Limitation of Liability Case in Federal Court
In the tragic Labor Day crash near Boca Chita in the upper Florida Keys on September 4, 2022 at Marker 15 the insurers of the vessel and/or vessel owner will likely file a “Limitation of Liability” action in federal court. What is a Limitation of Liability civil action? It is an action filed almost always by marine insurance companies in accidents involving severe injury or death or where there are multiple potential claimants. A Limitation action seeks to limit the recovery of all claimants to only the value of the vessel involved in the casualty, meaning the vessel’s post-incident value. So for instance in a casualty involving a boat-fire that causes injury or property damage, the at-fault vessel may be worth almost nothing.
Where Does This Law Arise From?
The initial version of this law was passed by the U.S. Congress in 1851, now officially known as the Limitation of ShipOwners’ Liability Act, and found at 46 U.S. C. 30501. At the time Congress created the law the reason for doing so was to help protect owners of vessels—arguably commercial vessels only—to limit the exposure of their assets to a vessel they owned but that may have been negligently operated by an otherwise seaworthy crew. It was common then, and still is today, for a commercial vessel owner to lease out or “charter” a vessel to an operator. When the operator causes damage with the vessel, the owner goes to federal court and claims they had no fault in the casualty and therefore the owner’s exposure should be “limited” to the worth of the vessel after the incident. This after-incident valuation is commonly referred to as the “post-casualty value” of the vessel.
In 1851 the commercial shipping companies in the United States were competing with the established shipping countries like Great Britain, Spain, Portugal, France, etc., most of whom had similar laws beneficial to their own shipping interests in their respective countries. Though arguably intended by Congress to protect only commercial vessels, all of the federal appellate courts who have spoken on the issue agree that the Limitation act applies to recreational vessels as well as commercial vessels. The 11th Circuit—which covers Florida—has agreed this law can be applied down even to “Jetskis” and yes to vessels similar to the 29-foot Robalo powerboat involved in the September 4, 2022 boat crash.
How Does a Limitation Action Work?
Injured claimants are often shocked to find out that a Limitation action has been filed in federal court after a serious boating incident. The insurer, through maritime defense counsel, files a “petition” in federal court on behalf of the owners of the vessel. The “Petitioner” obtains an Order from the federal court which gives a certain time limit—no less than 30 days—within which any claimant having a claim or interest in the incident must file a claim in the federal court. The notification for these Limitation actions is often served on the known claimants in the same type of format—by process server–as if the claimant was being sued. This can be very upsetting to victims involved in a boating incident to find out that the victim of a crash are essentially being sued and required to fight out their claim in federal court.
Once all claimants who are going to file a claim are in the federal court case, or the time to file such a claim has expired, the Limitation case moves forward to determine why the incident occurred. In Limitation actions a federal judge, not a jury, decides how and why the boating incident occurred and whether a “limitation of liability” is appropriate or not appropriate.
Why Do Insurers File Limitation Actions?
First, insurers file Limitation actions because they want to limit how much the insurer may have to pay on a claim. If successful, a Limitation action can drastically reduce the recovery amount available to claimants. The Limitation action seeks to limit the exposure only to that post-casualty value of the vessel–despite that the total insurance coverage may greatly exceed the post-incident value of the vessel. The post-accident value of a vessel in some cases could be near zero but the insurance policy covering the vessel may well be several hundred thousand dollars. If Limitation is granted by the federal court, the insurer’s payout is greatly reduced despite that the total amount liability insurance coverage purchased by the boat owner was much higher than the value of the vessel. A second reason insurers file Limitation actions is to try to bring all claimants into one forum, and to have any non-appearing claimants excluded from recovery. The Limitation Order written by the federal judge gives claimants only so much time to file their claim in the federal court, and failing to do so can extinguish such a claim.
A third reason insurers file Limitation actions cannot be discounted; very few attorneys practice in maritime law, and even fewer handle claims involving Limitation actions in federal court. An attorney who handles mostly auto accidents is unlikely to have ever faced a Limitation action and may never have had a case in federal court at all. Conversely, the attorneys working for the marine insurers are well versed in the Limitation law and procedures in federal court. A fourth reason an insurer will want to use this federal court procedure is that all of the issues are decided by a federal judge; no jury will be involved. Federal judges tend to be more dispassionate and perhaps more conservative than a jury might be in tragic cases.
The upper Florida Keys boat crash of September 4, 2022 has all of the factors generally involved when insurance companies file a Limitation action: a very unfortunate death, significant injuries, multiple potential claimants, a vessel with limited value compared to the expected claims. Attorney Frank Butler of www.888BOATLAW.com a 25-year maritime attorney representing injured claimants, states that, “Unfortunately, it would be more surprising if the marine insurance company in this case did not file a Limitation action in federal court. There is no doubt an increase in the filings of Limitation actions in even modest boating crash and injury cases. Not only are the traditional marine insurance companies resorting to Limitation actions, but also the traditional auto insurers who are now selling boating insurance policies are filing Limitation actions in boating injury cases.”
One final point to remember is that boating insurance policies, like auto accident policies, give the insurer—not the insured person—the rights to make decisions about how the injury case is defended. This means that the owner of a vessel who made a mistake and may want his or her insurer to pay the claims, it is the insurer who gets to make those decisions. Many times that results in the insurer initiating a Limitation action in federal court against the injured claimants.
Frank Butler is a native Floridian and Florida maritime attorney for 25 years. His firm www.888BOATLAW.com has had to fight many Limitation actions in federal court.
