Parasail Company Could File Suit in Federal Court Against Victims to Limit Liability

The insurer for the parasail company, Lighthouse Parasail, may file a Limitation of Liability action in federal court. This action would seek to limit the recovery of any claimant to the worth of the towing vessel only. You read that correctly. In many boating casualties involving severe injury, or even death, the insurer of the owner of the vessel files what is known as a “Limitation of Liability” (46 U.S. C. 30501) lawsuit, and seeks to limit the recovery of any and all claimants to worth of the involved vessel. Typically, in a parasailing operation the vessel being used to tow “flyers” (i.e., passengers) is worth just a few thousand dollars.

This “Limitation” law was originally passed by Congress in 1851. The original design was to provide protection to America’s relatively young commercial fleet in their competition with other nations who had more established sailing fleets. It was common then for an owner of a commercial vessel to charter (i.e., lease) it out to another company with the thought being that if the vessel was involved in a casualty—like striking a bridge for instance—then the owner’s “liability” would be “limited” to the value of the vessel. This was as long as the vessel owner had no negligence and was not connected to any person who was negligent.

Unfortunately, the U.S. Supreme Court has since held that this 1851 law applies not only to commercial vessels, but also applies to recreational vessels. The practicality of that ruling was to give insurers of recreational vessels a path to potentially greatly reducing payouts to injured persons in situations like the Lighthouse Parasail situation. The law also would apply in those incidents where a privately owned recreational vessel is involved in a casualty situation. (Think, recreational vessel strikes another vessel, or strikes a channel marker causing injury, or strikes a swimmer or diver.)

In 25 years of practicing maritime law, we are not seeing fewer of these Limitation cases, we are seeing more and more of them as the insurers for even personal recreational vessels file suit against injured claimants in federal court seeking to limit the payout to injured claimants. Another unsavory aspect of this 1851 law is: the claimants are sued by the owner of the vessel. Many injured people, and their attorneys who do not practice in maritime law, are surprised to be served with a federal court complaint against the injured claimants by maritime attorneys representing the vessel owner. The notification gives the claimant a limited amount of time to make a claim and file appropriate pleadings against the Limitation action. If the claimant fails to act within the time allowed by the federal court their claim can be barred. If the claimant does timely respond they must fight an often complex legal battle in federal court.

We have seen Limitation actions filed by boat rental outlets, various boating clubs, “Jetski” rental outlets, on behalf of individual recreational vessel owners, commercial vessels, and yes by parasail operators. The objective of the insurer is to get the case into federal court where a federal judge decides if the owner of the vessel was negligent, instead of having a jury decide the matter in state court. In federal court the insurer seeks complete exoneration—where nothing would be owed at all—or a “limitation” where the recovery is limited to the worth of the involved vessel. This legal maneuver is very common and it would not be surprising if the insurer for this parasailing company filed a limitation in federal court.