Maritime Update: Sailboat Owner Misses Opportunity to Limit Liability
On March 21, 2019, the U. S. Fifth Circuit Court of Appeal, in the case Brown v. Edwards and Richter, LLP, upheld the dismissal of a vessel owner's suit seeking exoneration from and/or limitation of liability. This ruling underscores the importance of understanding what factors a court will consider in deciding when a vessel owner first received "written notice" of a claim.
In August 2017, Hurricane Harvey hit Port Aransas, Texas. Gene Brown's sailboat broke loose from a municipal marina and crashed into the marina of Virginia's on the Bay ("VOB"). Brown had not taken sufficient precautions to secure his vessel. In September 2017, a lawyer for VOB wrote Brown to advise that his sailboat had caused property damage to VOB. Enclosed photographs showed Brown's boat in the aftermath of the storm with damage to VOB. In November, Brown's insurer denied VOB's claim. The following March, VOB's lawyer sent a second demand letter that listed VOB's damages ($85,000) and specifically described Brown's negligence.
On May 2, 2018, Brown filed suit in the U.S. District Court for the Southern District of Texas seeking to limit his liability to the value of his sailboat -- $2,000. VOB moved to dismiss the suit, and the trial court granted VOB's motion. Brown appealed.
Vessel owners may use the Limitation of Liability Act (the "Act") to cap their liability at the value of the vessel under certain circumstances. To receive the protections of the Act, a vessel owner must bring an action in federal court "within six months after a claimant gives the owner written notice of a claim." The timeliness of a complaint usually depends on which communication is considered the "written notice of a claim" that starts the six-month clock.
On appeal, Brown argued that the September 2017 letter did not give him notice that a claim exceeding the value of his sailboat was possible. The Fifth Circuit rejected Brown's argument and held that the September letter included more than sufficient notice given that the photographs and statements included in the letter indicated damages significant enough that it would likely exceed the value of Brown's vessel.
The Fifth Circuit noted that a vessel owner has incentive to investigate its potential exposure when it receives notice of a claim and instructed that a vessel owner can file a protective complaint under the Act prior to the expiration of the first possible deadline if he/she is uncertain about the extent of damage and/or liability.
The Fifth Circuit affirmed the trial court's dismissal of the complaint because it was not filed within six months of Brown's first receiving written notice of a claim.
D. Why Is This Important?
- Yacht, sailboat, and personal watercraft owners may not realize they may have an opportunity to limit their liability when faced with a casualty involving their vessel.
- A vessel owner has a limited window of time within which to seek exoneration from and/or limitation of liability.
- Initiating a protective complaint under the Act within the shortest possible deadline may be prudent if there is uncertainty regarding the value of the vessel, the extent of damages and/or liability.