Article by John T. Biezup and Timothy J. Abeel
In 1851, the United States Congress enacted the Limitation of Shipowners' Liability Act (Limitation Act) to encourage and protect investment in the American shipping industry. Early decisions of the United States Supreme Court interpreting the Limitation Act construed the statute broadly to effectuate this legislative purpose. In a series of decisions favorable to shipowners, the Supreme Court held a shipowner was entitled to limit his liability for all claims to his interest in the vessel and the vessel's pending freight. The Supreme Court held that a shipowner's interest in a vessel was to be valued at the end of a voyage, rather than at the beginning. As a result, a shipowner's interest was usually determined after a casualty, thereby reducing the amount of the shipowner's liability should limitation be granted. Moreover, the proceeds of a vessel's hull insurance were excluded from the limitation fund to permit a shipowner to repair or replace his ship.
During the 1935-1936 legislative session, Congress reviewed the Limitation Act and amended it to increase the limitation fund for personal injury and death claimants. The judiciary, spurred by maritime casualties of the era and frustrated by Congress' failure to completely revamp the Limitation Act, began to exhibit an open hostility toward limitation of liability for shipowners. Most of this judicial antagonism was directed at the parameters of the limitation fund because of a perception that shipowners were unjustly preferred over damage claimants. As a consequence, courts channeled their legal acumen into formulating methods of increasing or circumventing the limitation fund.
About the Author
John T. Biezup. LL.B., Yale Law School; Member of the Bar, Pennsylvania.
Timothy J. Abeel. J.D., Temple University School of Law; Member of the Bar, Pennsylvania.
Citation
53 Tul. L. Rev. 1185 (1979)