Saturday, October 2, 2010

Is the Limitation Liability Act still Applicable in the year 2010?

The Limitation Liability Act was introduced in congress on March 3, 1851. There has been three amendments since then: 1) 1935 Amendment fixed the total liability of owner of a sea going vessel for loss of life and injuries at less than sixty dollars per ton of vessel operated by the owner, when in an accident; 2) 1936 Amendment generally provided that when owner’s limited liability insurance is insufficient to pay losses in full and the portion of applicable payment for loss of life or injury is less than sixty dollars per ton, such portion would be bumped up to sixty dollars, if either the master, superintendent, managing agent or the owner of the seagoing vessel has a privy knowledge of the cause of the accident or issues leading to the accident; 3) 1984 Amendment increased the monetary penalty to $420 per tons of the vessel operated by a managing agent, superintendent, master or owner. The outdated Act and amendments would not have been mentioned, except for the huge disaster at the Deepwater Horizon rig. The magnitude of the accident and the potential limitation of liability against British Petroleum make this subject an issue of concern.

British Petroleum is the owner of the rig that exploded and Transocean operated the rig. Based on the provisions of the Limited Liability Act, none of the dead eleven or the injured two, or any other persons that may have been directly or indirectly injured from the Deepwater Horizon rig accident can claim more than $420 per ton of the vessel. This realization must be shared with the public and the congress. The lesson that either of these group would learn, is that: Implementing the applicable limited liability provisions of this act is inadequate to meet current day inflation.

Further, we are at a cross road of having to revert to an act and over quarter century amendments that are hardly reasonable or applicable to the environment that we have now. When the Limited Liability Act was introduced, the growth and competition in the US commerce were not as huge and expansive. To administer the provisions of the act and its amendments to current day commerce and accidents, will only lead to a misunderstanding. To restrict the liability due to the affected parties from the Deepwater Horizon rig disaster would only lead to misconceptions and bad blood.

We all know that the Deepwater Horizon disaster affected many residents of the Gulf Coast. The provisions of the Limited Liability Act call that affected parties prove beyond reasonable doubt that damages they suffer, come from negligence of the owner of the vessel, rig or platform. That means, the dead employees, the injured workers, the hotels, tourists managers, the local governments and any other parties in that area have to pass the litmus test that they have suffered tremendously and their suffering can only be adduced to the fault of British Petroleum, Transocean and probably, Halliburton. Common sense however indicate that restricting compensation to the limitations of the provisions of the Limited Liability Act, would only mean rubbing salt into the wounds of those people.

To maintain critical relationship between residents of the Gulf Coast and the owner or operator of the vessel, rig or platform at the Deepwater Horizon, it is better to look for other formulas for assessing fault or for making restitution to those affected by the Deepwater Horizon disaster. Astute operators and vessel owners know that when actions are based on criteria that are hardly applicable to modern day events or environment, or when affected parties are ignored for any reasons, we end up weakening the relationships between organizations and the public.

Further, when affected parties believe that they are being given a rough shoulder or treated with impunity, they are more likely to resort to other behaviors that may further disconnect the people from the organization. In order words, if BP had relied solely on the provisions of the Limitation of Shipowner’s Liability Act to address the concerns of those in the Gulf Coast with respect to what happened at the Deepwater Horizon zone, it would have had to deal with more irate people. For those who questioned Obama’s wisdom to negotiate with British Petroleum regarding compensation due the affected parties from the Deepwater Horizon disaster, it may be better for them to think again. Do they believe that the provisions of the Limitation of Shipowners’ Liability Act are adequate for the disaster in the Gulf of Mexico?

Evidence garnered by congressional investigative panel, the National Incident Center and hopefully, by lawyers who will be bringing up class action suits against British Petroleum and its cohorts would provide enough information to blow out the cap. The feelings, emotions and attitude of the people who feel they have been greatly impacted by the accident look unquantifiable; however, when it comes to settlements, the attorneys or arbitrators would have to find a way to quantify these variables. While most civil attorneys would be looking for a way to get a pound of blood for a pound of flesh from this accident, they may have to resort to facilitating the cases with what the law says or provides for. Unlike the provisions of the Shipowners’ Liability Act, the attorneys would be looking to the provisions of other civil laws to gain maximum compensation for their clients.

The primary role of the civil attorneys would be to make the most significant difference in the litigation. However, the limitations of the Shipowner’s Liability Act are like an albatross to the civil attorneys. The attorneys would be seeking ways to rope BP and its contractors to attain maximum compensations for their clients. Whether this will work or not, is better left for time to tell. It is the position of this blog that for us to have a fair and equitable compensation for the Deepwater Horizon disaster, there is going to be a need to revisit the Limited Liability Act. What happens during the adjudication of the cases against BP would justify this argument. The experience with the adjudication of the cases against BP may have the added advantage of serving as a pointer to how to better bring the provisions of the Act to the year 2010.

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