Limitation Of Liability In The Workboat Industry

The owners of tugs and other workboats are entitled to limit their liability under the Shipowner's Limitation of Liability Act, 46 U.S.C. §30501 et seq. ("Limitation Act"), to the same extent as the owners of ocean-going ships. Thus, if a workboat is involved in a maritime casualty, the workboat's owner or bareboat charterer may be entitled to limit its liability to the value of the workboat after the incident, plus any towing charges, hire, or freight still owed for the job. This limitation right obviously can be a great benefit to a workboat's owner and insurers when the damages from a marine casualty are substantial.

A vessel owner's limitation rights, however, are subject to several important qualifications, three of which have special significance in the unique circumstances of the workboat industry. Each is discussed below.

"Privity or Knowledge"

A vessel owner is only entitled to limit its liability if the fault that caused the casualty is not within the owner's "privity or knowledge." This is a term of art that has been judicially defined over decades of case consideration and does not lend itself to easy definition when a corporate owner is involved. Obviously, if senior management is aware of the fault that caused the casualty, then the fault is deemed to be within the owner's "privity or knowledge." The more difficult questions concern employees further down on the corporate ladder. For example, the knowledge of an operations manager, and even of a fl eet or port captain that reports to the operations manager, likely will be imputed to the owner, but the knowledge of a vessel's master or in house repairman likely would not be.

The above examples illustrate that it is not always easy to predict whether the knowledge of an individual will be imputed to the vessel's corporate owner, and most "privity or knowledge" questions can only be resolved on a case-by-case basis. In the workboat industry, these questions can be even more difficult given the closer involvement by management in the operation and maintenance of a fleet and the sheer proximity of the vessels to management control. But as a very rough guide, casual ties resulting from the operational negligence of the workboat's master or crew generally will not be considered within the owner's "privity or knowledge" and the workboat owner would be entitled to limit. The result, however, may well be different if the owner was notifi ed of the matter as it was happening and became...

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