COURT RULING SHOWS NEED TO REPORT DEFICIENCIES TO CLASSIFICATION GROUPS

For centuries, maritime law has concerned itself with issues of seaworthiness and perils associated with transporting goods by sea.

When cargo-ladened vessels flunder in storms, admiralty courts have the difficult task of determining if shipowners will be liable for cargo losses.

The recent 96-page Tuxpan case (1991 U.S. Dist. Lexis 7286) in New York is the latest attempt to resolve the complex liability issues associated with perils of the sea cases.

On Feb. 16, 1987, the containership Tuxpan, with a crew of 27 and a cargo worth $22 million, sailed for Mexico and the United States after loading in Belgium and Germany. Between Feb. 24 and 28, the vessel mysteriously disappeared without a trace.

The shipowner petitioned to limit its liability under the U.S. Limitation Act. Cargo interests sued to recover their losses under the Carriage of Goods by Sea Act (Cogsa) and the Hague Visby Amendments (Visby).

The shipowner asserted two related but independent defenses:

1.The loss was caused by a “peril of the sea.”

2.The shipowner exercised “due diligence” in making the vessel seaworthy.

Seaworthiness implies that a ship is reasonably fit for its intended use on a particular voyage. Under general maritime law, a shipowner’s duty to furnish a seaworthy vessel is absolute and non-delegable. Breaching this duty results in full liability.

A peril of the sea relates to dangers particular to the sea that are of an extraordinary, overwhelming nature and that cannot be guarded against by the ordinary exertions of skill and prudence. A peril, such as a catastrophic storm, may overcome a seaworthy vessel if the weather is unexpected in a geographic area.

The shipowner’s absolute duty to furnish a seaworthy vessel has been modified by Cogsa and Visby. The carrier is bound at the beginning of the voyage to exercise “due diligence” to make the ship seaworthy. The shipowner is not liable for losses resulting from unseaworthiness, unless caused by its lack of due diligence to make the ship safe. Due diligence requires the use of all reasonable means to make the vessel seaworthy and is always a question of fact.

The due diligence duty is non-delegable. Seaworthiness certificates issued by classification societies do not conclusively establish due diligence. However, failing to perform classification inspections may be considered a failure to exercise due diligence.

In the Tuxpan case, the court rejected the shipowner’s peril of the sea defense. The court found the vessel was experiencing heavy but expectable North Atlantic weather on the afternoon of Feb. 24. The argument that the vessel floundered in catastrophic seas on the evening of Feb. 24 was discarded. Telexes from the shipowner indicated the vessel was safely afloat on Feb. 27, three days after the storm had passed.

The court found the vessel had sustained 118 structural cracks over its lifetime and had experienced numerous engine problems that frequently caused it to stop at sea. Contrary to classification rules, most of these deficiencies were concealed from class. Although the court could not determine what condition brought about the vessel’s demise, it concluded the loss was caused by the shipowner’s failure to exercise due diligence to make the vessel seaworthy. Therefore, the shipowner’s limitation petition was denied.

The court went on to address the shipowner’s package limitation defense. Under both Cogsa and Visby, a shipowner’s liability for negligence is limited to a fixed sum per package transported. Visby, unlike Cogsa, prohibits the package limit in cases of “recklessness” However, no tribunal has ever decided a Visby “recklessness” case.

The New York federal court reluctantly permitted the shipowner to use the Cogsa $500 per package limitation defense on the cargoes destined for the United States. However, in a case of first impression, the New York court (which applies common law) denied the Visby package limitation on the cargoes slated for Mexico. This was based upon Belgian and German civil law code decisions that interpreted the meaning of “recklessness” in aviation cases.

The Tuxpan case is now on appeal. The decision should encourage shipowners to report unseaworthy conditions to their classification societies. However, shipowners should remember that reporting deficiencies does not necessarily establish due diligence.


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