Lloyd’s Register of Shipping recorded 31 merchant vessel losses in 1988 resulting from fire and explosions. During 1989, 25 vessels were destroyed by fire. These losses included seven fishing vessels, five general cargo ships, six tankers, two reefer vessels, a passenger ship, one bulk carrier, a roll-on roll-off vessel, one tug and one icebreaker. There were also hundreds of vessel fires that were controlled and extinguished during these periods.
Cargo losses associated with shipboard fires are substantial. Federal courts are called upon to resolve liability aspects of fire cases based upon two statutes – the Fire Statute and the Carriage of Goods by Sea Act, also known as Cogsa. These statutes were designed by Congress to give guidance to the shipping industry in resolving cargo loss and damage claims. Unfortunately these statutes fail to address whether vessel owners or cargo interests must carry the burden of proof in fire cases in order to prevail in litigation.
The burden of proof issue is left to the federal courts to determine. There is now a major conflict among the federal circuits with respect to which party must carry the burden of proof in fire cases. Until the issue is resolved, there can be no uniform application of the Fire Statute and Cogsa with respect to fire cases in the United States.
Before 1851, American common carriers by water were insurers of cargo against fire losses at sea. Congress enacted the Fire Statute in 1851 to enable the merchant marine to limit liability in order to compete with other countries that had similar legislation. The Fire Statute provides the vessel owner with a complete defense to cargo fire losses
“No owner of any vessel shall be liable to answer for or make good to any person any loss or damage, which may happen to any merchandise whatsoever, which shall be shipped, taken in, or put on board any such vessel, by reason or by means of any fire happening to or on board the vessel, unless such fire is caused by design or neglect of such owner.”
A bareboat charterer is deemed to be an owner for the purpose of the statute; however, timecharterers and voyage charterers are not protected
The defense only applies to loss or damage caused by fire. Damage by heat and smoke is not sufficient. There must be visible light, such a s a flame or glow
The benefits of the statute are conditioned on the absence of “design or neglect” on the part of the owner or its managing officers. Negligence of the master or crew will not suffice.
In 1936, Congress enacted Cogsa, which enumerates certain causes of cargo damage that are excepted from liability. The statute excepts fire damage, unless caused by the actual fault and privity of the carrier. The Cogsa term “actual fault and privity: has been interpreted by courts to have the same meaning as the term “caused by the design and neglect” in the Fire Statute. Cogsa specifically provides that it shall not affect the rights and obligations of the carrier under the Fire Statute. Cogsa also broadens protection to include timecharterers and voyage charterers..
There is now sharp disagreement among the federal circuits with regard to what carriers must do to assert a fire defense. The majority view (Second Circuit) holds that since Congress specifically retained the Fire Statute in Cogsa, the burden of proof under the two statutes must be the same. If the carrier demonstrates that the cargo damage was caused by fire, cargo interests must then show that the carrier negligently caused the damage, either by providing that a negligent act caused the fire or that the act prevented the fire’s extinguishment. If cargo interests fail to carry this burden, the carrier will be exonerated.
The minority view (Ninth Circuit) holds that the carrier cannot assert a fire defense unless it can first satisfy its overriding Cogsa obligation to exercise due diligence as to seaworthiness and proper manning of a vessel. This burden makes it extremely difficult for a carrier to avoid liability if crew error or faulty equipment causes the fire
The time has arrived for the Supreme Court to settle the burden of proof dispute. There must be unanimity in the federal court system on this issue in order to prevent circuit “shipping” and inconsistent court decisions in vessel fire cases.