Hurricane Ida: Considerations for Maritime Businesses and their Insurers

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Hurricane Ida has now passed and many are still in damage assessment mode. What are the issues that are going to be facing maritime businesses and their insurers as we move forward? This update identifies some of the key issues that will likely be front and center based on our experience with prior hurricanes.

1. Act of God?

Most hurricanes are treated by the Courts as an Act of God but that is only the beginning of the inquiry on marine liability claims. The central issue will be whether Hurricane Ida was an Act of God such that no reasonable preparations could have prevented a vessel from breaking free. Note that this could be different at different locations, depending on the severity of the storm in specific places. This usually requires a fact-intensive investigation that considers what meteorological conditions were predicted, which are then compared to what actually happened, and a detailed assessment of what preparations the vessel owner took.

2. Hurricane Planning

Most maritime businesses have or should have a hurricane plan in place that outlines what steps are to be taken to secure or move marine assets and when these should be taken based upon how any weather event develops. In liability claims, an initial central issue is how the execution of such plans was undertaken, often in challenging circumstances with rapidly changing information.

3. Exoneration from or Limitation of Liability

When a vessel has broken free during a hurricane, the vessel owner will usually file a “limitation action” in which it will seek exoneration from liability on the basis that the hurricane was an Act of God such that no reasonable preparations could have prevented the vessel breaking free or to limit any liability pursuant to the Shipowner’s Limitation of Liability Act, 46 U.S.C. §§ 30501 et seq. to the post-casualty value of the vessel, plus pending freight.

A limitation action must be filed within 6 months of the vessel owner receiving written notice of a claim, although it is usually prudent to do this within 6 months of the date of loss and possibly sooner to try and establish jurisdiction. The burden of proof is on the vessel owner seeking to limit liability to show that any fault that caused the loss was caused “without the privity or knowledge of the owner.” Generally, this means that Courts will look to who was in charge of decision-making with regard to hurricane preparations and the extent to which that rose to the managerial level such that this is imputed to the owner. Again, it’s a fact-intensive inquiry.

4. Who Else Might be at Fault that Cannot Limit Liability?

Sometimes during hurricanes, vessels break free because the land-based structure to which they were secured fails. The property owner (unlike the vessel owner) has no right to seek to limit its liability. Questions may be raised as to whether the property owner was at fault in failing to maintain the property that failed and allowed vessels to break free.

5. Don’t Believe Everything You Read

There have been extensive reports of maritime casualties, including vessel breakaways, collisions, allisions, property damage, and pollution. Not all of these reports are accurate and caution is warranted. However, it is best to provide notification to insurers of potential incidents as soon as possible so that a prompt investigation can be undertaken and claims adjusted. Communication is central.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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