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This article follows on a 2021 MAINBRACE article, “The Gateway to Federal Court: Admiralty Jurisdiction and Limitation of Liability,” which discussed the practical use of the Shipowners’ Limitation of Liability Act, 46 U.S.C. § 30501, et seq. (“Limitation Act” or the “Act”) in admiralty cases in U.S. Federal Courts. Following a recent Marine Casualty Seminar where the authors presented on this topic, this article will expand on the scope of the Limitation Act and provide more detail on the process for a limitation proceeding pursuant to the Limitation Act.

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Substantive Characteristics of the Shipowner’s Limitation Act

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A vessel owner may be able to limit its liability to the vessel’s post-casualty value plus then-pending freight (the “limitation fund”) if it did not have knowledge or privity of the acts of negligence or conditions of unseaworthiness that caused the incident. Whether a potential limitation petitioner is an owner able to limit its liability depends on the degree of control the putative owner exercises over the manning, operation, and navigation of a vessel. This means that entities other than the registered owner may be entitled to limit liability, including vessel managers, shareholders of a vessel-managing entity, former vessel owners, trusts holding legal title, and others. To evaluate whether a given entity may be able to limit liability, it is best to start with the question: Is this entity subject to shipowner’s liability because of its exercise of control over the vessel? If so, that entity should be a proper limitation petitioner.&nbsp;

A broad range of claims are limitable, from personal injury and death, to collisions and allisions, to cargo losses. “Personal contracts” of the shipowner—those undertaken at the owner’s choice after a casualty, are not limitable. In addition to personal contracts of the shipowner, other liabilities that are&nbsp;not&nbsp;limitable include liabilities for seaman’s wages and maintenance and cure, cargo damages caused by a vessel’s improper deviation, Oil Pollution Act and Clean Water Act liability, and preferred ship mortgages.&nbsp;

Limitation Act claims are most often invoked in commercial cases where claims for damages are high. But the Act has also been invoked to limit liability in recreational settings, which has given rise to changes in the statute to exclude certain small passenger vessels. In 2022, the Act was amended to specifically exclude vessels carrying fewer than 50 passengers on an overnight domestic voyage and fewer than 150 passengers on a non-overnight domestic voyage. This statutory change—largely in response to the M/V&nbsp;Conception&nbsp;fire—takes many domestic sightseeing or recreational vessels outside of the scope of the statute.&nbsp;

Procedural Aspects of a Limitation Proceeding

The Federal Rules of Civil Procedure’s Supplemental Admiralty Rules (“Admiralty Rules”), which apply to admiralty cases, provide at Rule F (9) that an action for limitation can be brought (a) in any U.S. judicial district where the vessel has been arrested or attached, or (b) any district in which the vessel has been sued. If no claim has been initiated, the proceedings can be commenced in any district where the vessel is located or, if the vessel is not within any district, then in any district. Depending on the nature of the claim and the location of the parties, the court also could transfer the action to any other district. Practically, petitioner vessel interests generally will commence an action where a casualty occurred, or where there is some nexus to the vessel.

A petition for limitation must be filed within six months from written notice of a claim. 46 U.S.C. § 30529; Admiralty Rule F (1). Of course, a limitation petitioner does not need to wait for written notice in order to commence an action, but if written notice is given, such notice would trigger a six-month clock. If no written notice of a claim is presented, vessel interests still may be entitled to assert limitation as a defensive measure in an answer to a complaint, though as discussed below, it may not always be prudent to rely on the option for defensive limitation.

Commencing a limitation action is similar to commencing a standard lawsuit—a limitation petitioner will need to set out the basics of its claim in the form of a complaint with basic details about the underlying incident and the vessel and the standards for limitation. The petition will also include a request for the court to grant an injunction requiring that all claims against the vessel be brought within the commenced action.

Upon commencing a limitation action, vessel interests must post security in an approved form equaling the value of the owner’s interest in the vessel and pending freight. This can take the form of a P&amp;I Club letter&nbsp;of undertaking (“LOU”)&nbsp;or posting a bond into court. If the value of the vessel is zero, no security would be required.

Once the limitation fund is posted, the court will issue an injunction directing any claimant to file its claim in the limitation action and enjoining claimants from filing claims elsewhere against the vessel interests. The consolidated claims (which could be for property damage, injury, or death) directed into a single lawsuit, in a single forum, is known as a maritime “concursus.” The concursus is a critical aspect of the Limitation Act and ensures that the claims will progress together in a single venue, and that all parties with a stake in the vessel interests’ application to limit liability will be treated equally.

A time limit for submission of claims will be set—there is no mandatory timeframe for claims to be filed, but a petitioner generally will make a recommendation to the court in its initial pleadings, and such timeframe will likely be determined by the complexity of the case and what is reasonable under the circumstances. Claimants will then file claims in the limitation action.

A petitioner can seek exoneration from, as well as limitation of, liability. This distinction will hinge on whether the claimants meet their initial burden of proving liability and whether an owner can prove its lack of privity or knowledge. If exoneration is not available, vessel interests still can limit based on the valuation discussed above.

Claimants are treated as plaintiffs with respect to the order of the proceedings, as they bear the burden of proof in the first instance.&nbsp;

A petitioner is not required to answer claims or plead affirmative defenses. There may be logistical and strategic reasons to file or not file answer(s) to the claims, and it also likely will depend on the number of claims filed. If many claims are filed, it may be needlessly complicated for a petitioner to answer each one.&nbsp;

As set forth in the Limitation Act, the amount available to pay injury and death claims is less than 420 times the gross tonnage (“GT”) of the vessel, “that portion shall be increased to $420 times the tonnage of the vessel.”&nbsp;

This is often interpreted as requiring a wholly separate fund just for injury and death claims, but that is not quite accurate. Take, for example, a 30,000 GT vessel that is worth $20 million after a casualty.&nbsp;The “supplemental” fund would be $12.6 million (30,000 x $420). Now say the other claim in limitation action is for $40 million by the other vessel owner in a both-to-blame collision.&nbsp;Do we need a supplemental fund for the injury and death claims? No, because equity subordinates a joint tortfeasor, meaning that the injury and death claims would have priority against the fund.&nbsp;The $20 million limitation fund is therefore adequate.

Importantly, any issue regarding a supplemental fund is to be adjudicated at trial on limitation, and not in preliminary proceedings, so claimants cannot demand posting of security for a supplemental fund during the first phase of a limitation trial.

Assessing Whether or Not to File for Limitation

Whether or not to file a limitation action requires consideration of a number of factors, including the number of potential claimants, the value of potential claims, the value of the vessel, the viability of the privity and knowledge defense, the strategic value of the limitation injunction, and consent to jurisdiction in the United States. For example, in cases where the value of the vessel exceeds the anticipated claim amounts or only one (or a few) claimant is anticipated, the limitation action may not be desired because the concursus function of the Limitation Act will likely be undermined, as discussed below. However, in cases where the number of claimants is expected to be large (or is unknown) and/or geographically varied, the procedural benefit of bringing all claimants to a single venue may be desirable.&nbsp;

Beyond the procedural and substantive considerations, operations considerations also play a role in whether to file a limitation action or not. For foreign owners that might not otherwise be subject to personal jurisdiction in the United States, filing a limitation action of course voluntarily submits the owner to U.S. jurisdiction for purposes of claims arising out of the casualty. On the other hand, submitting to U.S. jurisdiction to file a limitation action can effectively cut off the potential for multiple vessel arrests or attachments arising out of the casualty when an owner’s vessels call on U.S. ports.

Pursuing Claims Outside of the Limitation Action

One of the procedural benefits of a limitation action is that it functions as a concursus, forcing all claimants to appear in the limitation venue to assert claims arising from the relevant event. But the court’s stay order over other proceedings is not permanent. Rather, claims may be pursued outside of the limitation action under special circumstances where the claimant(s) make certain stipulations to protect the rights of the limitation petitioner. Indeed, the principal consideration in whether other claims may move forward—even claims that are not subject to limitation—is whether the limitation petitioner’s right to limit its liability is maintained.

Claims subject to limitation may be allowed to move forward if a claimant—or group of claimants—stipulates that the damages sought are less than the limitation amount or that the claimant(s) will not seek to recover an amount greater than the limitation amount, even if damages in excess of that amount are awarded in another proceeding. In a multi-claimant scenario,&nbsp;all claimants&nbsp;must stipulate that the aggregate value of the total claims asserted against the limitation petitioner will not exceed the limitation amount. Absent agreement of all claimants, no claimant’s claim may proceed outside of the limitation action. For claims not subject to limitation, the limitation court may exercise its discretion to keep the stay in effect to avoid inconsistencies that may arise from differing results in different litigation.&nbsp;

The limitation fund is stipulated by the limitation petitioner and approved by the court when the limitation action is initiated. This timing may result in a fund amount being set without complete information as to the value of the vessel and pending freight. Thus, the limitation fund amount is not set in stone and either the limitation petitioner or a claimant may move the court for an adjustment of the fund amount. When a party moves for modification of the amount, the court may permit discovery on the valuation, pending freight, and other costs and may also conduct a hearing with fact and expert witnesses in order to determine the proper fund amount.&nbsp;

The limitation petitioner and/or the claimants may prefer to prosecute the limitation action as a single trial, where damages and liability are dealt with concurrently, or as a bifurcated action, where limitation is considered first and damages second, if needed. Each approach has pros and cons and will be preferable under different circumstances. From a limitation petitioner’s perspective, bifurcation may be preferred when the expectation of limitation is high. If liability is likely to be limited, minimizing the expense of discovery on damages at the limitation phase will help to streamline overall costs and reduce the risk of costly damages discovery where the issue of damages may ultimately be moot.&nbsp;

But bifurcation is not ideal in all situations. If limitation is unlikely or there is a chance to settle the matter short of trial, conducting discovery on both liability and damages from the outset may help shed light on otherwise opaque damages issues, making settlement discussions possible. Further, bifurcation results in disproportionate expenses being levied on the limitation petitioner in the liability phase, letting the claimants off with minimal expense early on. In some instances, a court may choose to bifurcate trial but still allow discovery of all aspects of the matter. This may help the parties to assess settlement before trial must proceed on phase one liability and limitation issues.

Pleading Limitation as a Defense&nbsp;

There are a number of considerations to take into account when deciding whether to hold off on filing an affirmative limitation proceeding and to instead assert limitation as a defense if and when a claim is brought.

If a potential claimant is not considering filing a claim, or is on the fence about doing so, it may be beneficial for vessel interests to avoid drawing a claimant into a lawsuit and engaging in a litigation neither party really wants to be in. Limitation as a defense also does not come with any time limits and thus is not subject to the six-month clock that starts when notice of a claim is given. This puts the onus on the claimant to file any potential claim within whatever applicable time bars would apply to their claim.

There are a number of downsides to the “wait and see approach.” First, there is no concursus available. This is manageable when only one or two potential claims may arise, but in the event of multiple claimants, being subject to claims in multiple jurisdictions at different times would be burdensome to manage. More substantively, limitation is only available as to each individual claim, without pooling the claims against a similar limitation fund.

There also is the risk of a potential loss of subject matter jurisdiction if a claim is filed in state court. There are some cases holding that a state court lacks jurisdiction to decide limitation because it is traditionally within the exclusive jurisdiction of the federal courts. So even though the Limitation Act expressly permits asserting the right to limit as a defense, it would seem that in limited circumstances if a state court determines it does not have jurisdiction to decide limitation and there is no other basis for removal to federal court, the right to plead limitation could essentially be forfeited. This seems like it would be incorrect as a matter of law, but nonetheless remains a risk.

In short, if there is a reasonable chance that vessel interests could be entitled to limit and there are more than one or two claims, the possibility for the right to limit and the predictability of the concursus process are likely strong factors in favor of commencing a limitation proceeding. In the case of a single claim or a low likelihood that a claim will be filed at all, the “wait and see” approach might make more sense.

The Limitation Act in the United States is somewhat unique as compared to limitation provisions in other countries, namely with respect to how the fund is calculated, who is entitled to limit, and what a claimant must prove to break an owner’s right to limitation. There are many factors to consider in deciding whether and when to assert the right to limit, be it in an affirmative action or as a defense. That said, the possibility of potential limitation of or exoneration from liability after a casualty event is generally one worth pursuing.

This article is one in a series of articles written for Blank Rome’s&nbsp;<a href="https://www.blankrome.com/publications/mainbrace-january-2026">MAINBRACE: January 2026</a>&nbsp;edition.

The Limitation Act in the United States: A Deeper Look

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The Limitation Act in the United States: A Deeper Look

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