Article by Robert G. Clyne and James A. Saville, Jr.
Consonant with the vicissitudes and perils of maritime ventures, limitation of liability is a well-entrenched and long-established precept of federal maritime law, benefiting shipowners and mercantile interests alike. For over a century and a half, shipowners, vessel managers, and bareboat charterers have invoked the Limitation of Liability Act of 1851 (Limitation Act) to shield themselves from significant claims brought on behalf of cargo interests, crewmembers, and third parties. Likewise, the United States Carriage of Goods by Sea Act (COGSA) and its attendant package limitation have effectively limited ocean carriers' exposure to cargo claims. By virtue of Himalaya clauses and similar contractual provisions inserted into bills of lading, charter parties, and service contracts, several other parties—stevedores, terminal operators, warehousemen, and rail carriers, to name a few—have also gained the benefits of limited liability. Even the liability of vessel owners, operators, and demise charterers, with respect to environmental claims, is subject to limitation.
Historically, classification societies have played an integral role in the development of safety in shipping and maritime commerce. Yet their unique function and episodic contact with the vessels and offshore structures that they class and/or certify have left classification societies in a precarious position vis-à-vis shipowners and other maritime venturers. Although certain international conventions, as well as federal maritime law, offer limited liability to nearly all parties to a maritime enterprise, classification societies per se have not enjoyed such recognition. As both the M/V ERIKA and M.T. PRESTIGE oil spills have demonstrated, third-party claims against classification societies can result in potential liability exposure that vastly exceeds their net worth or insurable liability.
An international convention developed and adopted by the world's maritime nations that addresses the scope of a classification society's duties and provides for limitation of liability is one answer to the question of class liability. Realistically, such an undertaking likely would take years to implement, and whether those countries of strategic maritime importance would adopt such a convention remains an open question. In the absence of a convention, the issue of unlimited liability of classification societies is one for the courts and commentators to address.
Part II of this Article defines the role of classification societies and their surveyors in the maritime world. Part III traces the historical development of the liability of classification societies in the United States and, based upon this legal framework, Part IV argues that the only third-party claim cognizable in admiralty against a classification society is negligent misrepresentation. Part V proposes that a third party's reliance upon the representation that a vessel is “in class” cannot be a limited or partial reliance. Instead, the stated reliance must be analyzed in conjunction with all class representations, including those representations that portend a limitation of liability of the classification society, whether such a limitation provision is found in the Class certificate or other document upon which the third party relies, the classification contract, or even the applicable Class rules. This Article concludes by arguing that such a limitation of liability provision should be enforced against both those in privity as well as third parties that claim beneficial status or reliance on a classification society's representation that a vessel or structure was “in class.”
About the Author
Robert G. Clyne. Senior Partner, Hill Rivkins & Hayden LLP, New York. Treasurer, Maritime Law Association of the United States. J.D., New York Law School; B.S., United States Merchant Marine Academy.
James A. Saville, Jr. Senior Partner, Hill Rivkins & Hayden LLP, New York. J.D., St. John's University School of Law; B.A., Villanova University.
Citation
81 Tul. L. Rev. 1399 (2007)