If you have been to a marine industry function over the last few months, the buzz has been about punitive damages. Specifically, the discussions have revolved around the Supreme Court’s decision to consider a case to determine whether punitive damages were available to seamen who allege seaworthiness claims against vessel owners.
With the goal of providing a complete overview of the status of punitive damages for marine claims, this article provides an overview of the potential claims an injured seaman possesses, a description and history of punitive damages in maritime law, why the Supreme Court needed to address the seaworthiness issue, and how the Supreme Court resolved the issue in the industry’s favor.
PUNITIVE DAMAGES 101
The addition of punitive damages to seaworthiness claims would significantly change the way that marine operators manage risk. That’s because the addition of punitive damages would drive the value of a maritime personal injury claims up significantly, as each claimant would argue that he could recover such damages at trial. Most importantly, punitive damage awards are not usually covered by standard marine insurance policies and, if awarded, could provide a significant uninsured exposure to the company. As such, the firm could be put in a situation where a jury provided a damage award to compensate the seaman, which would be covered by insurance and a punitive award that would not be covered by insurance. If a vessel owner did not have the resources to pay such a claim, it could jeopardize the solvency of the operation.
To put this issue in context, take a look at the claims that are usually alleged by a Jones Act seaman and how the courts handle each issue with regard to punitive damages. Each seaman will typically allege three separate and distinct claims when filing a lawsuit. These allegations include claims for negligence, seaworthiness and for maintenance and cure.
A claim for maintenance and cure does not require a finding of fault and provides the injured seaman with medical care and a per diem payment to assist him with some basic living expenses until he or she reaches maximum claims based on General Maritime Law, the lower courts did not have any guidance from the Supreme Court as to whether punitive damages were recoverable for seaworthiness claims that were based upon the General Maritime Law. As a result, a split in the Circuits developed where some courts prohibited punitive damages and others did not. Unfortunately, this split created economic uncertainty for the domestic maritime industry as maritime employers could not properly estimate the value of claims or mitigate the potential risks associated with operations spanning multiple jurisdictions.
With a split in the Circuits, the issue was ripe for Supreme Court consideration. To resolve this issue, the United States Supreme Court considered The Dutra Group v. Batterton, a case that originated in California which allowed punitive damages. Ultimately, the United States Supreme Court, in a 6-3 decision, resolved the split in favor of marine employers, ruling that punitive damages are not recoverable by a seaman pursuing a seaworthiness claim.
Looking a little closer, Batterton was a crewmember on a vessel owned and operated by the Dutra Group, a dredging contractor. Batterton alleged that a pressurized hatch cover blew open while he was working on the vessel, injuring him and causing permanent disabilities. Batterton alleged that the vessel lacked an appropriate exhaust mechanism that would have prevented the blast, rendering the vessel unseaworthy under the General Maritime Law. Both the District Court and the Ninth Circuit Court of Appeal allowed Batterton to pursue a claim for punitive damages related to the seaworthiness of the vessel.
The Supreme Court ruled that punitive damages were not recoverable for seaworthiness claims. The Court found that there was no historical precedent for punitive damage awards for seaworthiness claims under the General Maritime Law. Furthermore, the Court held that a Jones Act negligence claim and a seaworthiness claim were similar and duplicative in nature and that it would not make sense to treat the two claims differently as to the recovery of punitive damages. Based upon this reasoning, the Court held that punitive damages are not permitted with seaworthiness claims.
So, based upon the Supreme Court rulings of the last thirty years, marine employers and vessel owners are immune from punitive damages for seaman claims related to Jones Act negligence and the seaworthiness of the vessel. With the issue is settled, the maritime industry can now move forward with some degree of certainty when evaluating potential risks and the best methods for mitigating these risks.
However, marine employers and vessel owners must recognize that the Supreme Court has affirmed punitive damages in situations where the employer wrongly denies maintenance and cure benefits. As such, it is important that you make a well reasoned and supported decision, anytime that denying an injured seaman maintenance and cure benefits is considered. Any termination that could later be determined to be willful and wrong could expose the company to a potential punitive award.