An Antiquated Law

The Limitation of Liability Act has a long history of shielding shipping companies from costly penalties following deadly disasters.

The law was enacted by Congress in 1851 to spur investment in the country’s nascent shipping industry, at a time when many maritime risks, like piracy and unknown weather patterns, were out of shipowners’ control. To account for the uncertainty, the act limited maritime damage claims to the value of a vessel plus its cargo — if the owner could prove they had no prior knowledge of any related negligence.

For decades, legal experts have said that in today’s context — where ship owners can closely monitor ships’ condition, and maritime insurance is widely available — the law is antiquated.

“The historical justifications of the Limitation on Liability Act make little sense today,” attorneys at Abraham Watkins law firm wrote in a 2016 analysis. “The U.S. shipping industry does not require extra protection to compete globally.”

Famously, the law was employed after the Titanic struck an iceberg and sank in the Atlantic Ocean in 1912, killing more than 1,500 people. The owner of the ship, White Star Line, invoked the Limitation of Liability Act and agreed to pay about $430 per each life lost — a measly amount, even in 1912. Ever since, the act has been commonly referred to as the Titanic Law.

In response to public outcry over such low payouts, legislators made some revisions to the law. In 1936, Congress revised it by requiring shipowners to establish a compensation fund “amounting to $60 per gross ton of the vessel.” Almost 50 years later, lawmakers raised the liability limit to $420 per gross ton. However, shipping companies could still avoid payments by showing they had no prior knowledge that the disaster was going to occur.

“The Unfairness of These Laws Is Grossly Apparent”

On April 20, 2010, an offshore drilling rig in the Gulf of Mexico called the Deepwater Horizon exploded, killing eleven people and releasing roughly 134 million gallons of oil, the worst marine oil spill in history.

Three weeks later, as millions of gallons of oil were still leaking into the Gulf of Mexico, the owners of the oil rig tried to use the Titanic Law to cap the damages they could be forced to pay to $26 million. That figure was a fraction of the cost of the cleanup — and after legal rebuke and public outcry, the oil rig company agreed in 2013 to pay $1.4 billion in damages.

In response to the Deepwater Horizon fiasco, lawmakers launched an effort to repeal the Limitation of Liability Act. Former representative John Conyers, a Michigan Democrat, introduced the bill, Securing Protections for the Injured From Limitations on Liability Act, alongside a coalition of Democrats.

“The unfairness of these laws is grossly apparent,” Conyers said at a subcommittee hearing on the bill. “In my judgment it is highly immoral.” He urged his colleagues, with families of the victims of the Deepwater catastrophe present, to support the legislation.

Leading the charge opposing the bill, however, was former Texas Republican representative Lamar Smith, a climate change denier and prominent champion of Big Oil. Smith is himself an oil baron, and during his time in Congress made millions from his Texas oil ranch while also accepting almost $300,000 in campaign contributions from the oil and gas industry over the past decade — his top industry donor since 2013, according to Open Secrets.

Smith, at the same subcommittee hearing, warned the reforms “threaten to increase dramatically the cost of shipping goods.” Another opponent of the bill, former Texas Republican representative Ted Poe, voiced similar concerns on behalf of the shipping industry.

“I fear that this legislation could put our remaining 220 shippers out of business,” Poe said at the hearing. “The maritime industry in the United States would be sunk.”

At the same time, a litany of shipping groups, oil companies, and business associations convened to lobby on the legislation in 2010, federal lobbying records show.

Big Oil, in particular, focused lobbying efforts on the legislation, likely due to provisions in the bill that would revise the 1990 Oil Pollution Act to make it more difficult for oil companies to escape legal liability for catastrophic oil spills.

Major oil companies like Shell, Anadarko Petroleum, and Halliburton reported lobbying on the bill alongside various powerful fossil fuel trade groups, including the American Petroleum Institute, the Independent Petroleum Association of America, and the International Association of Drilling Contractors.

In the last three quarters of 2010, the powerful US Chamber of Commerce industry group paid $270,000 to Akin Gump Strauss Hauer & Feld, one of Washington’s most influential lobbying firms, to lobby on the reforms, specifically on “provisions expanding liability,” as well as other issues. After leading the charge to kill the reforms in Congress, Smith now works as a lobbyist for Akin.

The oil lobby was joined by the shipping and cruise industries. Along with Maersk, a Tennessee-based barge company, the Chamber of Shipping of America, and the Cruise Lines International Association reported lobbying on the legislation. Even Disney, which operates its own cruise line, reported lobbying on the bill in two quarters of 2010.

The bill to reform the Titanic Law never made it out of committee.

Another Catastrophe

Despite the warnings of industry advocates, supporters of the reforms said there was little evidence that changing the Titanic Law would lead to catastrophic impacts on shipping companies.

“Shipowners will undoubtedly argue that elimination of their ability to pursue liability limitation will somehow put them out of business,” one maritime attorney, Paul Sterbcow, testified to Congress in 2019. “There is no data or credible study to support this argument.”

As shipping companies have easy access to maritime insurance, he emphasized, the law largely now protects the interests of insurers, who could seek to limit their own liability in the case of a shipping disaster.

“All the Limitation of Liability Act does now, in addition to eliminating accountability, is it limits the liability of the marine insurer,” he said.

Lawmakers have continued to consider the issue, holding hearings on maritime victims compensation as recently as 2019, but have so far failed to make headway on reforms.

A new round of calls for reform came after the catastrophic sinking of the Conception scuba-dive boat off California in 2019, since the law presented a hurdle for families of the thirty-four victims who were seeking damages.

In 2022, President Joe Biden signed into law reforms inspired by the tragedy, which repealed the liability limitations for smaller vessels — passenger boats carrying no more than 150 people. Massive cargo ships like the one that caused the Baltimore bridge collapse, however, still are covered by the law.