IN CONGRESS: THE FINAL OUTCOME ON MARITIME
TORT REFORM
(published
February 1997)
As first reported in Cruise Line Legal Update (Issue No. 18, October 1995), the maritime tort reform bill attached to the Coast Guard Authorization Act for Fiscal Year 1996 had passed the House and was in the process of winding its way through the Senate. The tort reform bill consisted of three components: (1) a proposed amendment to the Jones Act limiting the right of foreign seamen to bring suit in U.S. courts against foreign shipowners when a remedy, such as worker's compensation, was already available abroad; (2) new limits on emotional distress claims to deter the rising tide of frivolous lawsuits against passenger carriers; and (3) proposed apportionment of damages in medical malpractice cases so that shipowners cannot be held liable for negligent treatment of crewmembers by shoreside hospitals in the U.S., beyond the damages limits applied to those hospitals. Two out of the three measures ultimately passed the Senate and have become law. While the third did not, significant inroads were nonetheless made.
Jones Act Amendment
The proposed amendment to the Jones Act, which did not pass, proved the most controversial and contentious of the three measures. Because lobbying and funding by the Association of Trial Lawyers of America ("ATLA") and related special interest groups was so substantial, it became clear the entire bill was in jeopardy in the Senate. As a compromise measure, the cruise industry therefore withdrew the proposed Jones Act amendment in the final days of the 104th Congressional session to ensure the other two measures would pass.
It is truly remarkable that the industry came as close as it did to winning passage of the Jones Act amendment. The Jones Act provision was, in fact, a key point for debate in a specially-appointed Congressional Committee and came close to a full Senate vote. Factors contributing to its widespread support included the tireless lobbying efforts of the industry through the ICCL, including involvement among the highest management levels of several major cruise lines, direct, ongoing discussions with lawmakers, an informational campaign designed to correct the wealth of misinformation disseminated by ATLA and others, countless media interviews and placement of ads, bulletins and editorials in newspapers and newsletters. Editorial pieces were also written by industry advocates directly to editors when erroneous articles were printed, including one published in The Wall Street Journal. In addition, as the ICCL's maritime counsel, Kaye, Rose & Partners provided ongoing legal input to correct the misunderstandings (or misrepresentations) of certain ATLA-funded lawmakers concerning the history of the Jones Act, the types of abuses the amendment sought to correct, and the existence of substantial remedies already available in most other seafaring countries.
Regrettably, in the end the ATLA lobbying effort was so strong and well-financed that the Jones Act measure could not be passed. ATLA is one of the nation's most powerful lobbying organizations and in the last two decades, only one tort reform measure has ever even passed Congress - a product liability bill that was ultimately vetoed by President Clinton.
Although the amendment itself failed, many tangible benefits resulted from the struggle. One was the education of lawmakers regarding the problems underlying application of the Jones Act to seamen throughout the world, including the reported ethical abuses of their contingent-fee attorneys.
Many of these attorneys were forced to defend themselves publicly. In addition, a wealth of information was generated about actual remedies available to seamen in other countries, which enabled the industry to create a database for use in court cases where dismissals can still be sought on forum non conveniens grounds. This very information has already proved instrumental to winning such a dismissal in January 1997, leading to a new favorable judicial precedent in Buscio v. Carnival Corporation. (See article on page 7 of this issue.)
The industry owes special thanks to the following leading protection and indemnity clubs for their extensive efforts in assembling detailed information concerning seamen's legal remedies in some twenty foreign nations, through their network of worldwide legal port correspondents:
• Assuranceforeningen Gard
• Assuranceforeningen Skuld
• The Standard Steamship Owners' Protection and Indemnity Association Limited
• The Steamship Mutual Underwriting Association Limited
• The United Kingdom Mutual Steam Ship Assurance Association Limited
Emotional Distress Claims
The "emotional distress" legislation was one of the two measures that did pass Congress as part of the Coast Guard Reauthorization Act. The new statute can be found at 46 U.S.C. App. § 1 83c(b). The new law, entitled "Contract Limitations Allowed," permits passenger carriers to disclaim liability for emotional distress in the ticket contract, except when the distress was accompanied by an actual physical injury, a risk of actual physical injury, or was intentionally inflicted by the shipowner or operator, their agents or employees. This means, for example, that cruise lines will no longer be liable for emotional distress (also called psychological injury, mental anguish, etc.) unless there was some accompanying physical injury to the claimant, or at least some casualty that caused direct, actual risk of injury to the individual claiming emotional distress.
In casualties involving disputes or grievances where the passenger has suffered no injury or risk of injury, the maximum recovery will now be limited only to a refund of all or part of the cruise fare, depending on the circumstances, and other actual out-of-pocket damages (excluding medical bills for psychiatrists, psychologists or therapists). Some common examples in which the new limitation will be useful are as follows:
(1) trivial claims relating to the cuisine, accommodations or other shipboard services;
(2) claims for misrepresentation in the brochure or other advertising;
(3) witnessing accidents, injuries or other mishaps involving other passengers (even family members) when there was no risk of injury to the passenger making the claim;
(4) groundings, strandings, fires, mechanical, electrical or ventilation failures, elevator breakdowns, etc., when the passenger asserting the claim was not in actual danger of injury;
(5) foreign objects or substances in food discovered before the passenger consumed it; and
(6) allegedly offensive statements carelessly made by shipboard staff.
Although passengers in these circumstances will still be able to assert a claim for a partial refund on a breach of contract theory, they will no longer be able to threaten claims for mental suffering and/or unlimited damages.
One of the most significant aspects of the new legislation is that it effectively abolishes the right of one family member who witnesses an accidental injury to a husband, wife, child or other family member, from claiming emotional distress as a result of merely witnessing the event. Previously, under both maritime and shoreside laws in many states, a wife who witnessed her husband's slip-and-fall, for example, could join as a plaintiff in her husband's lawsuit, claiming emotional distress. The new legislation abolishes this so-called "bystander proximity rule" and clarifies the so-called "zone of danger" rule. The bill allows a spouse's claim for emotional distress only in those cases where the spouse was also injured, or was herself at risk of actual injury in the same occurrence. This means that the vast majority of spousal claims in passenger cases can now be precluded, driving down both the settlement values and legal fees incurred by cruise lines in such lawsuits.
In light of the new legislation, cruise lines are strongly encouraged to insert a properly worded disclaimer in the passage contract. We emphasize that the ability to limit claims for emotional distress as specified in the new legislation is specifically conditioned on the existence of such a disclaimer.
Apportionment In Medical Malpractice Cases
The third measure of the tort reform bill, which likewise passed Congress, addresses shipowners' liability in medical malpractice cases brought by crewmembers. This provision, which was digested by Kaye, Rose & Partners, can be found at 46 U.S.C. App. § 1 83(g). The court case in which the issue originally arose was Ann Lennon v. Western Steamship Lines, Inc. (See Cruise Line Legal Update, October 1994.) In that case a purser on a cruise ship developed an upper respiratory infection and was referred ashore in California to a well known hospital for further treatment. Due primarily to the hospital's malpractice, her condition seriously deteriorated and she ultimately died. Her family filed suit in Florida against the cruise line, seeking damages for wrongful death. Under U.S. maritime law a shipowner can be held vicariously liable to the seaman and his/her estate for the malpractice of a shoreside medical provider, with a traditional right of indemnity (reimbursement) against the shoreside provider.
In the Western Steamship case, the family received an award in excess of $7 million from the cruise line and its P&I club. The Club subsequently pursued indemnity in California against the negligent hospital, but ultimately the California Supreme Court ruled the hospital's liability for reimbursement was limited by the state's own statutory cap on malpractice damages of only $250,000. The result was that the cruise line and Club were left to pay the vast majority of damages which the hospital actually caused. Several states have similar caps, effectively shifting the risk of shoreside medical malpractice to shipowners and their P&I clubs. To correct this serious problem, which affects all shipowners, the new legislation was sponsored by the International Council of Cruise Lines to prevent such obviously unfair results. The new statute, which applies to all shipowners, provides that the liability of any shipowner for medical malpractice occurring at a shoreside facility in the U.S. will also be limited by whatever cap may exist in the jurisdiction where shoreside treatment is provided.
While this issue arises infrequently, even one such claim can result in a potentially huge damages award. Many states are enacting new medical malpractice caps protecting the powerful shoreside health care industry. In fact, a provision implementing a nationwide $250,000 medical malpractice cap for shoreside providers was introduced in Congress this past year. The change in maritime law is therefore quite significant and will protect shipping lines from unfair judicial results for many years to come.
