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The Ninth Circuit Court of Appeals in Live Life Bella Vita, LLC v. Cruising Yachts, Inc., -- F.4th --, 2024 WL 4163709 (9th Cir. 2024) found that claimants seeking indemnification or contribution are additional claimants to a limitation fund that render the “single claimant” exception under the Limitation of Liability Act inapplicable.
On or about October 6, 2022, the sailing yacht Allora was docked in Marina Del Rey, California. The vessel owners hired Eduardo Loaiza to dive under water to inspect and service the bow thruster. While Loaiza was servicing the bow thruster, it suddenly activated. The propeller blades cut through Loaiza’s hands causing severe injuries.
On December 20, 2022, the vessel owners filed suit in federal district court under the Limitation of Liability Act and provided security in the amount of $788,000, the stipulated value of the vessel at the time of the loss. The district court provided notice of the limitation proceeding in a published order and issued an injunction of any other proceedings arising from Loaiza’s injury.
On February 28, 2023, Loaiza filed a complaint in Los Angeles Superior Court and in March he filed counterclaims against the vessel owners in the limitation proceeding as well as third-party claims against several third-party defendants including his employer and his coworker from the incident. The vessel owners filed their own third-party complaint against the same third-party defendants for indemnity and contribution.
Loaiza sought leave from the district court from the stay imposed by the Limitation of Liability Act, alleging that he was a “single claimant,” which is an exception to the mandate that all claims arising out of a maritime casualty should be tried in the Limitation action.
The district court eventually agreed to stay the limitation proceedings and allow Loaiza to proceed in state court as the sole claimant to the limitation fund. The vessel owners appealed this decision arguing that there was sufficient reason to expect the imminent filing of additional claims in the Limitation.
The Ninth Circuit had previously declined to take a position on this issue in Williams Sports Rentals, 90 F.4th 1032, 1038 (9th Cir. 2024). The Court here, though, held that parties seeking indemnity or contribution constitute separate claimants for the purposes of applying the “single claimant” exception of the Limitation of Liability Act. Allowing Loaiza’s case to proceed in state court with the indemnity and contribution claims would defeat the purpose of the Limitation of Liability Act.
The Court reasoned that, if Loaiza was awarded a judgement of $1 million in his state court action against the vessel owners and the third-party defendants, the third-party defendants could attempt to recover the additional $212,000 from the vessel owners. This would theoretically make the vessel owners liable for an amount greater than that which they had stipulated to in limiting their liability and would make such a limitation action pointless.
This holding brings the Ninth Circuit into the majority camp of circuits having considered this issue and highlights the persisting circuit split considering the role of indemnity and contribution claimants as claimants in a limitation action. This decision is helpful for the marine sector because it further limits the extent of the “single claimant” exception, and cabins the number of cases in which vessel owners may be subject to state court verdicts. Further, this ruling protects the purpose of the Limitation of Liability Act by eliminating scenarios where a vessel owner could be liable for more than the owners’ stipulation of value.
Insurance and reinsurance
United States