Introduction
Background
Analysis

Comment


Introduction

The Supreme Court will soon decide whether a Jones Act seafarer can recover punitive damages in a personal injury suit based on a vessel's unseaworthiness. The court heard oral arguments on 25 March 2019 in The Dutra Group v Batterton, which has teed up the issue that will resolve a split among the circuit courts and provide clarity on the availability of punitive damages for seafarers in general maritime law causes of action. It is unclear how the court will rule on this long-contested issue.

Background

The decision will hinge on how the court interprets, applies and reconciles its prior rulings in Miles v Apex Marine Corp(1) and Atlantic Sounding Co v Townsend.(2) In Miles, the court held that damages for non-pecuniary loss in a general maritime action for wrongful death of a Jones Act seafarer were not recoverable. Miles specifically barred recovery for loss of society or future earnings. Punitive damages were not at issue in Miles, nor did Miles involve a general maritime claim for unseaworthiness. However, the Fifth Circuit Court of Appeals – an influential court for maritime law issues – has held that "punitive damages are non-pecuniary losses", and thus are barred from recovery by a seafarer under the Jones Act or under a general maritime law unseaworthiness claim.(3)

In Townsend, the Supreme Court held that punitive damages are available for a Jones Act employer's wilful failure to pay maintenance and cure.(4) In reaching that decision, the court noted that a seafarer's action for maintenance and cure and the available remedy of punitive damages were well established before passage of the Jones Act. It further reasoned that maintenance and cure is not addressed by the Jones Act, and thus the available remedies are not a matter to which Congress had spoken directly.(5) Townsend distinguished Miles as a wrongful death case on the basis that Congress had specifically spoken to the available remedies for wrongful death by enacting the Death on the High Seas Act.(6) Consequently, the court concluded that the availability of punitive damages for wilful failure to pay maintenance and cure is not precluded by the Jones Act or by Miles.

The Ninth Circuit Court of Appeals in Batterton interpreted Townsend broadly and Miles narrowly to conclude that punitive damages are available for a Jones Act seafarer's general maritime law claim based on unseaworthiness of the vessel on which he worked. The court distinguished Miles by reasoning that punitive damages are not compensation for either a pecuniary or non-pecuniary loss. "They are not compensation for a loss at all."(7) Rather, their purpose is punishment and deterrence of the offending action.(8) Thus, the Ninth Circuit held that Miles did not preclude their recovery. The court construed Townsend broadly to hold that Miles does not limit the availability of punitive damages in general maritime law causes of action other than for wrongful death of a seafarer.(9) Consequently, the Ninth Circuit held that punitive damages are available for a Jones Act seafarer's unseaworthiness action. It is this decision that is on appeal to the Supreme Court, which will soon issue a controlling ruling on the matter.

Analysis

If the Supreme Court permits the recovery of punitive damages for unseaworthiness claims, it could have wide-ranging effects in the US maritime industry. First, while punitive damages are intended to be awarded in only the most egregious cases of intentional acts or gross misconduct, it is likely that injured seafarers will seek their recovery as a matter of course in the majority of lawsuits. As a result, regular punitive damage demands could increase the litigation costs for ordinary personal injury claims. Settlement demands and ultimate settlement values may increase to account for the heightened exposure; and settlements may become more difficult due to disparate valuation of cases, leading to more protracted litigation. This effect on settlements could be further exacerbated by the inevitable issuance of several large punitive damage awards in what previously would have been more predictable Jones Act personal injury cases. All of these factors will increase the overall litigation costs.

In addition, the widespread availability of punitive damages would have commercial effects as well – notably in the insurance sphere. Insurance coverage for punitive damages has been a complex issue. Traditionally, most marine liability policies have excluded coverage for punitive damages; others have remained silent on punitive damages. More recently, some policies have expressly provided limited coverage for punitive damages – but at a cost. However, the policy language does not resolve the issue. While an express exclusion of coverage is typically determinative, policy language providing cover or remaining silent on the issue may not be effective. This is because several states:

  • prohibit an insured from indemnifying itself against punitive damages; or
  • limit the circumstances in which punitive damages may be insured.

The ability to legally obtain insurance for punitive damages is determined on a state-by-state basis, depending on each state's public policy concerns. Some states generally permit coverage of punitive damages; some generally preclude any coverage for punitive damages; others permit coverage of punitive damages awarded for grossly negligent conduct, but not for more serious conduct, such as intentional acts. This distinction can cause confusion, as an award may not specify whether the punitive damages are being awarded for intentional, reckless or grossly negligent conduct. Still, other states are silent or have unclear or inconsistent law on the issue. This patchwork of legal approaches combined with the varied coverages under marine liability policies can result in significant unpredictability in practice – which is bad for business.

Comment

If the Supreme Court determines that punitive damages are not available for a seafarer's general maritime law unseaworthiness claim, these issues frequently may not arise. After all, punitive damages for wilful failure to pay maintenance and cure – which were permitted by Townsend – are a relatively infrequent occurrence and often within the employer's control. However, if the court concludes that punitive damages are available for a Jones Act seafarer's unseaworthiness claim, the frequency of punitive damage demands in maritime cases will dramatically increase and the issues described above will soon come to a head. In that case, more and more insureds will seek coverage for punitive damages, and creative solutions may be necessary to address the scope of coverage issues, public policy implications and additional costs that may result.

The Supreme Court's decision in Batterton is expected to be issued by the close of the session on 24 June 2019. That opinion is expected to provide clarity on the availability of punitive damages for a seafarer's unseaworthiness claims, and possibly more generally under the general maritime law. Jones Act employers, seafarers, insurers and the broader maritime industry will be waiting anxiously for that decision.

For further information on this topic please contact Michael Harowski at Wilson Elser by telephone (+1 504 702 1710) or email ([email protected]). The Wilson Elser website can be accessed at www.wilsonelser.com.

Endnotes

(1) 498 US 19 (1990).

(2) 557 US 404 (2009).

(3) McBride v Estis Well Service, 768 F3d 382, 384 (5th Cir 2014) (en banc).

(4) Townsend, 557 US at 420.

(5) Ibid at 420-21.

(6) 46 USC §§ 30301-303065. Ibid at 418-19.

(7) Batterton, 880 F3d 1089, 1096 (9th Cir 2018).

(8) Ibid.

(9) Ibid at 1092.