July 17, 2019

Tenth Circuit: Admiralty Law Allows Limitation of Liability in Personal Injury Cases

The Tenth Circuit Court of Appeals issued its opinion in In re Aramark Sports & Entertainment Services, LLC on Monday, August 1, 2016.

Three couples vacationing at Lake Powell rented a boat from an Aramark facility. High winds caused the boat to capsize, and two of the couples died. Anticipating a lawsuit, Aramark filed a petition in admiralty in Utah district court under the Limitation of Liability Act, 46 U.S.C. §§ 30501–12, which permits a boat owner to obtain a ruling exonerating it or limiting its liability based on the capacity or value of the boat and freight. The district court denied the petition and Aramark appealed.

After a brief discussion of admiralty law, the Tenth Circuit evaluated the relevant provisions of the Limitation of Liability Act. The Circuit remarked that there are three possible outcomes from a limitation petition: exoneration, limitation, or no limitation of liability. Exoneration applies where no negligence is shown. Where the claimant demonstrates negligence, the burden shifts to the owner to show lack of privity or knowledge, capping the damages at the value of the vessel or freight if the owner meets this burden. If the owner fails to show privity or knowledge, there is no limitation of liability.

In this case, Aramark filed its admiralty proceeding before any negligence claim had been brought. The estates and heirs of the two deceased couples filed answers and counterclaims for wrongful death. The third couple filed an answer and counterclaim seeking indemnification from Aramark in case it was held liable for the deaths of the other couples. At the bench trial, the district court found that Aramark’s negligence had “at least in part” caused the accident and that the negligence was within Aramark’s privity or knowledge. The court therefore denied Aramark’s petition for limitation.

The Tenth Circuit disagreed with the district court’s methodology. First, the Tenth Circuit determined that Aramark had no duty to determine the weather conditions prior to renting the boat, finding that the boat’s weather radio was sufficient to apprise the boaters of any changes in weather conditions. The Tenth Circuit therefore found that Aramark had no duty to stop renting out boats when the weather would potentially change throughout the day, because claimants had an independent duty of care. However, the Tenth Circuit found a duty of Aramark to warn potential renters of the boat’s limitations. Because the district court did not decide whether Aramark exercised care in warning renters of the boat’s limitations, the Tenth Circuit remanded.

The Tenth Circuit vacated the judgment of the district court and remanded for further proceedings.