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            MARK C. MANNING, P.C.


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Newsletter for the Alaska
Maritime Community
Number 1

Adequate Rest For Crews Is Vital

Vessel owners are becoming increasingly vulnerable to claims for injury or damage allegedly caused by inadequately rested crew. Historically, a vessel owner has been at serious risk of being found liable for injury involving a fatigued licensed officer who had been required to work more than the legal limit of hours allowed in a day. A trend has developed in which liability may be found even though no legal daily work limit exists, if a crewman who arguably has not had enough rest appears to have caused injury as a result of fatigue.

Short and irregular sleeping hours occur commonly in the fishing and marine transportation industries. Owners should recognize the potential liability this poses. Further, an aggressive insurer may attempt to deny coverage for the loss of or damage to a vessel caused by crew fatigue, where the owner allowed the vessel to sail knowing the crew was fatigued, or knowing the vessel was not manned adequately to enable the crew to get adequate rest during the voyage.

Boatyard Facility Cannot Avoid Claims for Gross Negligence

A boatyard seriously damaged a yacht during a lift, when its crane’s wire snapped, dropping the yacht. The facility tried to avoid the yacht owner’s $900,000 damage claim by asserting a contractual disclaimer of liability for all claims. The federal appeals court having jurisdiction over Alaska held that governing admiralty law does not permit a company to shield itself contractually from liability for gross negligence. ("Gross negligence" is essentially an extreme departure from the ordinary standard of conduct.) The court held that the boatyard’s failure properly to test and certify the crane before the lift, together with other considerations, might well constitute gross negligence.

Similar clauses appear in maritime contracts in Alaska. It is now clear that they do not afford complete protection to the clause’s intended beneficiary, or a complete bar to compensation for an injured party.

Insurance Investigation May Cripple Lawsuit Defenses

A common insurance investigation practice may cripple lawsuit defenses following the appellate decision in Sana v. Hawaiian Cruises, Ltd., No. 98-15077 (9th Cir. June 4, 1999). Before this seaman’s suit against his vessel owner-employer for maintenance and cure was filed, an insurance investigator tape-recorded interviews of the seaman’s co-workers. The seaman tried to introduce transcripts of those interviews into evidence at trial to help prove his case. The trial court ruled the transcripts inadmissible hearsay. When the seaman lost his case and appealed, the appellate court reversed, holding that the transcripts should be admitted into evidence at a new trial.

Admission of insurance investigation interview transcripts at trial may seem to be a fair and reasonable contribution to the evidence available to the jury or judge hearing a case. But such interviews are commonly brief, and conducted by questioners who have little knowledge of the matter. The interviewer may have modest interviewing skills, and little or no pertinent background knowledge. Consequently, often there is little or no questioning that effectively tests the interviewee’s credibility, or the quality and reliability of his information. While these deficiencies might be effectively addressed in the suit by cross-examination of the interviewee, the interviewee may disappear before that can be done, as occurred in Sana.

Injudicious creation of taped statements has never been helpful to the defense of claims. Sana makes it even less so. If taped statements must be taken, the interviewer should be able, prepared, thorough and mindful of the potential uses of content at trial.

Insurer’s Selection Of Counsel Not Always The Best Choice

An insurer’s selection of counsel to defend its insured may have serious consequences for the insured. Most liability insurance policies afford the insurer the right to appoint defense counsel. Recently, a marine insurer appointed counsel to defend an insured marine company against a tort claim. Insurance defense counsel prematurely recommended the insured accept a tender of defense by a co-defendant, and did not raise an important admiralty defense in the answer filed on the insured’s behalf. Both these errors appeared to have resulted from insufficient experience in defending admiralty tort claims and in construing vessel charter language.

The errors were spotted and addressed by the insured’s corporate counsel.

In theory, an insured may have recourse against the insurer and against insurance defense counsel for harm caused by inadequate legal representation. In practice, however, pursuit of recourse is often expensive, and meritorious claims are usually compromised, leaving the insured to bear part of the consequences. The better solutions are for the insured to examine the qualifications of counsel the insurer selects or to have the progress of the case monitored by qualified counsel of the insured’s choice.

Mishandled Vessel Sale Transactions

Avoidable, expensive disputes continue to arise from mishandled vessel sale transactions. Sales of smaller commercial passenger and/or cargo vessels seem to generate a disproportionately large number of avoidable disputes between buyer and seller. The disputes generally concern the particulars of vessel design and performance. It may be that the sums of money involved in these transactions are not large enough to motivate the parties and involved lenders to insist on full documentation and contract management. Regardless of the reason, too often there is little or nothing in the way of a written contract.

Most problematic is the absence or near-absence of careful and thorough written coverage of design and performance specifications. The absence of written standards typically results in degeneration of disputes into swearing contests over alleged verbal agreements that cannot be resolved rapidly and economically. While the parties are at loggerheads, the unrepaired vessel may lie at the dock, failing to generate the cash flow the buyer was counting on to service his debt and remain solvent.

Such disasters can be minimized, and often avoided, by implementing the following three steps:

1. Before contracting, the would-be buyer should carefully research the performance his application will require. A thorough set of design and performance specs should be prepared, in consultation with qualified professionals, if necessary.

2. Buyer and seller should enter into a thorough written contract, containing, among other important provisions, all required design and performance specs, and effectively disclaiming specs that are not listed. The contract preparation process will help ensure the parties have truly reached agreement about what is being bought and sold. The contract itself will protect against faded memory, real or tactical, and will provide a much better avenue for the prompt, economical resolution of disputes.

3. Seller should insist on a sea trial that, as far as possible, tests the written specs at the time of delivery to buyer. Seller loses control over evidence proving the vessel’s adequacy and condition at time of delivery if no sea trial is performed. Buyer should, if possible, condition acceptance of the vessel on a successful sea trial. If for some reason seller will not agree to a sea trial before delivery and buyer must take delivery of the boat anyway, then immediately upon acceptance buyer should proceed with a sea trial. If the vessel sails away without a trial, buyer may thereby waive or seriously impair his recourse for deficiencies a trial would have revealed.

Recent Decisions of the Alaska Supreme Court

Fisheries regulation.  The Court rejected yet another attack on the Alaska Board of Fisheries’ regulation of the False Pass interception fishery. A claimant felt the Board’s management approach did not adequately protect Norton Sound subsistence fisheries. The Court held that the Board had "considerable discretion" in its management decisions, and that the Board policy at issue was valid. Whether new federal fisheries managers will be so deferential is in serious doubt.

Marital Property.  A marital dissolution decree distributes jointly owned property acquired during the marriage. The Alaska Supreme Court held in 1996 that NMFS quota shares issued during marriage are distributable marital property. Recently, the Court extended that rule to provide that quota shares and related IFQ’s issued after dissolution based on the couple’s joint fishing activity during the marriage may also be distributable marital property. A divorce decree that failed to apportion QS and IFQ’s awarded after the dissolution may be reopened and the property settlement adjusted accordingly.

Maintenance and cure.  A vessel crewman is usually entitled to payment by the vessel owner of medical expenses incurred in the treatment of medical conditions that "manifest themselves" in the course of his employment. Recently, the Alaska Supreme Court extended this rule to cover a non-symptomatic pre-existing condition discovered incidental to other treatment. The treating physician who discovered the 50 year old condition felt that it was potentially life-threatening, so he corrected it. Expensive complications resulted. Without explanation, the Court held that the discovery constituted manifestation, and required the vessel owner to pay the cost of treatment.

Expert witnesses.  A recently-developed federal rule curbing the use of expert opinion at trial has been adopted for use in Alaska state courts. Application of this rule should improve the quality of jury trials. Historically, juries were largely left on their own to sort out expert testimony of doubtful quality. This approach led to silicone breast implant, Bendectin, and other fiascos. Now, federal and Alaska state court judges are to determine whether proposed expert testimony is well-grounded in scientific or other appropriate methodology before allowing its use at trial.

Forum selection clauses.    Contracts commonly include clauses specifying the court or the city in which disputes arising from the contract must be litigated. Courts generally uphold these clauses, which can inflict prohibitive expense and inconvenience. Alaska fishermen hired by out-of-state interests commonly face employment contract clauses designating Seattle as the dispute forum. The Court held that a seaman’s personal injury claim did not "arise under" his employment contract, so he was not required to pursue it in Seattle, the designated forum. Whether an Alaska fisherman would be compelled to litigate a wage claim in Seattle was not addressed.

CSED May Try To Take Up To 50% Of An Owner’s Crab Production

Vessel owners risk losing up to 50% of an entire season’s production if an Alaska Child Support Enforcement Division position proves valid. The CSED has frozen and laid claim to 50% of the cash value of a crab vessel’s season product, claiming the crab was owned by the hired captain on board who held the interim use permit required to take the crab. The vessel was owned and operated by a corporation, which employed the crew members. The crewman who purchased the $30 permit was not an owner, director, or officer of the corporation. All crew members were to be paid a share of the vessel’s catch.

CSED is authorized by statute to take up to 50% of a child support debtor’s personal property from a third party, such as funds owed the debtor by a fishing company for its purchase of the debtor’s fish or crab. CSED is also empowered to instruct third parties to withhold delivery of personal property to a child support debtor. CSED has distributed orders instructing fishing companies throughout Alaska to withhold payments.

Historically, the catch of a fishing vessel owned by a corporation, partnership, or sole proprietor has been the property of the owner, not of the crew the owner hired to work the vessel. But CSED asserts that

the fact that an interim use permit is required by Alaska law to take and sell crab renders the crab the property of the permit holder, not that of his vessel owner/ employer.

Until this issue is resolved, a vessel owner who operates on a permit held by an employee subject to a child support order will put at risk up to 50% of the vessel’s catch under that permit.

Marine Insurers Continue to Lose Battles Over Ambiguous Language

A marine insured should not automatically defer to his insurer’s interpretation of its own policy. In a recent federal appeals case, the owner of a fishing troller was insured by a policy that contained a clause restricting crew members to no more than three. The vessel sank with a captain and three deck hands aboard. The insurer tried to avoid the resulting crew claims by asserting that the presence of four crew members violated the clause, voiding or suspending insurance coverage.

The court applied the usual rules that policy language must be interpreted from the perspective of an average person, untrained in law or the insurance field, and that ambiguities in the language are to be resolved in favor of the insured. The court noted further that the word "crew" does not have a settled meaning, and sometimes includes ship’s officers and sometimes does not. In light of the resulting ambiguity, the court held that the troller’s captain was not one of the "crew" and the crew warranty had not been breached.


Copies of court decisions available upon request 


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