Supreme Court decision may prove costly to vessel owners

In the September issue of WorkBoat , Legal Talk columnist and attorney Daniel J. Hoerner discussed the U.S. Supreme Court ruling in the case of Atlantic Sounding Co. Inc. v. Townsend .

In the case, punitive damages were awarded to an injured seaman in a maintenance and cure claim the employer failed to honor.

Where there are legal lessons, insurance lessons often follow. I’m going to explain what practical experience has taught me about punitive damages and who will ultimately pay them.

To review, the Supreme Court allowed punitive damages because the employer failed to honor a maintenance, cure and wages claim. Maintenance and cure claims are meant to pay for injury and illness that occur while a crewperson is in service of the ship. This applies regardless of fault and there are very few defenses for the claim. In other words, the ship owner either pays out of his own pocket or has a protection and indemnity insurance policy (P&I) pay the claim.

Here’s the big dilemma. There is usually an absolute punitive damage exclusion endorsement on any policy covering P&I. This means insurance companies can place whatever clauses in their policies that they feel will serve their clients and still make a profit.

So, what should you do? Consult a marine insurance agent and make sure all crew injuries and illnesses get reported in a timely manner.

Many vessel owners think that illness should not be claimed on a P&I policy. The Atlantic Sounding decision says otherwise. If the vessel owner asks the crewperson to turn the claim in on a health insurance policy or pay the bills out of his own pocket, the owner may be asking for trouble. Maintenance and cure illness claims that have been paid include a toothache, stomach cancer, sore neck, swollen testicles, multiple sclerosis, ear infection and strep throat. The crewman simply has to show symptoms of the illness or injury while in service of the ship.

Vessel operators should be very careful before they tell crews that their illness or injury is not vessel related. It could prove costly.

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