Background of the Case

The dispute arose from a maritime insurance contract between Raiders Retreat Realty, a Pennsylvania-based company, and Great Lakes Insurance, headquartered in the United Kingdom. The insurance policy, which covered a boat owned by Raiders that later ran aground, included a choice-of-law provision designating New York law for any future disputes. When a claim was denied by Great Lakes, citing a breach of contract by Raiders, a legal battle ensued over which state's law should apply; Pennsylvania, where the lawsuit was filed, or New York, as specified in the contract.

The Ruling

The opinion of the Court underscored the primacy of federal maritime law in governing such disputes. The ruling unequivocally supports the presumption that choice-of-law provisions in maritime contracts are enforceable, offering clarity and predictability for parties involved in maritime commerce. This decision emphasizes the importance of respecting contractual agreements regarding jurisdictional law, thereby reinforcing the sanctity of contract law in maritime disputes.

Insurance Implications

As vessels tend to move about, the idea of determining appropriate jurisdictions would be difficult and costly in some cases. Allowing the clause to stand is going to remove a potential topic of debate when tough claims come in.

As of recent, we have found a general movement in the marketplace to a neutral choice-of-law state as opposed to variation as the home state of the insured.  This is likely to continue, and with insurers paying more attention to the topic, it might be an area of negotiation going forward.  Those negotiations would necessarily include at least considering the potential for which if any of the exceptions would apply to any decision made.


Narrow Exceptions to the Rule

1. Contravention of a Controlling Federal Statute
(see Knott v. Botany Mills, 179 U.S. 69, 77 (1900))

If applying the law chosen by the parties would contravene a controlling federal statute, the choice-of-law provision cannot be enforced. This means that even if a contract selects a particular jurisdiction's law, that choice cannot lead to outcomes explicitly forbidden by federal law.

2. Conflict with Established Federal Maritime Policy
(see The Kensington, 183 U.S. 263, 269–271 (1902))

The choice of law must also not conflict with established federal maritime policies. Federal maritime law aims to provide (and sometimes actually provides) uniformity and predictability across the nation's navigable waters. If enforcing a choice-of-law provision would undermine these fundamental goals—such as exempting a party from liability for negligence in a manner that federal maritime law prohibits—then the provision may not be enforceable. This exception aligns with the judiciary's role in maintaining a coherent and consistent maritime legal framework supporting national and international interests in maritime commerce. 

3. Absence of a Reasonable Basis for the Chosen Law
(see Cf. Carnival Cruise, 499 U. S., at 594–595; The Bremen, 407 U. S., at 10, 16–17.)

This exception is designed to prevent the arbitrary selection of a legal jurisdiction with no substantive connection to the parties or the contract. The rationale behind this exception is to ensure fairness and to avoid situations where the choice of law would significantly disadvantage one party over another without a legitimate reason. While the Court emphasizes deference to the parties' agreement, selecting a jurisdiction's law purely for its perceived advantages, without any rational connection to the dispute, could lead to unenforceability.


This post aims to provide a comprehensive overview of the Supreme Court's decision and its implications for the insurance industry. As always, parties involved in maritime contracts should consult with legal experts to fully understand how this ruling may impact their operations and legal strategies.

The United States District Court for the Eastern District of Louisiana delivered an intriguing ruling in the case of In re Aries Marine Corp. The decision by Judge Lance Africk focused on the complex intersection of subrogation and offset rights within the framework of the Longshore and Harbor Workers' Compensation Act (LHWCA). 

The court's verdict stipulated that a waiver of subrogation by an LHWCA carrier does not negate the carrier's right to claim an offset against future LHWCA liability. This legal intricacy arose from an accident involving a lift boat off the coast of Louisiana in the Gulf of Mexico.

Workers injured when the lift boat capsized received compensation under the LHWCA, and the carriers then sought subrogation claims to recover the benefits paid from the defendants. However, the defendants and plaintiffs contested this by invoking the waiver of subrogation clause in their contract.

Judge Africk delved into the complex nuances of the contract, ultimately concluding that the waiver applied to the owner of the rig and its "invitees." Here, the court applied Louisiana law, defining invitees as individuals who enter premises with the express or implied invitation of the occupant, usually for mutual benefit.

The carriers subsequently filed motions for reconsideration, and the court recognized that a dismissal of their claim for an offset would be a "legal error." As a result, Judge Africk amended the summary judgment to acknowledge the carriers' right to claim an offset pursuant to Section 33(f). 

This ruling underscores the importance of understanding the nuanced aspects of legal provisions, even in cases where subrogation is waived, and reaffirms that carriers can still seek an offset against future LHWCA liability, ensuring a balance of rights in complex maritime compensation cases.

Ian Greenway

The U.S. Department of Labor has proposed changes to the regulatory framework governing penalties assessed against employers and insurance providers for non-compliance with reporting obligations under the Longshore & Harbor Workers’ Compensation Act.

Under the Longshore & Harbor Workers’ Compensation Act (LHWCA), compensation, medical care, and vocational rehabilitation services are provided to employees incapacitated by job-related injuries on U.S. navigable waters or adjacent areas typically used for ship-related activities. The LHWCA also stipulates survivor benefits for dependents in cases where a work-related injury leads to an employee's death.

The LHWCA allows the Office of Workers’ Compensation Programs (OWCP) to impose civil penalties against employers failing to report workplace injuries or deaths promptly and accurately.

In an effort to bring more transparency to the process, the proposed modifications unveiled by OWCP on September 11, 2023, would alter the practice of assessing and imposing civil penalties. 

By implementing a system of graduated penalties based on violation history, increasing measures for clarification throughout the assessment process, and expanding opportunities for employer appeals, the OWCP aims to promote accountability and ensure fairness in the process.  

OWCP is accepting written comments regarding the proposed rulemaking through November 13, 2023. You may submit written comments, identified by RIN number 1240–AA17, via the Federal eRulemaking Portal.

Ian Greenway

Congress has amended the Limitation of Liability Act to remove “Small Passenger Vessels” from its protection. The amendment, passed as part of the National Defense Authorization Act for Fiscal Year 2023, will make it more difficult for vessel owners to limit their liability in accidents that cause death or injuries.

The Limitation of Liability Act was enacted in 1851 to protect shipowners from financial ruin in a maritime accident. The law allows shipowners to limit their liability to the value of the vessel and its cargo. However, the amendment to the law now excludes “Small Passenger Vessels”.

The amendment was prompted by the 2019 Conception fire, which killed 34 people. The Conception was a small passenger vessel that caught fire while anchored off the coast of California. The fire quickly spread, and many passengers were trapped below deck. The owners of the Conception were able to limit their liability under the Limitation of Liability Act, even though they were found to be negligent.

A “Small Passenger Vessel” in the United States, is defined as a vessel that is less than 100 gross tons and carries more than six passengers for hire but fewer than 150 passengers or fewer than 49 passengers overnight. This includes vessels that are chartered with the crew provided or specified by the owner or the owner's representative and vessels that are chartered with no crew provided or specified by the owner or the owner's representative.

Examples include:

  • Ferryboats
  • Sightseeing boats
  • Dinner cruises
  • Charter boats
  • Fishing boats
  • Water taxis

 What does this mean for passengers?

Previously, the law potentially allowed vessel owners to limit their liability to the value of the vessel and its cargo, even if they were found to be negligent. With “small passenger vessels” removed, the Limitation of Liability Act amendment means that passengers on such vessels will now have a better chance of recovering damages if they are injured or killed in an accident. 

Review the law and amendment

Ian Greenway

Tucked away on page 1748 of the "James M. Inhofe National Defense Authorization Act for Fiscal Year 2023" were changes to the Jones Act—the most dramatic changes since 2008.

The changes introduce something the Jones Act has never had before expressly excluded operations.

The predominant changes are as follows:

New Definition:
The law introduces the term "aquaculture worker."

Exclusion from Seaman Category:
Aquaculture workers are excluded from being classified as "seamen" under subsection (a) if two conditions are met: (A) State workers' compensation is available to the individual, and (B) The individual was engaged in aquaculture activities at the time of injury in a place where they had lawful access.

Looking at the reason these changes were made, the most vocal proponent of the changes we see is the East Coast Shellfish Growers Association (ECSGA). They point to the expense of Jones Act coverage and the non-standardized application of the perceived need.

Jones Act crew benefits cost the insured more than workers' compensation, with average Jones Act claims several times more expensive than the average similar State Act Claim. With the goals in mind, the changes will likely fit the bill.

However, the problems arise from the unintended consequences of these changes. The first is that the Jones Act defines aquaculture instead of relying on the Longshore Act's exact definition from the Code of Federal Regulations. The duplication rather than re-use means any case law in one is not immediately applicable to the other. Any changes to the code of Federal Regulations will also not be directly applied to the Jones Act.

The second significant change is to the newly defined subsection (a) of section 30104 of the U.S. Code. The subsection now starts with the clause "In General.—". This clause introduces more ambiguity as to who is a Jones Act Seaman. We have a specific named carve-out for Aquaculture Workers, but no limiting clause that states that it is the only carved-out operation.

In 2009 the changes to the Longshore Act that changed the jurisdiction for the repair of recreational vessels led directly to more attention on what was and was not a recreational vessel. We expect to see similar tests as to what is and is not included in these new changes. Would processing of shellfish count as aquaculture? What does "controlled" mean in cultivation? Most of the well-known Longshore caselaw about aquaculture is focused on fish canning, so we will see some new cases to follow.

As always, please get in touch with us if you have any questions, such as how best to cover these employers now that the laws are changing.

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