In late March 2019, the United States Supreme Court heard oral arguments in Dutra Group v. Batterton, a case that turns on whether the general maritime law precludes a seaman from recovering punitive damages under an unseaworthiness claim for injuries sustained while working on a vessel. While the Supreme Court's imminent (at the time of this writing) decision is likely to resolve a circuit court split on this issue, it could create an ocean of uncertainty for vessel owners, their customers and insurers on how to best defend a claim asserting Jones Act and general maritime law remedies.

If a seaman suffers injury due to an unsafe condition aboard a vessel, the seaman may pursue a Jones Act negligence claim against his employer for not providing a reasonably safe place to work or an unseaworthiness claim against the vessel owner for a vessel that is not reasonably fit for its intended use. Unseaworthiness is a strict liability claim that imposes liability even if the vessel owner had no knowledge of the unseaworthy condition.

Often, the employer and the vessel owner are one and the same. For decades, shipowners have relied on established case law which held that punitive damages are not recoverable in unseaworthiness actions. For example, in 2014, in its ruling in McBride v. Estis Wells Serv., the U.S. Court of Appeals for the Fifth Circuit relied on the Supreme Court's 1990 decision in Miles v. Apex Marine Corp. in holding that seamen's damages under combined Jones Act and general maritime law unseaworthiness claims are limited to pecuniary loss.

In Miles, a case concerning recovery of loss of society in a wrongful death action, the Supreme Court focused on maintaining a uniform rule applicable to all actions, whether under the Jones Act or general maritime law. The court also declined to allow for greater damage recovery in a judicially created strict liability unseaworthiness claim under the general maritime law than was legislatively provided for under the Jones Act.

In its decision in Batterton, however, the Ninth Circuit tossed precedent on its ear (according to some, at least). Relying on its own 1987 decision in Evich v. Morris and the Supreme Court's ruling in Atlantic Sounding v. Townsend, which held that a seaman could recover punitive damages for an employer's arbitrary and capricious withholding of maintenance and cure payments, the Ninth Circuit determined that under certain conditions punitive damages are available for general maritime law claims of unseaworthiness.

The imposition of punitive damages will require proof of unseaworthiness, a strict liability standard, and will require a showing of willful or wanton and reckless conduct that proximately caused the injury. The seaman would have to prove the vessel owner's actual knowledge of an unseaworthy condition and a conscious choice to ignore it. If the Supreme Court affirms the Ninth Circuit in Batterton, courts will have to distinguish obligations to provide a safe place to work under the Jones Act with obligations to provide a seaworthy vessel before assessing punitive damages. Contrary to the Court's reasoning in Miles, courts will employ different damage models, providing greater recovery under a judicially created unseaworthiness claim than was legislatively provided for by the Jones Act.

Practically speaking, vessel owners have long had a predictability when estimating potential liabilities in the event of a maritime accident. Such risks are factored into financial strategies, insurance procurement, acceptable deductible or self-insurance exposure and cash-flow decisions, contract indemnity negotiations, and the prices of maritime insurance policies (which generally do not cover punitive damages).

It is difficult to predict how the Supreme Court will rule. While the Supreme Court's ultimate ruling in Batterton will resolve a split in the circuits, if it affirms the Ninth Circuit's ruling, it will cause lasting consequences for the maritime industry and overturn long-standing precedent. The maritime industry is flexible and will adapt.

In particular, if punitive damages are available for general maritime law claims of unseaworthiness when combined with Jones Act claims, in-house counsel and risk managers will need to revisit their current assessments and costs of risk. In-house personnel should work with their brokers to review their current insurance programs for coverage of punitive damages, to monitor if such insurance is or will become available in the market, and to determine whether applicable law will invalidate coverage for punitive damages on public policy grounds. Indemnity language in contracts will need to be analyzed in light of any change in the law.

If Batterton is upheld, there may not be a high number of punitive damage awards at trial because “willful and reckless conduct” is a fairly high hurdle to recovery. Nonetheless, the industry should expect to see punitive damages allegations in nearly every conjoined Jones Act and unseaworthiness claim, setting up a potential reservation of rights from an insurer, uninsured exposure for the assured, and tension between the insurer and assured to settle the claim based on pecuniary damages to avoid an uninsured exposure if a matter is taken to trial.

Assureds and insurers should work closely together to make sure that the mere inclusion of a punitive damage allegation does not artificially increase the value of any otherwise ordinary negligence and unseaworthiness claim. Over time, the cost of any punitive damage awards will be factored into a maritime company's calculation of its cost of risk, which inevitably will be included in its prices and passed to its customers, increasing the cost of maritime commerce.

Cindy Matherne Muller is special counsel at Jones Walker in its Houston office.  After serving as in-house and General Counsel to oil field service providers for more than a decade, Ms. Muller relies on her in house experience to distill theoretical legal issues into practical advice for in-house practitioners.