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Second Circuit Court of Appeals Reverses Decision of Northern District of New York

Holding that Injuries Sustained by a Passenger on a Recreational Vessel Fall

Within Admiralty Tort Jurisdiction

On June 1, 2016, the United States Court of Appeals for the Second Circuit reversed a decision of the United States District Court for the Northern District of New York in In Re Germain, 15-665, finding that admiralty tort jurisdiction was present and holding that a vessel owner may bring a limitation of liability action for injuries sustained by a passenger while diving off the recreational vessel when it was anchored in shallow, yet navigable waters in Lake Oneida.

Appellee Matthew Ficarra ("Ficarra") and three (3) other guests left on Appellant Bruce Germain's ("Germain") thirty-eight (38) foot motorboat, Game Day, for an excursion on Lake Oneida in New York. The group sailed through a federal shipping lane up to Three Mile Bay, located less than a nautical mile from said lane. As the group prepared for the return voyage, Ficarra dived off the port side into the water on two (2) occasions, including making a backflip from the back of the boat that resulted in him suffering a serious spinal cord injury causing paralysis and quadriplegia. As part of the rescue efforts, local rescue and police boats arrived at the scene.

On June 16, 2014, Ficarra sued Germain in the New York State Supreme Court, asserting claims for negligence under New York law. The Complaint alleged that Germain was negligent for failing: (1) to operate, captain, anchor, maintain, or control his vessel in a safe and reasonably prudent manner to protect the safety and welfare of his boat's passengers; (2) to properly and adequately instruct his passengers on safe boating and diving practices; (3) to properly and adequately inspect the area in which his boat was anchored; and (4) to adequately warn his passengers of the dangerous conditions existing at the time of the aforementioned incident.

Germain removed the action to the United States District Court for the Northern District of New York, and petitioned that he be exonerated, or his liability limited, under the Limitation of Liability Act of 1851, 46 U.S.C. §§ 30501-12 ("Act"), and Rule F of the Supplemental Rules for Admiralty of Maritime Claims and Asset Forfeiture Actions ("Rule F"). The District Court found that Ficarra's claim did not meet the modern test for admiralty tort jurisdiction, and thus admiralty subject matter jurisdiction over Germain's petition for limitation did not exist. The negligence claim was remanded, and Germain's limitation petition dismissed. Germain appealed the District Court's dismissal of his limitation petition.

Finally, the Court considered whether SJT had violated the doctrine of uberrimae fidei under the facts and circumstances of the case. The Court determined that despite advertising that sale of the PERSEVERANCE at USD 800,000 in April 2011 – the same month the Catlin Policy took effect – SJT failed to disclose this fact; the true value of the floating drydock; what SJT paid for the floating drydock; or the level of deterioration of the drydock at the time that the Policy was sought. The Court determined that these were material facts required to be disclosed to Catlin in applying for the policy, and that nondisclosure violated uberrimae fidei. As such, the First Circuit affirmed the District Court's ruling (but modified the decision to reflect that the insurance contract was deemed valid until voided at Catlin's election, as opposed to voided ab initio as the District Court had held).

On appeal, the Second Circuit stated that admiralty cases involving petitions for limitation of liability can be pursued while a state court proceeding takes place. The Court also reiterated the Act is a particularity of the maritime and admiralty area that provides exoneration from or limitation of liability for "damages caused by the negligence of his captain and crew." A petition under the Act can only proceed if the Court has admiralty subject matter jurisdiction over the underlying facts of the case.

The Second Circuit held that the "location" test for jurisdiction had been met, because the incident took place in navigable waters. The Second Circuit then proceeded to determine whether the matter met the "modern test" for admiralty tort jurisdiction ("modern test"), which contains two prongs: (1) whether a tort occurring in a body of water presents a potential disruption to maritime commerce; and (2) whether the general character of the activity giving rise to the incident has a substantial relationship to traditional maritime activity.

The Second Circuit stated that Ficarra's maritime emergency response could have affected other vessels in the area and found that a passenger who jumped from a vessel onto open navigable waters has a "more than fanciful potential to disrupt maritime commerce." In addition, the Second Circuit stated that Germain's maritime activity was the transport and care of passengers onboard of a vessel on navigable waters, which constituted a substantial relationship to traditional maritime activity. Accordingly, the Second Circuit held that modern test was met, stating that for purposes of admiralty tort jurisdiction, it does not matter whether a vessel is taking part in commercial or recreational activities, as long as it is on navigable waters. Thus, the District Court's emphasis on the recreational nature of Germain's vessel was held to be misplaced and admiralty tort jurisdiction was found.

To read a copy of the Second Circuit's Opinion, click here.

For more information about the Court's decision and how it may apply to specific facts and circumstances, please do not hesitate to contact us at info@chaloslaw.com.

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