We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
02 May 2018
Under general maritime law, a vessel owner is entitled to the reasonable cost of repair of the vessel, unless this cost exceeds the pre-incident value of the vessel. But can the vessel owner also recover the post-repair loss of market value associated with so-called 'stigma' damages simply because the vessel was repaired following a maritime collision? In MBH Mar Interest LLC v Manteiga,(1) the court answered this question in the negative.
The plaintiff's vessel was damaged in a maritime collision. His insurer filed an action against the tortfeasor to recover the cost of repairs. The vessel owner joined in the suit to recover damages not covered by the insurance policy and for loss of market value in the vessel caused by its involvement in a collision and the resulting repairs. The defendants filed a motion to dismiss the plaintiff's claim for post-repair loss of value, citing the well-known rule that damages to a vessel involved in a collision must be measured by the cost of repairs. The plaintiff argued that the "post-repair loss of value is included in general maritime law's doctrine of Restitutio in Integrum" (ie, total reinstatement). Alternatively, the plaintiff sought post-repair loss of value under Florida common law. The court rejected both arguments.
Zeller Marine Corp v Nessa Corp
The plaintiff cited Zeller Marine Corp v Nessa Corp(2) in support of its argument that the maxim restitutio in integrum "allows post-repair, loss of market value to be claimed". In Zeller, while unloading steel girders, the defendant allowed some of them to fall, penetrating the vessel's deck. The plaintiff in Zeller argued that under restitutio in integrum, it was entitled to have the vessel put back into its original condition, irrespective of the cost. The defendant argued that the vessel owner was entitled only to the reasonable cost of repair, together with depreciation, if any. A special commissioner agreed with the vessel owner and allowed the cost of repair. The district court rejected the commissioner's report, finding that the owner of the vessel was entitled to recover both "the reasonable cost of repair which would restore the scow (vessel) to as good a condition as it was before the damage" and "due allowance for any difference between the original value of the scow and its value after repairs".(3) The plaintiff relied on this language to support its argument.
Hatt 65, LLC v Kreitzberg
The defendants in Manteiga argued that Zeller was inapplicable and urged the court to follow Hatt 65, LLC v Kreitzberg.(4) In Hatt 65, the defendant's sailboat broke loose from its moorings during a hurricane and collided with the plaintiff's vessel. The plaintiff sought to recover damages for the diminution in the vessel's market value due to the stigma of its having been in a collision. The question before the court was "the novel legal issue of whether Plaintiffs could recover for loss of market value of a luxury private yacht". The court found that loss of market value is not recoverable under general maritime law. In so doing, the court noted that it was unaware of any case in which such damages had been permitted for any type of vessel. Thus, creating a new rule for a luxury private yacht would disturb the uniformity of maritime law.
The plaintiff argued that Hatt 65 was not controlling because the parties in that case had failed to direct the court to Zeller, which allowed post-repair loss of value as an element of restitutio in integrum. The Manteiga court noted that in Zeller, the defendant, as opposed to the plaintiff or vessel owner, had advocated for the recovery of depreciation costs plus repair costs because they were significantly lower than the amount of repairs sought for the renewal of the keelson. Ultimately, the Manteiga court concluded that post-repair loss of value was not recoverable under restitutio in integrum.
Delta Marine Drilling Co v M/V Baroid Ranger
The parties then addressed the plaintiff's argument that Florida common law allows for the recovery of post-repair loss of value. The analysis involved the origin of the phrase restitutio in integrum within the context of general maritime law. The court cited Delta Marine Drilling Co v M/V Baroid Ranger(5) to establish the following meaning of 'restitutio in integrum' in admiralty:
"That doctrine, strictly construed, would limit damages to the difference in the value of the vessel before and after collision. However, that measure has long been equated with the cost of necessary repairs and the loss of earnings while they are being made."
Ultimately, the court concluded that the maxim restitutio in integrum, as developed in maritime law, is distinct and different from that applied in Florida common law. Therefore, allowing the plaintiff to apply Florida state law to recover post-repair loss of value would create a general prejudice to a characteristic feature of general maritime law. The court dismissed the claim for post-repair loss of value.
For further information please contact please contact Todd G Crawford at Fowler Rodriguez by telephone (+1 228 822 9340) or email (email@example.com). The Fowler Rodriguez website can be accessed at www.frfirm.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.