Cruise Pax, Crew and Shareholders Suing Over COVID-19

The last cruise ship carrying passengers reportedly docked on Tuesday, April 21, 2020. The COSTA DELIZIOSA disembarked passengers in Genoa, Italy, allowing more than 1,500 people to return home after a 113-day round the world voyage. Under orders from the Centers for Disease Control and Prevention, it will be some time until cruise ships will once again be able to sail from U.S. ports. In the meantime, cruise lines are dealing with a host of lawsuits filed by passengers, crew and their own shareholders who accuse the companies of negligence in exposing them to the Coronavirus or otherwise downplaying the risk.

One of the first cases filed was for 40 passengers on board the GRAND PRINCESS, who claimed emotional distress due to an outbreak of COVID-19 onboard. Princess has defended the suits, stating that allowing cruise ship passengers to sue over emotional distress because they could have been exposed to the COVID-19 pandemic would “open the door to open-ended liability.” Princess cited the U.S. Supreme Court case of Metro-North Commuter R. Co. v. Buckley, 521 U.S. 424 (1997), which generally holds that Plaintiffs are prohibited from suing for fear of exposure, in this case, to the Coronavirus. Such an “unprecedented theory of liability for emotional distress” could unleash lawsuits against all types of businesses, reasons Princess. Princess further notes that “[i]f accepted, plaintiffs’ theory would open the door to open-ended liability for every business, school, church, and municipality across America, stalling economic recovery in the wake of the COVID-19 pandemic and complicating the ability of businesses to reopen…If individuals in plaintiffs’ situation can recover, businesses, school, churches and other venues across America will be forced to keep their doors closed long after state stay-at-home orders are lifted, lest they risk crushing liability to each and every one of their invitees for emotional distress, based on the mere possibility of infection, because some employee or other current or past customer of the business was later discovered to have the virus.”

Maritime law generally allows recovery for emotional distress if there is physical injury to the claimant. However generally, maritime law does not permit recovery for mental anguish or wholly emotional injuries absent some physical impact and unless the emotional injury is associated with some actual physical injury to the claimant.

In addition to the lawsuits for emotional distress, Princess faces wrongful death claims on behalf of passengers who died from COVID-19 and at least one class action on behalf of more than 2,000 passengers on the GRAND PRINCESS. The suit claims Carnival and Princess failed to protect passengers and contain the spread of the virus. At least 100 of the passengers contracted COVID-19, and two died after disembarking, according to the complaint.

A shareholder also filed a class action against Carnival Corp., the parent company of Princess. The same occurred to Norwegian Cruise Lines, where a shareholder filed a stock drop securities class action in the Southern District of Florida. The shareholder’s suit challenged statements made by NCL on and after February 20, 2020, in which the company allegedly minimized the likely impact of the Coronavirus outbreak on NCL’s operations and omitted information about allegedly deceptive sales practices undertaken in response to the virus.

Rpyal Caribbean faces a wrongful death lawsuit after a 27-year-old crew member on the CELEBRITY INFINITY died from the virus and two others were airlifted off of the OASIS OF THE SEAS.

Congress has launched an investigation into Carnival’s response to the Coronavirus pandemic. Bloomberg reported that the U.S. House Committee on Transportation and Infrastructure is investigating the company's handling of the outbreak as more than 1,500 cases have been confirmed from aboard the company's ships and dozens of passengers and crew members have died.

The rapid developments in the spread and economic impact of COVID-19 present particular challenges for officers and directors of public companies trying to manage their businesses while providing timely and truthful information to shareholders. Shareholders have filed suits alleging that public companies materially misrepresented the impact of COVID-19 on their operations. If history is any guide, derivative litigation alleging director and officer mismanagement is likely to follow. Directors and officers of public companies should exercise great care in any public statements regarding the impact of COVID-19 on their businesses, and carefully consider and document the steps they are taking to oversee and respond to COVID-19 developments.

Cruise lines have been particularly hard hit as large numbers of COVID-19 cases were identified among cruise passengers, certain cruises faced lengthy quarantines at sea, and cruise ship operations were suspended from all U.S. ports of call. Add to the expenditures of cruise lines having to keep ships afloat, requires huge expense, while not generating revenue. There have been articles suggesting that with so many lawsuits already filed, and more likely to come, the hope is that some rulings will help write new case law and make it easier to bring future cases against cruise lines. The idea being that cruise lines have insurance to cover any possible awards or settlements. However such statements ignore the plain truth that cruise lines have high self-insured retentions. They would have to pay out a considerable amount of money for each individual claim before their insurance policies kick in. These same people suggest that high volume litigation against cruise lines are unlikely to have much of a financial impact on the companies. This is to not understand how cruise ships and their owners are insured. Add the fact that the no-sail orders in effect in the U.S. are crippling the cruise industry, there is the adage that you should not kill the goose that lays the golden egg.

This law firm does not represent cruise lines and has no “skin in this game.” Nevertheless, these are issues that will affect not just cruise lines but ordinary working ships. If the cruise lines all go down with some of these novel theories, smaller carriers, with less power, will likely be next. Please feel free to reach out to us at blog@miamimaritimelaw.co, if you would like to discuss these issues further.

Eleventh Circuit Court of Appeals Sinks Open and Obvious Defense

In Carroll v. Carnival Corp., No. 17-13602, 2020 U.S. App. LEXIS 11860 (11th Cir. Apr. 15, 2020), the Eleventh Circuit Court of Appeals found that where a cruise ship passenger tripped over the leg of a lounge chair while she was walking through a narrow pathway on a cruise ship, summary judgment on the open and obvious doctrine was not warranted where there was an inference that a reasonable person may not have observed the chair leg obstructing her path.

The general rule is that an operator of a ship has a duty to warn only of known dangers that are not open and obvious. In evaluating whether a danger is open and obvious, courts are guided by the reasonable person standard and not the plaintiff’s subjective perspective. Carroll had argued that while walking behind her heavy-set husband, due to the narrowing of the walkway she was transiting, her right foot clipped the leg of one of the lounge chairs, causing her to fall and suffer injuries. Carnival moved for summary judgment, arguing that the lounge chairs did not constitute a dangerous condition and even if they somehow did, it had no duty to warn of the condition because it was open and obvious and because Carnival had no notice of the hazard. Thus the issue framed by the Court was “whether a reasonable person would have observed the chair leg and appreciated the risk of walking through the narrow passageway under the circumstances.” Id. at *6.

The Court adopted the Third Restatement of Torts, which distinguishes between failure to warn claims and negligent maintenance claims in finding that the fact that a dangerous condition is open and obvious bears on the assessment of whether reasonable care was employed, but it does not pretermit the liability of the defendant. In other words, the Court found that while the Third Restatement of Torts treats the open and obvious nature of a dangerous condition as factor to be considered in a comparative fault analysis, it is not a bar to liability for negligently maintained premises.

This finding by this panel changes the tenor of open and obvious claims and increases litigation costs for marginal claims against shipowner defendants. While the Court properly applies “landlubber” principles to determine negligence of shipowners with respect to notice of defective or dangerous conditions aboard their vessels, the Court fashions the adoption of the Third Restatement of Torts from “whole cloth” by citing to an Eastern District of Virginia case so holding. The Court attempts to state that this approach is also dictated by the former Fifth Circuit decision in Arthur v. Float Mercante Gran Centro Americana S.A., 487 F.2d 561 (5th Cir. 1973), but in Arthur, the plaintiff was not a passenger but a “seaman.” Of course, the vessel owner owes a different duty to a different classes of persons aboard their vessels and the Court so noted in a footnote. Id. at *17, n.5.

If you are interested in discussing this case further or receiving a copy of this decision, please feel free to reach out to me at blog@miamimaritimelaw.co or at 305.377.3700.

Navigational Limits Upheld in Eleventh Circuit

In Geico Marine Ins. Co. v. Shackleford, Case No. 18-12105, 2019 U.S. App. LEXIS 37228 (11th Cir. Dec. 17, 2019), the U.S. Court of Appeals for the Eleventh Circuit held that a marine insurance policy did not cover the loss because the policy unambiguously contained a navigational limit when the loss occurred, nothing in the record supported the conclusion that the insurer voluntarily and intentionally relinquished its right to enforce the navigational limit, the parties did not contract out of federal maritime law, which required absolute enforcement of express navigational limits and the vessel was outside of the covered navigational area when the loss occurred.

The facts in this case are a little convoluted, but ultimately, the insured had informed Geico Marine that he needed an updated policy to sail his vessel to Fort Lauderdale for repairs. However, when Geico Marine updated the policy to allow for navigation, it reinstated a previous navigational limit requiring the vessel to be “north of Capt Hatteras, NC from June 1 until November 1 annually.” When the insured had a casualty in Lake Sylvia in Fort Lauderdale in June and made a claim under the policy, Geico Marine denied coverage and filed a declaratory judgment action claiming, among other things, that coverage was barred by the policy’s navigational limit and that Florida law does not strictly enforce warranties in marine insurance contracts.

The insured alleged, among other things, that Geico Marine “waived” its right to enforce the navigation limit when it agreed that he could sail the vessel to Fort Lauderdale in late May. The Eleventh Circuit painstakingly reviewed the policy and found that the policy unambiguously contained a navigational limit when the loss occurred. The Court then found that under Florida law, Geico Marine did NOT waive its navigational limit requirement as “[n]othing in this record supports the conclusion that Geico Marine voluntarily and intentionally relinquished its right to enforce the navigational limit.”

More importantly, the Court address the insured’s argument that the parties contracted out of the federal maritime rule requiring absolute enforcement of express navigational warranties. The Court found that the federal rule of absolute enforcement of warranties, as opposed to the Florida rule which allows a marine insurer to avoid coverage based on an insured’s breach of warranty only if the breach “increased the hazard by any means within the control of the insured”, was controlling as the the federal maritime law is the default rule and displaces contrary state law when construing a marine insurance contract. Thus, “[b]ecause the parties did not contract out of maritime law, we must apply the federal rule requiring absolute enforcement of express navigational limits.”

This is a very important ruling post AIG Centennial, as prior to this, the courts had adopted a “entrenched federal precedent” standard. In other words, the court would have to find that the general maritime law was “entrenched federal precedent” before it would allow federal maritime law to displace state law.

If you are interested in receiving a copy of this decision or wish to discuss this decision further, please feel free to write to me at blog@miamimaritimelaw.co or you may call me at 305-377-3700.

No Dismissal of Rape Case Against Royal Caribbean on Motion to Dismiss

In K.T. v. Royal Caribbean Cruises, Ltd., No. 17-14237 (July 24, 2019), the Eleventh Circuit Court of Appeals reversed and remanded a District Court Judge’s order in dismissing, for failure to state a claim, an action against the cruise line alleging negligent failure to warn passengers and prospective passengers of danger of sexual assault on cruise ship and failure to take action to prevent physical assault, including sexual assault, suffered by the plaintiff.

According to the Complaint, the plaintiff, a minor, embarked on a 7-day cruise with her 2 sisters and her grandparents. Plaintiff alleged that on the first  night of the cruise, a group of nearly a dozen male passengers bought her multiple alcoholic drinks in a public lounge and other public areas of the ship. The plaintiff alleges she became “highly intoxicated” and “obviously incapacitated.” The group of nearly a dozen men then steered the plaintiff “to a cabin where they brutally assaulted and gang raped her.” The plaintiff alleged that everything, except the rape itself, happened in the view of multiple Royal Caribbean crewmembers and allegedly did nothing. Royal Caribbean filed a motion to dismiss, alleging that the plaintiff did not sufficiently allege that Royal Caribbean breached its duty of care or that any breach proximately caused the plaintiff’s injuries.

The appellate court held that the complaint sufficiently alleged that defendant breached duty of ordinary care owed to plaintiff when crewmembers did nothing to prevent large group of men from plying plaintiff, a minor at the time, with enough alcohol to incapacitate her and did nothing to stop the men from leading plaintiff away to a private cabin where she was brutally assaulted and gang raped. The Court also found that allegations in the complaint demonstrated that the cruise line had notice and actual knowledge of dangers that resulted in plaintiff's injuries.

Writing a special concurrence to his own opinion, Chief Judge Ed Carnes stated that generally when a concurring judge agrees with the opinion, “there is nothing else for the author of a majority opinion to say, but here there is…It is self-evident from the allegations of the complaint that but for Royal Caribbean’s breach of its duties of care to K.T. she would not have been brutalized and gang raped…If the allegations are true, Royal Caribbean proximately caused the alleged injuries.” Carnes added that publicly available data reinforces the plaintiff’s allegations that Royal Caribbean knew or should have known about the dangers of sexual assault on its ships. According to the opinion, this is due to cruise lines being required to keep records of all complaints of sexual assaults and other serious crimes since 2010, which are given to the FBI and the Department of Transportation. Carnes noted that the court can take judicial notice of those incident reports.

According to transcripts from oral arguments referenced in the opinion, there were more than 20 sexual assaults on Royal Caribbean’s ships between 2010 and 2015, not counting those which were still under investigation. Carnes said those numbers are likely understated, and yet amount to almost one-third of the number reported by all cruise lines. This information, Carnes wrote, reinforces plaintiff’s claims of negligence, particularly since there have been congressional reports on it.

This opinion is remarkable for drilling down into the facts of a case for purposes of a motion to dismiss. If you are interested in receiving a copy of this decision or have any questions regarding this decision, you may contact us at blog@miamimaritimelaw.co or 3053773700.