The Maritime Economic Loss Rule: Keeping Contract Law Afloat in a “Sea of Tort”
Atl. Specialty Ins. Co. v. General Ship Repair Corp., 2021 U.S. Dist. LEXIS 186894, 2021 WL 4458926 (D. Md. Sept. 29, 2021).
By Clifford Fields Jr.
On September 29, 2021, the United States District Court for the District of Maryland granted the defendant’s Motion For Summary Judgment in the captioned case on the basis that the maritime economic loss rule barring recovery from the plaintiff’s negligence claim.
In September and October of 2016, General Ship Repair Corporation (GSR) negotiated with the owners of MISS T, a tugboat, to work on the vessel. The contract included drydocking, blasting the vessel, pumping and cleaning the vessel's bilges, reinstalling new bow fenders, renewing zinc anodes, repairing wasted steel, and painting the vessel. The signed contract included a clause that limited the time one could bring suit to one year after the completion of work which was to be completed on November 4, 2016.
On November 13, 2016, MISS T sank in Baltimore. At least one of the deck hatches was missing its gasket which would ensure a watertight seal when the vessel left the GSR shipyard. The insurers of the vessel sued GSR on November 4, 2019, seeking economic damages for repairs and other associated fees the company incurred to recover the vessel. The insurance company referred to the work done as painting and zinc renewal rather than an overhaul of the vessel.
Under General Maritime Law, the economic loss rule prevents a party from recovering in tort when the defective product harms only the product itself. Lacking definitive case law on the matter, the court relied on Fifth Circuit precedent to determine the scope of this bar. The Fifth Circuit extended the bar to include repair services and vessel modifications.[1] The trial court in the noted case had to determine if the injuries happened to “other property” outside the scope of the overhaul work.
The trial judge analyzed the object of the contract and found it was more than a simple repaint and zinc renewal. GSR hauled the vessel out of the water and put it on blocks, pumped, cleaned, removed, replaced, painted, and polished all parts of the ship not just a specific part of it. The economic damages experienced by MISS T when it sank were covered under the scope of the contract. The economic loss rule bars recovery; and as there are no disputes of fact material to the case, the motion for summary judgment was granted. The other claims brought by the insurance company were time-barred under the contract.
This case helps preserve the distinct nature of maritime contract law from being swept up in the wave of maritime tort law. It clearly shows what factors of a contract the court gives weight to, helping parties predict outcomes of cases. The decision reiterates the economic loss rule and builds a base of precedent in the Fourth Circuit.
[1] See Nathaniel Shipping, v. General Elec. Co., 932 F.2d 366, 368 n.3 (5th Cir. 1991) (extending bar to repairs); Smith Mar., Inc. v. Eymard 710 F.3d 560, 563 (5th Cir. 2013) (extending bar to vessel modifications).
