Briefing

A new Limitation Act exclusion for workboats from the Fifth Circuit

In direct response to the tragic fire and multiple passenger deaths that occurred on the passenger diving vessel Conception off the coast of California in 2019, in 2022 the U.S. Congress passed the Small Passenger Vessel Liability Fairness Act amending the Limitation of Liability Act of 1851 with regard to its application to certain passenger-carrying vessels. In what is likely a case of first impression for the United States Court of Appeals for the Fifth Circuit,¹ it held the amendment to exclude a thirty-eight foot commercial workboat from the protection of the Act – a vessel which had enjoyed such protection since 1851.

The effect of the 2022 amendments should be considered by owners and operators of traditional passenger vessels, as well as service vessels carrying offshore workers in oil, gas, and wind farm fields. The amendments to the 1851 Act should be of keen consideration for vessel owners – both operationally, and when negotiating charters and marine service agreements. They are also an important consideration for the underwriters providing liability coverage for such vessels.

The U.S. limitation act

In 1851, Congress enacted the U.S. Limitation of Liability Act. Limitation of liability for shipowners was common in the admiralty law of most nations well before 1851. In 1734, a limitation of liability scheme was enacted under British law.² Prior to 1851, U.S. shipowners were uneasy facing potentially unlimited personal liability, which also put them at a competitive disadvantage with respect to shipowners in countries that offered a limitation of liability scheme. The U.S. shipowners pressed Congress to remedy this perceived disparity. As a result, Congress passed the 1851 Act. Whereas many countries have since amended and restricted their limitation of liability schemes, until 2022, the U.S. Limitation of Liability Act of 1851 (the 1851 Act) had remained essentially unchanged. In general, limitation liability schemes seek to limit the exposure of the shipowner to its interest in the vessel and any pending freight.³ This was at the heart of the 1851 Act, and remains so today.⁴

The 1851 Act has been used in every major maritime disaster from the Titanic, to the Andrea Doria – Stockholm collision, the Dali bridge allision, Deepwater Horizon explosion and sinking, as well as the tragic sinking of the El Faro with the loss of all hands. It also continues to be used in cases involving smaller craft from row boats to jet skis. In response to the tragic fire and multiple passenger deaths that occurred on the passenger diving vessel Conception off the coast of California in 2019, the U.S. Congress passed an amendment to the Act in 2022 called the Small Passenger Vessel Liability Fairness Act (the 2022 Amendment). The Amendment lessens the protection afforded by the 1851 Act to owners of similar small passenger vessels (less than 100 gross tons, carrying between 49 and 150 passengers, on an overnight voyage). While the 1851 Act remains a useful tool for limiting liability, fixing venue, marshaling claims in one convenient forum, and maintaining control of what can be an expensive and complicated litigation, for commercial workboats that may carry passengers, the Amendment is somewhat of a game-changer.

The voyage of the M.V. Ms. Adalyn

The Ms. Adalyn is a 38-foot aluminum-hulled commercial workboat. Hunter Maritime Group LLC (Hunter), and Michael Pittman were owner and bareboat charterer, respectively. In December 2018, Encore Dredging Partners LLC (Encore) entered into a “Contractor Agreement” under which Hunter agreed to “provide equipment and perform services” for Encore. Hunter was responsible for “manning, maintaining, repairing, and operating the Ms. Adalyn.” Encore paid a flat rate of $2,000 per day, regardless of how (or whether) the vessel was used, and provided fuel and charter hire.⁵

Encore was using the Ms. Adalyn to assist in a dredging operation in the Alabama River. On November 3, 2024, the Ms. Adalyn was transporting eight Encore employees from the dredge to shore when it ran aground and struck a steel pipe, injuring all eight workers.⁶ The Encore employees filed state court personal injury actions against Hunter and Encore. In May 2025, Hunter and Pittman (Petitioners) filed a limitation proceeding pursuant to the 1851 Act in the U.S. District Court for the Southern District of Texas before Senior District Judge Lee H. Rosenthal, who stayed all state proceedings pursuant to the 1851 Act.⁷ The personal injury claimants filed a motion for summary judgment arguing, inter alia, that the Ms. Adalyn was a “covered small passenger vessel” excluded by the 2022 Amendment from the limitation of liability afforded by the 1851 Act. Judge Rosenthal granted the motion dismissing the Limitation Proceeding, and lifted the stay of the state actions so the personal injury suits could proceed in the state forum. Petitioners appealed. Judge Rosenthal’s decision was affirmed by the Fifth Circuit in all respects.

Small Passenger Vessel Liability Fairness Act of 2022

The Fifth Circuit began its review by restating the relevant portions of the amended 1851 Act:

The 1851 Act applies to “seagoing vessels and vessels used on lakes or rivers or in inland navigation, including canal boats, barges, and lighters.” 46 U.S.C. § 30502(a). However, it does not apply to “covered small passenger vessels.” Id. § 30502(b). The 1851 Act defines a “covered small passenger vessel” as “a small passenger vessel” that is (i) “not a wing-in-ground craft [Hover craft],” and, as relevant here, (ii) “carrying not more than 49 passengers on an overnight domestic voyage.” Id. § 30501(1)(A). It also defines “small passenger vessel” as:

a wing-in-ground craft, regardless of tonnage, carrying at least one passenger for hire, and a vessel of less than 100 gross tons as measured under section 14502 of this title, or an alternate tonnage measured under section 14302 of this title as prescribed by the Secretary under section 14104 of this title—

A. carrying more than 6 passengers, including at least one passenger for hire

B. that is chartered with the crew provided or specified by the owner or the owner’s representative and carrying more than 6 passengers;

C. that is chartered with no crew provided or specified by the owner or the owner’s representative and carrying more than 12 passengers;

D. that is a submersible vessel carrying at least one passenger for hire; or

E. that is a ferry carrying more than 6 passengers.

In re Petition of M/V Ms. Adalyn, No. 25-20584,2026 WL 2364283, at *2 (5th Cir. Aug. 14, 2026) (citing 46 U.S.C § 2101(49) (emphasis in original)).

In the lower court, the Petitioners argued that to qualify as a “small passenger vessel” exempted from the 1851 Act, the craft must be both “a wing-in-ground craft … and a vessel of less than 100 gross tons.”.⁸ They also argued that the personal injury claimants satisfied neither the definition of “passenger” nor “passenger for hire,” so the Ms. Adalyn also failed to satisfy the requirements of Section 2101(47)(A) of the 1851 Act.

The alpha and the omega

The Circuit Court noted its analysis was “anchored, as always, in the statutory text” and that when interpreting a statute, “text is always the alpha [and] the omega.”.⁹ Its analysis involved consideration of two questions: (1) was the vessel itself a “covered small passenger vessel” contemplated by the amendments; and (2) at time of the incident, was it also carrying “more than 6 passengers, including at least one for hire” thereby implicating the exemption

The court quickly answered the first question, noting the statutory definition of “small passenger vessel” was disjunctive, not conjunctive as argued by Petitioners. The statute states:

“[S]mall passenger vessel” means a wing-in-ground craft, regardless of tonnage, carrying at least one passenger for hire, and a vessel of less than 100 gross tons as measured under section 14502 of this title.

46 U.S.C. 2101(49)(emphasis added). The court reasoned:

Although the definition employs “and” in between the “wing-in-ground craft” language and 100-gross-tons measurement, the 1851 Act places the article “a” before each and separates them by a comma. See 46 U.S.C. § 2101(49). The operative verb—“means”—is distributive. See Pulsifer v. United States, 601 U.S. 124, 134–35, 144 S.Ct. 718, 218 L.Ed.2d 77 (2024). Thus, the single, best reading of the 1851 Act’s definition of “small passenger vessel” is that it “means a wing-in-ground craft, regardless of tonnage, carrying at least one passenger for hire” or it “means … a vessel of less than 100 gross tons.” 46 U.S.C. § 2101(49) (emphases added).

In re Petition of M/V Ms. Adalyn, 2026 WL 2364283, at *2. Having quickly determined the vessel itself satisfied the requirements of the exception, the court moved on to the second question, noting “this appeal turns on whether Adalyn carried ‘more than 6 passengers, including at least one passenger for hire.'” Id.

The court recognized that under the 1851 Act, a “passenger” is defined as “an individual carried on the vessel.”.¹⁰ The amendments then provide three exceptions to passenger status, one of which the court found relevant to the Ms. Adalyn: a passenger may not be “a member of the crew engaged in the business of the vessel who has not contributed consideration for carriage and who is paid for on board services.”.¹¹ To qualify for that exception to passenger status, the court found three criteria must be satisfied: (1) the worker must be “a member of the crew engaged in the business of the vessel”; (2) the worker must not have “contributed consideration for carriage”; and (3) the worker must be “paid for on board services”.¹² The court assumed, without deciding, that the claimants satisfied the first and third criteria. It focused its analysis on the second clause – one “who has not contributed consideration for carriage.”

Charter hire was certainly paid for, among other things, the carriage of the workers on the Ms. Adalyn. Petitioners argued, however, consideration must be paid by the individual passenger. The court thus framed the “fundamental question” as whether to have the status of a “passenger” a crewmember must personally provide consideration. The court found it persuasive that the section of the statute immediately following the foregoing defines “passenger for hire” as a passenger “for whom consideration is contributed as a condition of carriage on the vessel, whether directly or indirectly flowing to the owner … or any other person having an interest in the vessel.”.¹³ The court thus concluded that “Congress did not require personal consideration as a condition for carriage.”

Grammar and syntax then took center stage. Petitioners seized on a grammatical distinction between two adjoining provisions of the statute. The crew exception uses the active voice: a crewmember is not a passenger if he or she “has not contributed consideration for carriage”. The very next provision, defining “passenger for hire,” uses the passive voice: someone qualifies if “consideration is contributed” on his or her behalf, “whether directly or indirectly”. Petitioners argued that Congress’s choice of the active voice in the crew exception was deliberate, and that it meant a crewmember must personally hand over consideration to lose the benefit of that exception. Consideration paid by someone else on the crewmember’s behalf, they contended, should not count.

The Fifth Circuit rejected that reading as a form of “hyper-literalism,” invoking Judge Oldham’s concurrence in United States v. Palomares, 52 F.4th 640, 648 (5th Cir. 2022) (Oldham, J., concurring) and Judge Learned Hand’s admonition that “sterile literalism . . . loses sight of the forest for the trees”.¹⁴ The court reasoned that grafting a personal-payment requirement onto the crew exception would open what it called a “crewmember loophole[,]” allowing a vessel owner to route consideration through an employer, a charterer, or any other third party and thereby convert an admitted “passenger for hire” back into ordinary, unprotected “crew”. That result, the court found, could not be squared with the neighboring provision’s express instruction that consideration “directly or indirectly” flowing to the vessel’s owner or another interested party still counts.

Petitioners also argued that reading the crew exception this way rendered surplusage of the exception’s remaining clause, that a crewmember must also be “paid for on board services[,]” to fall outside passenger status. The court was unpersuaded, observing that the canon against surplusage “is not an absolute rule” and that some redundancy within a single statutory subsection is unremarkable, particularly where, as here, the plain text of a neighboring provision compels the result.

On the facts before it, the Fifth Circuit therefore concluded that because claimants had indirectly paid consideration for carriage on the Ms. Adalyn they were “passengers for hire,” and therefore the Ms. Adalyn was a “covered small passenger vessel”. Accordingly, the 1851 Act’s limitation of liability scheme did not apply.

Considerations for vessel owners, operators, and their underwriters

Those operating and insuring small passenger vessels, or workboats working in the offshore oil, gas, and wind farm fields, should pay keen attention to the 2022 Amendment. Attention should be given to its effect upon operational considerations involving the carriage of passengers. Legally, the obligations or the benefits undertaken when negotiating defense and indemnity agreements may have changed drastically. Lastly, for the same reasons, when placing coverage for such vessels, both assureds and underwriters should give keen consideration to the effect of these recent changes.

*The foregoing is provided not as legal advice, but as a service to clients and friends of the firm. For review and consideration of specific facts, we recommend contacting your legal advisors.

Footnotes

The Fifth Circuit encompasses the coastal states of Texas, Louisiana, and Mississippi which border on the Gulf of Mexico and contain some of the busiest ports in the U.S. It has developed one of the nation’s most influential bodies of admiralty jurisprudence. In addition to a high volume of traditional maritime cases, the Circuit also adjudicates more offshore oil field-related matters than any other federal circuit. Given its location and the numerous traditional, and oil field-related, maritime cases that come before it, it is considered a court with extensive experience in admiralty matters. See, e.g., McDermott Int’l, Inc. v. Wilander, 498 U.S. 337, 356 (1991) (“The Fifth Circuit has long been recognized as possessing extensive expertise in maritime and offshore litigation due to the volume of admiralty cases arising within the Gulf Coast region.”).
Responsibility of Shipowners’ Act, 1733, 7 Geo. 2, c. 15 (1734).
This is not much different than the limitation of liability created by the corporate fiction recognized in land-based torts. Basically, an owner limiting its liability to its assets. See generally Lynn N. Hughes, The Shipowners’ Right to a Limitation of Liability Adrift on a Sea of Tort Changes, 1988 Lloyd’s Mar. & Com. L. Qtly 517, 521 (1988) (“The protection of doing business available through the corporate form is a common example of non-maritime law that encourages economic development and limits liability.”).
46 U.S.C. §§ 30505-30512.
In essence a time charter agreement.
See In re Petition of M/V Ms. Adalyn, No. 25-20584,2026 WL 2364283, at *1 (5th Cir. Aug. 14, 2026).
In re MV/MS ADALYN, 813 F.Supp.3d 728 (S.D. Tex. 2025) (Rosenthal, J.).
Id.
In re DeBerry, 945 F.3d 943, 947 (5th Cir. 2019).
In re Petition of M/V Ms. Adalyn, 2026 WL 2364283, at *3 (citing 46 U.S.C § 2101(31)(A)).
Id. (citing 46 U.S.C. § 2101(31)(A)(iii)).
Id.
In re Petition of M/V Ms. Adalyn, 2026 WL 2364283, at *3 (citing 46 U.S.C § 2101(32)).
New York Trust Co. v. Commissioner, 68 F.2d 19, 20 (2d Cir. 1933) (Hand, J.)