D. Damages for Injury to Vessel—partial Loss

• Library: South Carolina Damages (SCBar) (2009 Ed.)

D. Damages for Injury to Vessel—Partial Loss

1. Measure of Recovery

if a vessel is not a total loss, the measure of recovery is ordinarily the reasonable cost of reclamation and repair to put the vessel in as good a condition as it was before the injury, with an allowance for depreciation. in addition to a discretionary award for prejudgment interest, any recovery may also include a reasonable allowance for the loss of use.⁸¹

There are two exceptions to the general rules for a partial loss: (1) the cost of repairs must be less than the diminution in market value resulting from the injury and (2) if the cost of repairs exceeds the pre-injury value or if the repairs are not physically or economically feasible, the vessel is a constructive total loss. if the costs exceed the diminution in market value, the owner can recover only that value of the vessel peculiar to him or her that is greater than the cost of repairs.⁸²

2. Repair Costs

The general method of measuring damages for partial loss is the cost of the repairs. The costs of the repairs are sometimes stated to be the equivalent of diminution in value, which is the stricter but sometimes less accurate measure.⁸³ Although the measure of damages for partial loss is the reasonable repair expense, the plaintiff need not show that actual repairs were made.⁸⁴ Estimated costs of repair will not support an award of prejudgment interest, however, because the owner has made no disbursement.⁸⁵

The doctrine of restitution in integrum entitles an owner to have the vessel in a condition as seaworthy and serviceable as before the injury. The owner may not have a vessel restored to an identical pre-accident condition when other, considerably less expensive methods would make the vessel equally serviceable.⁸⁶

The argument that the collision will necessarily diminish the value of the vessel in the eyes of a potential buyer does not support an award based on the alleged depreciated market value if the vessel is as strong and seaworthy as it was before the accident.⁸⁷ The cost of temporary repairs, if those repairs reduce the amount of permanent repairs required, will be deducted from the damages award based on the cost of permanent repairs.⁸⁸ if temporary repairs are made and then exceptional conditions make it impossible to effect permanent repairs, the owner is limited to the costs of those temporary repairs.⁸⁹

The plaintiff has a duty to minimize damages after a collision. A damages award may be reduced or eliminated if the defendant can prove that (1) the plaintiff acted unreasonably in failing to repair the vessel immediately and (2) the failure aggravated the damage to the vessel.⁹⁰

3. Miscellaneous Expenses Incidental to Repair Costs

Miscellaneous expenses include dry-docking charges, wharfage, survey fees, and superintendent fees during repairs. Forced dry-docking expense, as oppose to the cost of work done in the course of regular dry-docking, is recoverable.

Necessary survey fees incurred by the owner, not the underwriter, are allowed in the usual case. This is particularly true if the fees appear to be for the tortfeasor's account and if he or she had notice of, and participated in, the surveys.⁹¹

Costs of towing incident to repairs are considered reasonable expenses and are properly included in a damages award.⁹²

Practice Tip: Get an immediate survey of any substantial loss. Advise the client to begin (or continue) to keep detailed records of all expenses, outlays, and consequential losses. The better practice is to notify the other parties to allow them to attend any survey. Courts look more favorably on joint surveys. Such a step may affect the award of costs and will affect the weight given to the survey.

4. Recovery Costs

Subject to the requirements of necessity, reasonableness, and certainly of proof, the costs of transporting a vessel from the collision site to the repair site are recoverable.⁹³ Additionally, reasonable costs for inspection or operations necessary to determine the extent of damages to a vessel are recoverable.⁹⁴

5. Prejudgment Interest

The discussion in §§ C.5.a-b, supra, relating to admiralty awards of prejudgment interest on a total loss, also applies in general to partial loss situations. There is a difference, however, in the partial-loss case. The exercise of the admiralty court's discretion in partial-loss situations largely determines the date when interest begins to run. in a total loss, there can be only one relevant date, namely, the date of collision or other event causing the total loss. in the case of a partial loss, however, there are a number of potential starting points for the accrual of interest. Many of the results may be explained on the ground that they involve mutual fault.⁹⁵ Some courts have denied prejudgment interest on the basis of mutual fault.⁹⁶

The Sixth Circuit also adopted the Ninth Circuit's view set forth in Alkmeon Naviera,⁹⁷finding that it would no longer consider mutual fault to be a peculiar circumstance justifying the denial of prejudgment interest.⁹⁸

6. Loss of Use or Lost Profits

a. In General

A claim for loss of use is translated into one for lost profit or earnings. As mentioned in C.4., supra, admiralty does not allow damages for loss of use in the total loss situation.⁹⁹

Damages for loss of use for a partial loss are commonly termed demurrage although detention damages is probably the proper term. Strictly defined, demurrage is the measure of damages, often stipulated, in a charter party that reflects loss occasioned by the delay in loading or unloading a vessel.¹⁰⁰ Detention damages include lost profits as well as incidental expenses reflecting necessary maintenance during the detention period. The term "detention damages" is broader than "lost profits," though the terms are often used interchangeably. When the vessel is under charter, the vessel's hire may be used to fix the owner's measure of damages.¹⁰¹

Sometimes the damaged vessel is arrested while undergoing repairs. if the arrest was made in good faith, the owner cannot recover detention damages simply because of his or her financial inability to effect release.¹⁰² Calculation of detention damages may also include delays in repair time. As long as delays are unavoidable or reasonable, they are properly included in an award of detention damages.¹⁰³

Calculation damages can be made in a number of ways, as long as the method permits determination of damages with "reasonable certainty." in Orduna S.A. v. Zen-Noh Grain Corp.,¹⁰⁴the defendant grain company challenged the district court's calculation of damages based on an average of profits for three voyages.¹⁰⁵ The grain company argued that other cases required averaging six voyages.¹⁰⁶ The Fifth Circuit Court of Appeals affirmed, holding that no set formula need be followed as long as the damages can be calculated with reasonable certainty.¹⁰⁷

So long as a party can show an active market for a tortiously damaged vessel, detention damages are appropriate without proof of the loss of a specific opportunity.¹⁰⁸

b. Commercial Vessels, Including Fishing Vessels

Cases set out different measures of recovery of demurrage or lost profits for commercial vessels.¹⁰⁹

To determine lost profits, some courts take an average of the voyages before and after the casualty.¹¹⁰ In determining the loss of profits for damage to a jack-up drilling rig struck by a vessel, the Eastern District of Louisiana used the daily contract rate multiplied by the number of days the rig was out of operation for repairs.¹¹¹

Lost profits or loss of use can also be measured by the charter hire for barges or vessels¹¹² or by loss of rental for containers. There is not just one method of calculating lost profits.¹¹³ However, if the owner manages his or her affairs in such a fashion that no profits are lost during repairs, then none can be awarded.¹¹⁴ The cost of hiring a substitute vessel may be the measure of damages.¹¹⁵ The "spare boat" doctrine allows the ship owner to recover for the use of an extra vessel maintained specifically to fill in during the repair time on other vessels.¹¹⁶ When no extra boat is actually used, however, an owner cannot recover demurrage damages under the spare boat doctrine. This is true even though the owner may have overloaded other boats to meet the contingency.¹¹⁷

Although not a collision case, in Navieros Inter-Americanos v. M/V Vasilia Express,¹¹⁸the court addressed the issue of a substitute vessel. There, a repudiation of a charter agreement occurred.¹¹⁹ The owner claimed the charterer should have used a substitute vessel to mitigate its damages.¹²⁰ The charterer claimed that the substitute vessel was too slow and would not have fit its needs under the original charter party.¹²¹ The First Circuit Court of Appeals held that the charterer was under no obligation to accept a slower or smaller vessel than that originally chartered and, therefore, there was no failure to mitigate.¹²²

c. Fishing Vessels Generally

Lost profits on fishing vessels deserve separate mention because of the dual significance of the catch. To the owner, the fish already on board represent earned freight. If the fish are lost because of a casualty, the owner has a right of recovery on the owner's own behalf. To the crew members working for the owner, the fish caught represent earned wages of which they are entitled to a percentage. The first issue is whether the owner can recover damages for a prospective lost catch as a result of injury caused by a third party. The second issue is whether the owner or the deckhands or both have standing to sue the negligent third party. The case law generally applies different, more relaxed standards in cases involving commercial fishermen than in admiralty cases generally.

d. Fishing Vessels—Lost Catch During Detention

When a maritime casualty causes the loss of fish already in the net or on board, the owner can recover for that loss.¹²³ The more difficult question is whether the owner or the...