The Limitation of Liability Act of 1851 is a United States federal law that allows shipowners to limit their liability to the value of the vessel after an accident, as well as any pending freight. It was enacted to encourage investment in the maritime industry by providing a degree of financial protection for shipowners during the olden days.
This law, which was referenced by the owner of the Titanic in a Supreme Court case over a century ago, allowing ship operators to limit their liability for damages arising from maritime incidents.
In United States maritime law, the Limitation of Liability Act of 1851, codified as 46 U.S.C. § 30501 since February 1, 2010, states that the owner of a vessel may limit damage claims to the value of the vessel at the end of the voyage plus "pending freight", as long as the owner can prove it lacked knowledge of the problem beforehand. This Act was the subject of a 2001 United States Supreme Court case in Lewis v. Lewis & Clark Marine, Inc.
The Act was passed by Congress on March 3, 1851 to protect the maritime shipping industry; at the time, shipowners were subject to loss from events beyond their control such as storms and pirates, so the Act was designed to limit the shipowners' liability to the value of the vessel. Without it, American shipping was "at a competitive disadvantage" compared to other maritime countries where similar limitations applied.
However, in recent decades the law has been used in a way totally unintended by its authors: protecting large corporations from being held accountable for their negligence. As in the olden days the maritime industry did not have any such resources, we have today such as advanced forecast equipment, no satellite or GPS, no long-range communication equipment that keeps ship owners in contact etc.
There fore, the act was formulated in the those periods, where the shipping industries were much dangerously at risk . Unpredictable catastrophes like weather, pirates, attacks by foreign nations, fatal illness, and other serious hazards at sea, legislatures feared that lawsuits from injured crew or upset merchants hampering to then American shipbuilding and shipping industries.
To mitigate the high risks shippers and ship owners faced on every voyage, the Limitation of Liability Act was created.
