The following is a letter sent to Big Island Gazette (BIG). BIG does not edit letters to the editor.
At the end of 2022, Congress passed a law that is raising the cost of liability insurance for the charter boating industry and will heavily impact the ability for dive, touring, or fishing boats to operate. The Dive industry—which I am a part of—is a major source of both tourism and recreation dollars for the region, part of the multi-billion dollar U.S. scuba diving and snorkeling industries that bring thousands of jobs and tax revenue to the area.
We are seeing liability insurance premiums skyrocket and even withheld for these small business owners at a time when inflationary overhead costs are already making it more difficult to do business.
Congress did this without any input from the public, and we believe people need to hear about the impacts actions from the federal government are having on the lives of the people right here in the local community.
I would love to put you in touch with a small business owner in the area so you can hear more about the direct impact it will have on local businesses. I’m happy to share with you a bit more information about what is happening if that would be helpful.
A DEEPER DIVE
Congress included a new liability requirement for small passenger vessel operators into the 2023 Defense Authorization bill that passed in December. The language was added under the guise that it was simply a fix for the families who lost loved ones in the Conception Dive Boat fire of 2019. The legislation instead provides NO relief for the victims’ families. It also does nothing to make boats safer and is now threatening to put many dive operators out of business because of exponential cost increases for liability insurance coverage.
Like many small businesses, small passenger vessels (as defined below)—fishing, diving, ferries, and tour boats—operate on razor-thin margins. Most of their earnings are recommitted to staff wages or invested into operations, safety inspections, and regular maintenance of the vessel and related equipment. These operators were already struggling in the wake of rising inflation and pandemic-related income losses. Because of Congress, they are facing exponential increases in insurance costs which must be passed along to consumers or other small operators using the vessel’s services. Instead of making the dive industry safer, this provision punishes small businesses and redirects limited resources. The bill was never considered through the formal committee process, so stakeholders never had a chance to weigh in publicly.
OLD LAW
Under previous U.S. Maritime Liability laws (46 USC Ch 305 Subtitle III, §30501 see page 28), which had 170 years of precedent:
- The owner of any seagoing vessel of any size could bring a civil action in a district court to limit their liability from damage claims to the value of the owner’s interest in the vessel.
- When the owner filed for this limitation, all actions and damage claims arising from an accident could be rolled into one action in state court, and if awarded, damages would be equally distributed to all successful claimants.
- This limitation was allowed only so long as the damages were “done, occasioned, or incurred without the privity or knowledge of the owner.”
- The owner would have to act on the claim within six months of that notice.
NEW LAW
The new law, which was included as Section 11503 of 2023 National Defense Authorization Act, is sometimes referred to as “The Small Vessel Passenger Act.”
- It defines small passenger vessels as those carrying more than 6 passengers—but not more than 49 passengers on an overnight domestic voyage; and not more than 150 passengers on any voyage that is not an overnight domestic voyage.
- The liability limitation for the owners of these vessels was removed. Now, they can be held legally responsible for compensating accident victims and their families regardless of the value of the boat.
- The new law also extends the notice time for bringing action to two years after the accident.
- These small business owners have also lost the one-year limitation on civil actions for personal injury or death. It has also been extended to two years.
FALLOUT
Small vessel owners must now try to secure new liability insurance that takes into account the new calculated risks. This change in liability limit—targeted only at owners of small passenger-carrying vessels—will necessarily cause a substantial increase in liability insurance rates for these small businesses. The terrible Conception tragedy is being used as justification to help the trial bar line their own pocketbooks at the expense of hard-working, small business owners and their employees.
Through the efforts of associations like DEMA, various boating, fishing, and other recreation trade organizations, as well as the U.S. Coast Guard, boating safety in the U.S. is better than it has ever been. But in December 2022, insurance companies began notifying small vessel companies that coverage rates would be increasing exponentially—citing the legislation as the reason.
For example, a dive shop/boat owner in South Florida reported that their long-time insurer will no longer provide coverage, and the owner has received denials from four other insurance companies. They do not know if they will be able to operate once the existing liability policy expires. We have heard from others in the same situation who may be forced to run without liability insurance because they cannot afford or find an insurer willing to cover them. This puts their entire business and employees at significant risk, and it certainly does nothing to protect passengers.
Please let me know if would like any additional information and we would also be happy to assist by putting you in contact with local boat owners, as possible.
Thank you for your time and consideration,
Tom Ingram
President & CEO
DEMA, Diving Equipment & Marketing Association