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Insight: Laws leave cruise-ship victims at sea

/ Source: Reuters

When Walter Henry Alderfer learned last month about the Costa Concordia shipwreck off Italy, it brought back bad memories.

In April 2007, he, his wife and his daughter were aboard the Sea Diamond cruise ship when it struck a reef off Greece and sank into the Aegean Sea. Screaming passengers fought over life preservers, Alderfer says, and his wife hurt her neck and later needed surgery.

Five years later, the family is still seeking redress - and its experience may be instructive for survivors of the Concordia disaster.

They turned down an offer of compensation by the owner - Cyprus-based Louis Cruises, a unit of Louis PLC - that included a free voyage. They filed a federal lawsuit in New York but settled for $2,500 - less than his wife's medical expenses and the family's lost belongings, he says - because the tickets required them to sue in Greece. An additional suit in Greece is still dragging on.

An attorney for Louis Cruises said many passengers were satisfied with the compensation offer, and Louis reached "fair and reasonable" settlements with some U.S. passengers who sought additional awards. She also said the evacuation was swift and orderly.

Most cruises proceed without mishap. But in the rare cases when passengers do suffer serious injury - at least 17 died in the wreck of the Costa Concordia on January 13 - they can face formidable obstacles in recovering significant damages, an examination by Reuters shows.

The cruise business - led by industry giant Carnival Corp. & PLC, whose Italian subsidiary owned and operated the doomed Costa Concordia - has put in place over the years a legal structure that ring-fences operators from big-money lawsuits.

The rules for seeking redress are spelled out in complex, multi-page ticket contracts that passengers may not receive until right before boarding. Victims are often required to file suits in remote jurisdictions. The wording has been the subject of decades of court battles.

Thomas Dickerson, a New York state judge who has written extensively on travel law, says the legal hurdles resulting from the industry's victories over the years give operators the upper hand in litigation and make the business highly profitable. The industry faces "fewer payouts because of all the roadblocks," he said.

Cruise industry officials say their contracts streamline the litigation process, prevent frivolous claims and lower cruise costs for passengers.

In the case of the Costa Concordia wreck, the ticket contract stated that "all claims, controversies, disputes, suits and matters of any kind whatsoever ... shall be instituted only in the courts of Genoa, Italy."

Many survivors are now discovering the challenges of the Italian court system.

Italian lawyers rarely accept cases on a contingency basis, so clients may have to pay them up front to take a case. And personal-injury cases can drag on for years, especially if there is a parallel criminal investigation. The Costa Concordia's captain is under investigation for allegedly abandoning ship. That probe must be completed before evidence will be made available to plaintiff attorneys in civil cases, said Alexander Guttieres, a Rome lawyer who has litigated major personal-injury cases.

"I've done cases that took seven years and are not nearly as complicated" as the Costa Concordia case, he said.

Some U.S. plaintiff lawyers are attempting to test the Costa Concordia's contract terms by bringing action in Florida, home base of Carnival Corp. In one case, 39 survivors are seeking at least $528 million in damages in a lawsuit alleging negligence that was filed in a state circuit court.

Marc Bern, the lead plaintiffs' attorney, said he believes the contract terms that require lawsuits to be filed in Italy are "null and void by virtue of the extreme nature of the conduct" of the captain. But U.S. courts have held that such clauses are valid.

The Costa Concordia is owned by Genoa-based Costa Crociere S.p.A., whose parent company is Carnival Corp., the world's largest cruise company with a market share of nearly 50 percent. Carnival's other cruise lines include Princess Cruises, Holland America Line and Cunard.

A spokesman for Carnival Corp. declined to respond to questions for this article. A Costa Crociere spokesman in Florida said the company does not comment on litigation.

Over the years, Carnival and its competitors have changed their ticket contracts in ways that make it tougher for passengers to bring injury claims to court or collect large settlements.

One concerns where passengers must file lawsuits. That issue has been contested all the way to the U.S. Supreme Court.

The Supreme Court case began with a cruise that real-estate broker Eulala Shute-Wood took on a Carnival ship bound for Mexico from Los Angeles in 1988. During a cake-decorating demonstration in the ship's kitchen, she fell on a freshly washed tile floor and hurt her back.

In an interview, Shute-Wood, now 75 and retired, said she received no medical attention until disembarking in Puerto Vallarta, Mexico. The experience, she said, ruined the trip for her and her husband and she sued in her home state of Washington to get a refund.

Carnival fought to dismiss her case because it was not filed in the state of Florida, as the ticket contract then stipulated. In 1991, the Supreme Court, in a 7-2 decision, sided with Carnival, ruling that the clause helped to avoid confusion over where to sue when an incident occurred in international waters. The case, Carnival Cruise Lines Inc. v. Shute, also affirmed the legality of such clauses, which are now common in cruise tickets and many other commercial contracts.

Andre Picciurro, a San Diego, California, attorney with Kaye Rose & Partners LLP, which serves as general counsel to the Cruise Lines International Association, said the so-called forum clause helps to "eliminate wasteful litigation" and "provides predictability for the passengers and the cruise lines."

Shute-Wood said requiring her to file her suit in Florida represented a hardship. She said she didn't know any attorneys there and feared the costs would be far more than what she had hoped to recover. "We didn't even consider it," she said. After the Supreme Court sided with Carnival, the case was quickly resolved for what her attorney said was a small sum.

Carnival Cruise Lines, headquartered in Miami, later narrowed the forum clause on its ticket contracts. By around 2000, passengers were required to file suits in Florida's Miami-Dade County, rather than anywhere in the state. About two years later, Carnival tickets stated that claims could only be filed in federal court in Miami, provided it had jurisdiction.

A Florida appeals court upheld the federal court requirement in 2008.

Gabrielle D'Alemberte, an attorney with Robert L. Parks, P.L., in Coral Gables, Florida, said in recent years cruise lines have also tightened the rules regarding legal actions involving shore excursions. Increasingly, passengers are required to sue the excursion company, not the cruise company, in the event of injury, she said, adding that the chances of recovering any damages are very unlikely. D'Alemberte is representing three Costa Concordia passengers.

Jennifer and Joseph Henderson discovered the limits of a cruise company's liability following an ill-fated honeymoon on a Carnival cruise in the Caribbean in 1998, according to federal court records. They booked a catamaran excursion to the island of St. Lucia. Although the catamaran was not operated by Carnival, it bore the Carnival logo, and the boat's crew wore Carnival shirts, according to court records.

The catamaran struck a reef, and the couple suffered multiple injuries. In federal court in Miami, they alleged they ended up spending most of their honeymoon in pain and seeking medical attention, and sought at least $100,000 in damages. The court dismissed the case because their ticket stated that independent contractors operate shore excursions and Carnival assumed no responsibility for any injuries.

The Hendersons couldn't be reached for comment.

Even in cases of deaths aboard cruise ships due to negligence, surviving family members may receive little compensation. That's because of a 92-year-old U.S. law that deals with redress for families of people who die at sea.

Richard Liffridge set sail with his wife on the Star Princess cruise ship from Fort Lauderdale, Florida, to the western Caribbean in March 2006 to celebrate his 72nd birthday.

Four days into the cruise, a fire broke out in the middle of the night. Liffridge and his wife tried to escape by crawling out through a wall of black smoke, according to an investigation by the government of Bermuda, where the ship was registered. The emergency hallway lights were dim, staff didn't man emergency phone stations, there were no balcony sprinklers to contain the fire, and the fire door the Liffridges were instructed to use was closed, the investigation found.

According to a lawsuit brought by Liffridge's family, the last words his wife heard him say were, "Don't let me die."

An autopsy showed Liffridge died from smoke inhalation. The family sued Princess Cruise Lines Ltd. - part of Carnival Corp. - for wrongful death. The case was settled, but one of his daughters, Lynnette Hudson, said her family only received money for funeral expenses. According to their attorney, that's all they were entitled to under U.S. law.

That law - the 1920 Death on the High Seas Act - allows families of those killed due to the negligence of a ship owner to collect for lost financial support.

Miriam Lebental, the California attorney who represented Hudson, said that because Liffridge was retired, there was no loss of potential earnings, and he did not provide financial support to Hudson or her siblings.

"It was horrible because what it basically told my family was that my father's life was worth zero," said Hudson, an insurance-claims adjuster from Delaware, who was not on the cruise. Carnival declined to comment on this or any other legal cases.

The United States is not a party to an international maritime treaty - known as the Athens Convention - that establishes liability for loss of life, personal injury or loss of luggage at sea. Nor is Italy.

The final cost of the personal liability claims in the Costa Concordia case won't be known for years. But the ship's owner is covered by insurance with about a $10 million deductible, according to Carnival Corp.'s recent financial filings.

Walter Henry Alderfer, whose wife was injured in the sinking of the Sea Diamond in 2007, is pinning his family's hopes on a lawsuit filed against the government of Greece over allegedly faulty nautical charts that the ship owner blames for the wreck.

But he's not optimistic. "It's been slow going," he said.