Arbitration Clauses And The Costa Concordia Cruise Disaster

Arbitration Clauses And The Costa Concordia Cruise Disaster

Passengers of the Costa Concordia are just beginning to discover the lengths to which companies have gone to protect themselves from liability after a cruise accident. This week, the passengers who were not injured when the ship ran aground were offered $14,500 to resolve their legal claims. This may seem like a paltry sum for the hours of terror and shock of being on a cruise ship as it capsized into the sea, but cruise lines have a secret weapon that helps them avoid paying victims a reasonable amount. The fine print on the back of a cruise ticket, too small to attract anyone’s notice, protects most cruise companies from responsibility for their actions.

Among the rights that most cruise passengers unknowingly sacrifice are the rights to seek significant punitive damages or to claim compensation for emotional distress. Perhaps the most controversial element common to cruise ship contracts is the arbitration clause. In the cruise industry, arbitration clauses have been used to limit the right of passengers to sue in certain circumstances. Forum shifting clauses limit where any suit against the cruise line can be filed. Together, these clauses make it very difficult to pursue proper compensation for passengers who come from all over the world.

The Legality Of Arbitration Clauses

The use of arbitration clauses recently drew the attention of the Supreme Court. In a 5-4 opinion, the court supported the 1925 Federal Arbitration Act, which forces courts at every level to enforce the arbitration accords that many businesses, including cruise operators, have employed. It took this action despite evidence that businesses win more than 95 percent of arbitration actions and have enormous influence over the outcome of disputes resolved in this way. The Supreme Court chose to ignore the statistics and repeated the common justifications for arbitration clauses.

Those who support arbitration over litigation generally do so on the grounds that its informality and streamlined nature allow many disputes to be resolved much more quickly. Critics point out that because businesses have a say in picking arbitrators and only pick those with an established record of favoring business interests, the process is unbalanced from the beginning. While a company like Carnival, the operator of the Costa Concordia, may participate in hundreds of arbitrations per year, the average consumer will participate in just one in his or her lifetime. Arbitrators have a clear financial incentive to ingratiate themselves to their repeat customers: big businesses.

The Impact On Injured Passengers

For the people who suffered serious injuries and the families of those who died in the cruise disaster, the ticket fine print could cost them the chance to sue for any damages at all. While many states, including Florida, have statutes of limitations that give people a specific amount of time to file a lawsuit, the contractual restrictions on cruise tickets can cut that time severely. If you do not act quickly, you could find you have no right to compensation through the courts or through arbitration. Carnival requires injured people to inform it within six months of the injury of their intention to file a lawsuit. After meeting the notification requirement, injured parties must then file the suit in the court of Carnival’s choosing within one year. With many people still missing and an investigation that is likely to span years, the requirement to file suit in such a short period hardly seems reasonable.

What Comes Next For Cruise Passengers?

Despite the harsh terms imposed by the cruise industry, victims of the Costa Concordia are still encouraged to seek the compensation they deserve. Carnival’s offer is clearly designed to help it avoid litigation by getting people to sign away their right to sue. The full impact of being involved in such a disaster may not become clear for months. A class action lawsuit or a mass offer such as the one made by Carnival may serve the needs of a few passengers, but many will be entitled to more than these forms of redress will yield. As one of the biggest maritime disasters in history, the Costa Concordia capsizing may force lawmakers and industry leaders to amend the questionable practices that have built up over time.