Navigating the Obstacles Created by Cruise Lines in Shore Excursion Tragedies

Article written by Robert D. Peltz and Carol L. Finklehoffe of Leesfield & Partners Published in the Massachusetts Academy of Trial Attorneys Journal.

The allure of exotic foreign ports and exciting new excursions form the centerpiece of the advertising campaigns of cruise lines, whether in the broadcast, print or electronic media:

• Parasailing in St. Thomas • Zip lining in Costa Rica • Snorkeling in the lagoons of Bermuda • Jungle trekking by ATV in Cozumel • Alpine hiking on Alaskan glaciers • Driving the scenic mountains of Tortola • Learning the secrets of the cooks of Caribbean by visiting local villages in Dominica • Visiting the Mayan ruins at Tulum

Over the past decade, the number of passengers cruising with North America’s largest cruise lines has literally exploded. According to industry figures, the number of passengers has dramatically increased from 9.5 million in 2003 to over 16 million passengers forecasted to cruise in 2012. As the industry itself is quick to admit, at least to its shareholders and tour excursion partners, the continued development of new and existing excursions has played a major role in this growth.

Nevertheless, at the first sign of an excursion gone awry, the cruise lines have been quick to try and disassociate themselves from responsibility for their own creations. In an effort to insulate themselves from liability, the cruise lines have utilized a system of disclaimers, which attempt to hide the true character of their relationships with their tour operating partners. These disclaimers are typically buried in the fine print in the passenger’s ticket of passage and in self-serving statements inserted into the cruise lines’ contract’s with their tour operators.

There is typically a wide divergence, however, between these self-serving statements and the facts on the ground when it comes to describing the cruise lines actual relationship with its excursion partners. Overcoming these inaccurate self-serving and inaccurate descriptions contained in the carrier’s written and electronic materials therefore typically becomes the first order of business.

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Contrary to these disclaimers, the most accurate description of the relationship between the carrier and its tour operating partners is best characterized by the joint venture. Nevertheless, because of the degree of control maintained by the carrier, various other agency relationships are equally as applicable in most cases. This article will discuss the nature of these various relationships, strategies for holding both the carrier and tour operator responsible for their conduct and the discovery which will be helpful in the process.

Holding the Tour Operator Responsible

Although most of the attention in excursion cases is typically focused on holding the cruise line responsible for its negligence, it is important not to overlook the case against the tour operator. Sometimes, one gets lucky and the tour operator is located in the U.S. Virgin Islands, Puerto Rico or some other domestic location. Most of the time, however, that is not the case. Nevertheless, that is not reason for despair.

Since all of the cruise lines based in North America have forum selection clauses, which require suit to be filed in the jurisdiction where they maintain their base of operations, the carriers have a vested interest in keeping their perceived home court advantage. As a result, the contracts between the cruise lines and their tour operator partners sometimes require the latter to waive jurisdictional defenses and agree to be sued in the forum selected by the carrier in its ticket. As with any contract, some of these clauses are drafted better than others and more clearly express this intention. For example, the clause contained in Princess’ contract with its tour operators provides:

Even in the absence of a broad jurisdictional clause, however, a strong argument can be made to establish jurisdiction over the foreign tour operator in the United States.

Most tour operators have ongoing and continuous business activities with the various cruise lines and other commercial entities, which can be used to establish jurisdiction. These purposeful contacts include entering into repeated consecutive contracts with multiple cruise lines, repeated and ongoing direct communications with cruise lines in the forum state, submission of invoices to and receipt of payment from the forum state, solicitation of business by providing advertising and informational literature, in person meetings with cruise line representatives in the forum state for the purpose of securing and maintaining business relationships, and attendance at industry conferences such as SeaTrade.

All of the major North American carriers–Carnival, Royal Caribbean, Celebrity, Princess, NCL and Silversea–are members of the Florida Caribbean Cruise Association. The FCCA serves as the liaison between the carriers and excursion operators in the Caribbean. In addition to hosting social functions, educational programs and conferences, the FCCA also sets forth various policies and procedures applicable to tour operators located in the Caribbean. One of the most significant of these requirements is that each tour operator maintain liability insurance in the amount of at least $2 million per incident.

To ensure that such coverage is placed with reputable carriers, so as to protect its cruise line members, the FCCA generally requires that the coverage be maintained through a broker located in Miami, Florida. At this time, the broker is AON, however, in the past, it has used Royal Marine. Not only does this arrangement provide a significant amount of liability coverage for the excursion operations, but it also provides an additional basis for establishing jurisdiction to the extent that it is necessary in a particular case. Accordingly, the first subpoena which should go out in any excursion case is to AON or its successor in order to establish the existence of such insurance and to obtain the various applications, correspondence and other documents between the excursion partner and the broker.

Joint Venture

Many of the district court decisions analyzing joint venture claims in the shore excursion context have retreated to a formalistic resuscitation of the need to establish each of the following elements: (1) a community of interest in the performance of a common purpose; (2) joint control or right of control; (3) a joint proprietary interest in the subject matter; (4) a right to share in the profits and (5) a duty to share in any losses. A number of these cases have over-construed the Supreme Court’s decisions in Bell Atl. Corp. v. Twombly and Ashcroft v. Iqbal as requiring the passenger to plead facts supporting each of these elements in order to state a cause of action.

These cases which have construed Twombly and Ashcroft to require pleaders to return to the overly technical pleading requirements of times long past, have also tended to misconstrue the substantive requirements for establishing a joint venture in the first place. In Fulcher’s Point Pride Seafood, Inc. v. M/V “Lady Mary,” the Eleventh Circuit Court of Appeal’s seminal joint venture case, the court criticized blind adherence to the idea that it was necessary to establish all five elements by holding:

Accordingly, the Court went on to affirm the lower court’s conclusion that a joint venture existed, even in the absence of an agreement to share in profits and losses.

Nevertheless, the better approach is to attempt to develop facts in support of each of the five elements, since some district judges tend to consider them essential to establish the relationship, despite the Eleventh Circuit’s admonitions to the contrary. Therefore, while the fact that the carrier and operator share revenues from the sale of tickets to the excursions is an important factor, the true nature of the relationship goes much deeper and clearly supports the existence of a joint venture.

The starting point begins with the recognition that although cruise lines are considered to be common carriers, cruising is not at all about transportation. Instead, it is about entertainment, both on and off of the vessel. As such, visits to the ports of call are recognized by the courts as the sine qua non of the “cruising experience.”

As such, an integral portion of each cruise line’s business plan is to develop and implement exciting port excursions. Therefore, while the revenue generated from these excursions is important to the carrier’s bottom line, an equally important benefit is the impact which these excursions have on drawing passengers to their ships in the first instance. Accordingly, the carrier’s “profit” from these excursions is not limited to simply the generation of revenue from the sale of tickets as it also includes the enhancement and profitability of its overall product – the “cruise experience.”

The same effect benefits the tour operator as well. By successfully performing excursions for well known cruise lines, the tour operator also boosts its own professional image, increasing its ability to sell its excursions to other cruise lines in addition to hotels, travel agencies and other entities. Therefore, the sharing of profits goes beyond just the division of revenue. This concept of “profit” was relied upon by the Eleventh Circuit in Fulcher’s Point Pride Seafood to establish that the parties were each gaining a material joint benefit out of the venture.

The same is true with the other side of the ledger as well. Cruise lines devote enormous amounts of resources to their excursions. Shoreside, each carrier maintains a department or designated group of individuals whose job duties include the creation and development of excursions, the recruitment and screening of partners to implement them and the subsequent supervision and monitoring of their activities to ensure compliance with company safety and financial rules. Each of the carrier’s vessels also contains designated shore excursion staff, whose job involves explaining, selling and promoting excursions, organizing the passengers to participate at the appointed time and acting as liaisons with the tour operator or partner to implement the excursion itself.

The tour operator likewise has its own expenses incurred in employing personnel, purchasing and maintaining equipment, vessels and vehicles, purchasing insurance and operating the excursion. Accordingly, when the excursion is unsuccessful, both parties suffer considerable losses. The carrier’s losses continue in such circumstances, since it is then required to expend the resources necessary to go back to the drawing board to create a replacement excursion. Therefore, there is a true sharing of the profits and losses inherent in this relationship.

For a variety of reasons, cruise lines also structure these relationships in order to retain considerable amounts of control over the operation of the excursion. This is typically done in a number of ways. Cruise lines set the selling price, retaining the sole discretion of offer and provide passenger refunds, establish start and finish times, set staff appearance guidelines, set driver requirements, establish the types of policies and procedures tour operators must have in place (preventive maintenance programs, emergency plans and procedures).

More importantly, cruise lines maintain the “right of control” the tour operator’s operations. This includes retaining the authority to inspect, supervise and monitor all aspects of the tour operator’s operations. This includes but is not limited to review of maintenance facilities and programs, tour operator emergency situation plans, and training of employees. Cruise lines also maintain the “right of control” as they have the ability to request changes and modifications to the excursions, and the ability to refuse to allow certain personnel or employees to participate in the provision of tours to its passengers. Absent the tour operator’s compliance with the cruise lines requests, the cruise line has the ability to suspend or terminate business.

Cruise lines maintain consider control over their tour operator partners. It is therefore important to establish and show the day-to-day relationship and operation of the parties and not rely on self-serving statements in the cruise line generated documents .

Direct Negligence

Although passenger tickets and other shipboard documents seek to disclaim the carrier’s liability for injuries occurring during shore excursions, 46 U.S.C. §30509 invalidates any contractual provision seeking to insulate a cruise line from liability for its own negligence on voyages which touch a U.S. port. As a result, many shore excursion cases focus on the direct negligence of the carrier as a means of circumventing such contractual waivers. Although earlier were generally limited to the carrier’s duty to warn its passengers of latent dangers, more recent cases have attacked the cruise lines failure to properly screen, select, monitor and supervise its tour operator partners.

Since the earlier forum selection clauses did not mandate filing in federal court, the first group of excursion decisions came from the Florida state courts. In an often cited 1985 opinion, Florida’s Third District Court of Appeal, whose jurisdiction includes Miami, recognized a duty to warn passengers of “dangers known to the carrier in places where the passenger is invited to, or may reasonably be expected to visit.” Accordingly, the court upheld a claim based upon the failure warn passengers of criminal activity in a high crime area of Nassau where the passengers had been directed by the ship’s crew.

More recent cases coming out of Florida’s federal district courts have taken a somewhat inconsistent approach to failure to warn claims. At one extreme is the decision in Isbell v. Carnival Corp., in which a passenger brought suit for injuries sustained as a result of being bitten by a poisonous snake during the course of a Jungle River excursion in Belize. The court granted the cruise lines’ motion for summary judgment on the grounds that the danger was open and obvious even though the passenger had asked the cruise director whether they would encounter any snakes in response to which he replied “any 90 year old woman could safely enjoy the excursion.” Other decisions have also held carriers immune from liability arising from dune buggy crashes and falls on uneven terrain while hiking on glaciers utilizing similar rationales.

Several cases have also held that the carriers duty to warn is limited to specific dangers in specific locations. Accordingly, in Koens v. Royal Caribbean Cruises Ltd., the court held that it was not enough for a passenger, who was robbed during the course of an excursion in Nassau to show that the carrier had knowledge of high crime in the city. Instead, the passenger was required to show that the cruise line had knowledge of excessive criminal activity in the specific area of the city where the robbery took place.

On the other hand, a number of cases have taken a much more expansive view of the carrier’s duty to warn. In Fojtaske v. NCL (Bahamas) Ltd., the court upheld a claim by a passenger for failing to warn it of the dangers of a ship sponsored zip-lining excursion in Costa Rica. Similarly, in Belik v. Carlson Travel Group, the court denied the carrier’s motion to dismiss a claim brought by a passenger who had allegedly been encouraged to jump into shallow water adjacent to a Señor Frogs Restaurant, which was hosting an unlimited drinking party.

A significant factor in the failure to warn cases is whether the passenger was participating in an excursion operated by the cruise line as opposed to a truly independent and unrelated third party. Where the excursion is sold by the carrier, the courts have been more likely to impose the duty upon it to warn of hazards, which otherwise might be considered open and obvious. For example, in Haese v. Celebrity Cruises, Inc. the court denied the carrier’s motion to dismiss the passenger’s complaint seeking recovery for catastrophic injuries occurring while participating in a parasailing excursion sold by the cruise line, while in Joseph v. Carnival Corp., it was held that there was no duty to warn of the dangers while participating in a parasailing activity which the passenger had purchased itself during the course of an excursion.

Although carriers often rely on the failure to warn cases to argue that their only duty is to warn the passenger of dangers of which they had notice, the duty to warn is only one aspect of its legal duty. The cruise line also has the duty to exercise reasonable care for its passenger’s safety in the first instance. Accordingly, recent cases have also recognized that carriers may be negligent for failing to comply with other legal obligations. Some of these cases have been based upon the failure to properly recruit and/or screen tour operators, especially where they have utilized sub-standard or defective equipment or in competent personnel.

Other legal duties have been recognized by virtue of the carrier’s retention of significant aspects of control over the excursion. Generally, cruise lines require their tour operator partners to comply with extensive rules and regulations, which are normally set forth in a voluminous tour operators manual. Although each company’s manual varies, they typically contain numerous directives relating to the selection and training of personnel, the manner in which excursions are operated and the use and maintenance of equipment. Accordingly, a number of cases have successfully asserted that the carrier was directly negligent for failing to live up to these obligations.

Misleading Advertising and Misrepresentation Claims

Some attorneys have attempted to assert causes of action based upon misleading advertising under either the common law or Florida statutes. Generally, however, these efforts have not been very successful.

In considering motions to dismiss such claims, a number of courts have applied Rule 9 (b)’s heightened pleading requirements, which require a party alleging fraud or mistake to “state with particularity the circumstances constituting fraud or mistake.” Based upon existing Eleventh Circuit precedent, some district courts have held that this standard further requires the plaintiff to set forth the time and place of each reported misrepresentation.

Other cases have further raised the pleading bar by requiring the plaintiff to plead facts establishing each of the elements of common law fraud in the inducement as well as the carrier’s knowledge of the specific danger and the manner in which the excursion was unsafe.

Even where the Plaintiff has alleged sufficient facts to support a cause of action for misleading advertising or misrepresentation, some cases have held that such causes of action are essentially contractual in nature and therefore do not allow the recovery of non-economic damages.

Cases asserting statutory violations have even been less successful. Claims brought under Florida’s Unfair and Deceptive Trade Act have been side-tracked by the provision of the statute which exempts personal injury and wrongful death claims from its operation.

Apparent Agency

A number of cases have taken the same overly formalistic interpretation of the pleading requirements necessary to sustain claims based upon apparent agency as they have with those based upon joint venture. These cases have required the plaintiff to plead facts supporting each of the three elements normally required to establish such claims: (1) representations by the principle that the agent is authorized to act on its behalf, (2) a reasonable belief of the existence of such an agency relationship and (3) reasonable reliance on such belief to the plaintiff’s detriment.

Although other decisions have only required the Plaintiff to comply with Rule 8’s notice pleading provisions, the practice has developed in the Southern District to create extensive pleadings quoting from voluminous publicity brochures, web pages and other documents prepared by the cruise lines. While these complaints tend to resemble War and Peace rather than the notice pleadings envisioned by Rule 8, they generally avoid dismissal.

In an effort to attack apparent agency claims at the pleading stage, carriers will often argue that their tickets of passage, which typically include clauses indicating that shoreside excursion operators are independent contractors, make it impossible for the passenger to establish the element of reasonable reliance. In the Eleventh Circuit there is also authority to support argument that the defendant may refer to documents outside of the pleadings in support of a motion to dismiss, where the document is referred to in the complaint and central to the Plaintiff’s claim.

Therefore, from a strategic standpoint, it is a good idea not to attach a copy of the ticket to the complaint, nor to even refer to it, unless it is absolutely necessary in order to avoid such attacks.

Actual Agency

In order to establish a claim based upon actual agency, the passenger must set forth sufficient allegations to establish the following elements: (1) acknowledgment by the principal (carrier) that the agent (tour operator) will act for it, (2) the agent’s acceptance of the undertaking and (3) the principal’s control over the actions of the agent. As with other types of claims, the degree of specificity required at the pleading stage varies dramatically from judge to judge.

The evidence necessary to establish control in this context is essentially the same as with the joint venture claim discussed above.

The decision not to attach a copy of the ticket is important in establishing claims based upon actual, as well as apparent agency. As with apparent agency claims, carriers often utilize the ticket language to attack claims of actual agency at the pleading stage as well. Therefore, the decision not to attach the ticket and to further avoid any reference to it in the complaint, if possible, will avoid such challenges.

Third Party Beneficiary Claims

Another theory of recovery sometimes asserted in shore excursion cases is the third party beneficiary claim. In these claims, it is generally argued that the passenger is a third party beneficiary of the contract between the cruise line and shore excursion operator. In order to assert such a claim against the cruise line, however, it is important to remember that one must allege that the carrier (and not the tour excursion operator) breached the agreement. Accordingly, such claims have generally focused upon the carrier’s obligation to initially screen the tour operator and thereafter monitor, supervise or audit its performance.

As with the other basis of recovery, some cases have taken an overly technical view of the required pleadings and held that the passenger must set forth specific factual allegations establishing the intent of the carrier and operator to benefit the passenger through the contract. Other cases, however, have concluded that while a specific intent to benefit the third party is a critical element of the claim that Federal Rule of Procedure 9(b) only requires intent to be alleged generally.

One of the problems with such claims, however, is that it is obviously necessary to plead the existence of the contract between the tour operator and the cruise line. Since these contracts typically contain a self-serving disclaimer regarding the relationship between the two, the pleading of the third party beneficiary claim opens the door to allowing the cruise line to argue the terms of the contract in support of its motion to dismiss. Accordingly, the better practice is often to forgo such claims.

Ticket Disclaimers, Waivers and Exculpatory Clauses

As discussed above, cruise lines and their excursion partners typically utilize a variety of ticket disclaimers, waivers and contract provisions to evade responsibility for injuries occurring during excursions. Even where it is possible to avoid having to overcome such provisions at the pleading stage, they will generally arise like the proverbial phoenix later on when it comes time for the filing of summary judgment motions.

Typically these provisions will take a number of different forms. The passenger ticket will invariably contain a clause describing shoreside excursion operators (as well as ship’s medical personnel and concessionaires) as independent contractors. The contract between the carrier and the excursion operator will also contain similar self-serving language. In addition both the cruise line and the excursion operator will also generally require the passenger to sign a liability release or waiver in order to participate in the activity.

One of the most effective ways to avoid getting trapped by the independent contractor language in the ticket and tour operator contract is to avoid focusing your claims on either document. Instead, it is important to look to the actual relationship between the carrier and shoreside excursion operator, which is typically established by both a series of documents as well as an established course of dealing.

For example, in addition to the tour operator contract, the carrier will also publish a detailed tour excursion manual, which establishes various duties, guidelines, policies and procedures governing it’s relationship with the shoreside excursion operator. This document generally invests the carrier with considerable control over the operation of the excursion and helps define the actual nature of the relationship. As part of its IMO mandated safety management system, the carrier will also typically have a number of other rules, regulations and guidelines applicable to the operation of shoreside excursions, which will also help fill out the nature of this relationship. Over time, a course of dealing may also develop that is based upon industry practice, tradition or routine, rather than written documentation. Therefore, it is important to look to the full spectrum of the relationship and to all of the documents, practices and other sources, which impact upon it.

Where the excursion involves more than a minimal nature of risk, it is likely that the passenger will be required to sign a liability waiver or release in order to participate in it. The legal issues involving the validity of such documents differ between the carrier and the excursion operator. As noted earlier, the courts have refused to enforce such agreements in favor of the cruise line by virtue of 46 U.S.C. §30509, which prohibits a carrier from attempting to limit liability for injuries caused by it’s negligence in voyages which touch upon a U.S. port. Although the statutory prohibition also includes the negligence of the carriers “agents” so far there are no reported cases construing whether it applies equally to a shoreside tour operator.

In the event that 46 U.S.C. §30509 is found not to apply to a shoreside excursion operator, the validity of the waiver would likely be determined by the law designated in passage contract. If the passage contract does not contain a choice of law provisions then the law of the forum will be determinative.

Limitation of Liability

Although the scope and operation of the Limitation of Liability Act is beyond the parameters of this article, it should be kept in mind that most cases considering the issue have found it to be applicable to injuries occurring from the operation of recreational “vessels,” such as jet skis, parasailing boats and the like. Therefore, it is possible that this is an issue which may be faced in some excursion cases. Where applicable, however, limitation only applies to the vessel owner or bareboat charterer, which would generally preclude the carrier from taking advantage of it in those circumstances where the excursion is operated by a local shoreside entity.

Applicable Law

The applicable law governing an excursion case is often an important issue. For example, the damages recoverable for a non-wage earning decedent will vary dramatically depending upon whether the Death on the High Seas Act or the forum state’s wrongful death act will be applicable. If the case is governed by DOHSA, the decedent’s beneficiaries will be limited to their pecuniary losses, while under most state wrongful death acts they are entitled to seek much more substantial non-economic damages. Therefore, the applicability of maritime law, the forum state’s law or even the law of the location where the incident occurred may be a significant issue in excursion cases.

A court must have admiralty jurisdiction before general maritime law will apply to a cause of action. Admiralty jurisdiction is established when (1) the tort occurred “on or over navigable waters” or the injury on land was “caused by a vessel on navigable waters;” and (2) the activity has a maritime nexus. A party seeking to invoke federal admiralty jurisdiction must satisfy both conditions, location and marine nexus.

Alternatively, the Admiralty Extension Act can be used to establish admiralty jurisdiction. This Act provides that admiralty jurisdiction “shall extend to and include all cases of damage or injury, to person or property caused by a vessel on navigable water, notwithstanding that such damage or injury to be done or consummated on land.”

Courts have taken an expansive view of admiralty jurisdiction and stated that in modern maritime commerce “the shore is now an artificial place to draw a line. In Doe v. Celebrity Cruises, Inc., the Eleventh Circuit Court of Appeal’s seminal opinion on the subject, the court found that admiralty jurisdiction applied to a shore side incident where a passenger claimed she was raped by her shipboard waiter in a local park in Bermuda. The court held that the location prong of admiralty jurisdiction was satisfied because scheduled stops at a port-of-call are an integral part of the ongoing cruise. The court reasoned that the passenger was “no less a cruise passenger the moment she stepped off the ship at the port-of-call than she was the moment before she stepped off.”

Based upon the decision in Doe, courts have routinely found that admiralty jurisdiction and law applies for injuries occurring during shore excursions. However, just because an incident happens during a shore excursion does not automatically mean that maritime law will apply. In each case the location and maritime nexus requirements must be met. Therefore each case must be analyzed on a case by case basis.

Notwithstanding the finding of maritime jurisdiction, a cruise line may assert a choice of law provision in their ticket contracts designating some law other than general maritime law as the governing law to be applied. If, however, there is a dispute as to which law applies, courts will apply the admiralty choice of law analysis in determining whether general maritime law or some other state or foreign law applies. The Supreme Court has set out a non-exhaustive list of factors to be considered when determining which law to apply in admiralty tort cases. These factors include (1) place of the wrongful act, (2) the flag of the vessel, (3) domicile of the injured party, (4) domicile or allegiance of the ship owner, (5) the place of the contract, (6) accessibility of a foreign forum, (7) law of the forum, and (8) shipowner’s base of operation.

Even where a matter is governed by general maritime law, claims can be supplemented by state wrongful death statute and survival statutes. In Yamaha Motor Corporation, U.S.A. v. Calhoun, the Court held that the exercise of admiralty jurisdiction does not result in the automatic displacement of state law. In Calhoun, state remedies were applied to supplement liability and damages claims in wrongful death cases in which no federal statute specifies the appropriate relief and the decedent was not a seaman, longshoreman worker, or person otherwise engaged in maritime trade. State law will also supplement personal injury claims which occurs in state territorial waters.

Conclusion

Although they typically retain between half and two-thirds of the price paid by their passengers for shoreside excursions sold on their ships and web sites, the cruise lines seek to avoid their responsibility for injuries occurring during these activities by using self-serving ticket and contract language to distort the true nature of their relationships with their tour operators. In order to educate both judges and juries, it is therefore necessary to show the critical importance of such excursions to the cruise “experience” marketed by the carriers and the true nature of their relationship with those they have selected to carry out this integral portion of their central business plan. Because the defense will typically present a narrow view limited to the self-serving language inserted into the contract documents, the successful presentation of such claims by the plaintiff requires providing the broader context necessary to explain both the importance of these activities to the carrier’s core business as well as its overriding control over their operation.