Uninsured Boaters Are Subject to Personal Injury Lawsuits

I was seriously injured aboard a neighbor’s boat last year, and I have talked to an attorney about a personal injury lawsuit. The attorney has advised against pursuing the claim because the boat was not insured and a mortgage has been recorded for almost the full value of the boat. The boat owner, therefore, has no equity in the boat – and since he has no other assets, it appears that we would have no chance to collect on the claim. My attorney suggested that I talk to a maritime attorney before giving up. Are we overlooking anything?

Yes, it does appear that you have overlooked several issues.

First, your attorney needs to familiarize himself or herself with the special rules that are unique to maritime liens and claims. Unlike claims against real property, the priority of one maritime lien over another is not based solely upon the date that the lien is perfected. Instead, maritime liens are classified by the nature of the underlying claim. And maritime torts, such as a personal injury claim, have a higher priority than a mortgage against the boat.

Certain other claims, such as crew wages or salvage, are awarded an even higher priority, while claims for unpaid repairs or mooring fees will generally have a lower priority. The date of the claim will be relevant against other claims of the same rank, but the ranking is principally based upon the classification of the lien.

In the scenario you described, it appears that your personal injury claim and the mortgage are the only claims against the boat. A mortgage on a boat is subordinate to a personal injury claim, and the boat will therefore provide security for the claim.

Another concern in this case is the fact that the boat is uninsured, even though it is encumbered by a mortgage. Commercial lenders always require a boat owner to maintain adequate insurance on the boat, and the insurance company is required to notify the lender if there is a lapse in coverage. A mortgage with no insurance should therefore raise a red flag.

It may be that the lender is a private party who is a friend or relative of the boat owner. Such a scenario may be perfectly legitimate, but it may also be a tip-off to a form of fraud, where the mortgage was recorded solely to protect the owner’s equity from claims by third parties. The law will subordinate such a claim to the legitimate claims of third parties, such as the personal injury claim you described.

Maritime personal injury and maritime lien priority are specialized areas of law with significant differences from their land-law counterparts. An experienced maritime attorney should always be consulted for questions such as this.