In the case Union Oil Company of California v. Smith, 1918, the Supreme Court ruled in favor of Union Oil Company. The dispute arose when a ship owned by Union Oil collided with another vessel off the coast of California resulting in damages to both ships and their cargo. The owners of the other vessel sued for compensation claiming that negligence on part of Union Oil's crew led to the collision. However, under maritime law at that time, liability was limited based on tonnage or value post-accident rather than pre-accident value as argued by plaintiffs. This meant if a ship sank completely after an accident its owner could not be held liable for any damage because its post-accident value would be zero. The court upheld this interpretation stating it was consistent with international practice and U.S federal statutes which were designed to encourage shipping industry growth without exposing shipowners to excessive risk from potential accidents.

The dissenting opinion in the case of Union Oil Company of California v. Smith argued that the majority's decision to hold a shipowner liable for injuries sustained by a seaman due to negligence was incorrect. The dissent contended that this ruling contradicted longstanding maritime law, which traditionally did not impose such liability on shipowners unless they were found guilty of "unseaworthiness." This term refers to situations where the vessel or its equipment is defective and unfit for its intended purpose, thus causing harm. In contrast, negligence involves careless behavior but does not necessarily mean the ship itself was unsound or unsafe. Therefore, according to this viewpoint, it was unjustified and unprecedented to make an owner responsible for damages caused by mere carelessness rather than unseaworthiness.