University of Cebu - Banilad Campus

College of Business and Accountancy

S.Y. 2019 – 2020 | 1st Semester

Royal Caribbean Cruises Ltd.: Addressing Service Risks and Lawsuits

(A Case Study)

In partial fulfillment of the Midterm Requirement in BA 328

(Operations Management and Total Quality Management)

Submitted by:
Compra, Donna Rose
Branzuela, Tshina Jill
Mantuhac, Anthony
Cajes, Dave Israel
Enovero, Andrea

Submitted to:
Ms. Liezyl A. Kuhail, MBA
 Abstract

The proponents of this study aim to focus on the recent lawsuit cases filed against Royal Caribbean
Cruises Ltd., an internationally-renowned cruise line. Royal Caribbean was established in 1968 by Arne
Wilhelmsen and Edwin Stephan merging three (3) Norwegian shipping lines to create a new shipping line
offering luxury cruise services around the Caribbean and now has expanded all throughout Europe and
the Pacific. They have come a long way from just three (3) ships in the 1970s to a total of twenty-six (26)
ships at present. Despite their success, Royal Caribbean Cruises Ltd., has faced numerous lawsuits
through the years ranging from environmental issues to physical injury and personal damage cases. All of
which have branded the company as one with a “criminal culture”. The aforementioned lawsuit cases
includes the following: (a.) an 18-month old child, Chloe Wiegand, fell off an open window on the kids’
play area of one of the company’s cruise ships; (b.) a trampoline accident due to an improperly fastened
harness which the victim, Casey Holladay, has suffered serious injuries from: and (c.) a faulty catheter
insertion which left the guest, Lewis Masotti, disabled for life. Upon careful consideration of the
information gathered, this generalization is hereby derived: safety, security, and health measures play
pivotal roles in the rendering of quality services in every business. Furthermore, the proponents have
come up with the following general recommendations to address the issues presented: (a.) proper
enforcement and application of safety, security, and health measures are a top priority; and (b.)
prevention, mitigation, and addressing risks of lawsuits have to be considered. Thus, businesses especially
those in the service industry like Royal Caribbean Cruises Ltd. need to consider said factors in order to
improve service quality and better business performance.
Introduction

One of the most important, yet sometimes overlooked, aspects of every business especially large
corporations is the potential risks and liabilities such businesses may face in their operations. These risks
and liabilities, with lack of proper mitigation, more often than not entail lawsuits from aggrieved parties
which are never beneficial to the business. Such an issue costs money, time, and can even be a red flag for
the end of some businesses and corporations. According to a survey conducted by the United States
Chamber of Commerce, businesses pay approximately $105.4 billion in lawsuits every year (2010). The
proponents of this study aim to focus on a specific lawsuit case that Royal Caribbean Cruises Ltd., is
currently facing in order to provide possible recommendations in order to address said issue.

Royal Caribbean Cruises Ltd. (RCCL) traces its beginnings back in 1968 before becoming
today’s best cruise line based on data from consumer reviews, like J.D. Power Cruise Line Satisfaction
Report and U.S. News and Cruise Critic (2019). Arne Wilhelmsen and Edwin Stephan, the founders of
the company, came upon the idea of joining three successful Norwegian shipping lines to build a new
cruise-liner business from scratch, thus, a springboard for the birth of the Royal Caribbean Cruise Lines.
The company’s first cruise ship, the Song of Norway, was one of the world’s first major cruise ships
which first set sailed in November 1970, officially launching Royal Caribbean (www.usatoday.com). It
was the first cruise ship who introduced glass-walled dining rooms, expansive sun decks in the middle of
the ship, and their signature Viking Crown Lounge, inspired from the revolving restaurant atop the Space
Needle in Seattle, a design which would set the vessel uniquely recognizable from other ships. They built
and operated three ships cruising throughout the Caribbean namely, the Song of Norway, the Nordic
Prince, and the Sun Viking (www.royalcaribbean.com.uk). Being the first line to design ships specifically
for warm waters cruising year-round was a major competitive advantage over other cruise lines who only
offered cruise to the Caribbean for limited months only.

Royal Caribbean focused on establishing its own brand through concentrating high quality for all
its cruises and on generating market demand. In order to meet said demands, the company’s ships
underwent a process called ship stretching which involved cutting a ship in two and adding midsections
to increase passenger capacity (www.referenceforbusiness.com). In 1992, the company went public,
offering 11.5 million shares of common stock on the New York Stock Exchange which lowered its debt-
to-capital ratio from 75% to 45% and a 28% increase in net income in just a span of two years after going
public. Currently, Royal Caribbean Cruises Ltd. has six companies under its name which includes the
following: (a.) Royal Caribbean International (1969); (b.) Silversea Cruises (1994); (c.) Celebrity Cruises
(1997); (d.) Pullmantur (2006); (e.) Azamara (2007); and (f.) Tui Cruises (2009). Each cruise line has
destinations catering all seven continents of the world, thus, making it a renowned international brand
employing around 65,000 people from over 120 countries serving more than 50 million guests for almost
50 years (www.royalcaribbean.com.au). The company debuted countless “firsts” in the industry such as
bungee jumpin, rock climbing, ice skating, and surfing at cruise ships. They look forward to extending
their warm hospitality and delivering extraordinary experiences to every guest.

Despite the success of Royal Caribbean Cruises Ltd. in the hospitality industry, the company has
faced recurring lawsuits from its guests and environmental organizations ranging from personal injury
cases to criminal offenses. Unfortunately, this has branded the company as having a “culture of crime”.
The proponents of this study aim to focus on the recent lawsuits filed against the company due to
accidents and medical malpractices that have occurred on the cruise ships owned by Royal Caribbean
Cruises Ltd. Further details and information on the said cases will be thoroughly discussed in the
following pages. In order to provide a more stable framework for this study, here are some other lawsuits
that the company has faced through the years and how they were able to address them:

1. 1997-1999: Royal Caribbean pleads guilty to 9 counts (1997) and 21 counts (1999) of polluting
and agrees to pay a total of $27 million fine. The company admitted, despite denying guilt in the
first claim, to routinely dumping oil and hazardous chemicals from nine ships in coastal waters
around the United States. Negative publicity has also dawned on the company as environmental
organizations like Oceana, made various propaganda against them. Due to this, the company
began installing new advanced waste water treatment plants as well as atmospheric and maritime
laboratories on its ships to address said polluting issue.

2. July 31, 2016: Richard Puchalski died of a heart attack during an Alaskan cruise with his family
to celebrate his 70th birthday. Even though this might seem as a natural cause of death to some
considering his age and health condition, the Puchalski family’s lawyers successfully argued that
the cruise ship’s doctor, Dr. Amanda Saunders, made several medical malpractice that turned a
serious cardiac incident into a fatal heart attack. The lawsuit presented that Mr. Puchalski went to
the cruise ship’s, Explorer of the Seas, infirmary with shortness of breath. Dr. Saunders detected a
septal infarction and gave him medicine and sent him back to his room. After a half hour later, he
collapsed in his room and there was a significant delay before he was transferred to a hospital
ashore. They argued that she should have contacted the family, kept him in the infirmary for more
testing or sent him to a hospital on shore immediately. The court ruled that the company is guilty
of negligence and must pay Puchalski’s estate $3,384,073.22.
Presentation

I. TODDLER ACCIDENT

VICTIM AGE INCIDENT DATE

CHLOE WEIGAND Fell to death from an open window on

18Months July 7, 2019
(Female) a Royal Caribbean Cruise ship.

On July 7, 2019, a toddler named Chloe Wiegand fell from an open window on a cruise ship
docked in Puerto Rico. The 18-month old Chloe reportedly slipped from the hands of her
grandfather, Salvatore “Sam” Anello, as he held the toddler on an 11th-floor window lining a
child’s play area of the ship. The said victim fell from 45 meters or 150 feet on the concrete dock
below. Her parents, Kimberley and Alan Wiegand revealed that the family will be taking Royal
Caribbean Cruise Ltd., to court for “not having a safer situation on the 11th floor of the said cruise
ship” (www.foxnews.com). The family is pinning the blame on Royal Caribbean and questioned
why a single window was open in a child’s play area. The family’s lawyer, Michael Winkleman,
said that the child asked her grandfather to lift her up to bang on the “wall of windows”, as the
child said, that lined the area, which Mr. Anello thought to be closed just like every other window
in the area. They questioned the fact that if the crew already knew about the said danger, why is
there no warning signs or notice on the vicinity. An earlier investigation by Mr. Winkleman
revealed that said windows were not in accordance to applicable safety codes designed precisely
to protect children from falling out of windows (www.news.com.au). The answer lies in security
footage which could play as key piece to the puzzle that would answer the questions on what
actually happened on the night of the horrific accident. Such CCTV footage has not yet been
shared by the company despite repeated requests from the aggrieved party.
II. TRAMPOLINE ACCIDENT
VICTIM AGE INCIDENT DATE
Disconnected harness on a bungee
Casey Holladay (Male) 26 Yrs Old February 2019
trampoline

Mr. Casey Holladay is suing Royal Caribbean Cruise Ltd., after falling off its Mariner of
the Seas cruise ship’s “Sky Pad”, a bungee trampoline activity. He was on a weekend cruise to
the Bahamas in February when he plunged to the ship’s deck after the harness he was fastened to
got disconnected while he was 20 feet in the air, according to the lawsuit filed in US District
court in Miami (www.usatoday.com). The lawsuit states that the activity was located on the 13th
deck of the ship, which has a hard surface with no padding or safety nets surrounding it. Holladay
became disabled, he has plates and screws in his pelvic are, and has suffered severe orthopedic
injuries which requires lifetime treatment and medication. Holladay’s attorney, Brett Rickind,
commented that Holladay is seeking $10 million in compensatory and punitive damages.

III. FAULTY CATHETER INSERTION AND SHODDY MEDICAL CARE

VICTIM AGE CAUSE DATE

Faulty catheter inserted wrongly in

Lewis Masotti (Male) 85 yrs. old May 21, 2018
urethra

Mr. Lewis boarded the Royal Caribbean with his wife Judith the week of May 21, 2018.
He boarded the ship with a catheter and a urinary drainage bag, which he’d been using for five
months. Lewis was having trouble reinserting the catheter while on the cruise, so he followed his
primary doctor’s advice and went to the ship’s medical staff for help. Thus, the doctor inserted
the catheter and, according to Judith, immediately drew only blood, which had never happened
before. As the couple went back to their suite, they were shocked when they saw the back full of
blood which it never happened before. By noon, Lewis was shaking and a steward ran unto him
to help. He was rushed to the medical bay and found out with the CT scan that the inserted
catheter didn’t reach the bladder but puncture his urethra instead, causing the blood to flow. The
Masottis sent the company a pre-suit demand for $750,000 which the company did not respond to
as the litigation is still pending. The Massottis are now suing Royal Caribbean for negligence
(www.miaminewtimes.com).
Outcomes

Taking into consideration the information presented in the previous pages, the proponents have
come up with the following recommendations to address the legal, safety, and security issues of Royal
Caribbean Cruises Ltd., and to a certain extent, other businesses of a similar industry in general:

A. Proper enforcement and application of safety, security, and health measures is a top priority

 Increased presence and number of security personnel in every major areas of the ship

Although often taken for granted, security personnel are actually one of the most
important members of a service company, especially in the hospitality industry as the lives of
every single person on board are laid on their hands. Their increased presence in major areas of
the premises is highly important to prevent, minimize, and address potential accidents and
disputes as they occur. Increasing duty hours is not an option. Employing more competent
employees may entail additional expenses but such may minimize the occurrence of potential
accidents, the happening of which may cost the company a lot more money than a personnel’s
annual salary. It is better to spend additional money on necessary expenses for the betterment of
the company’s service quality than risk spending more on lawsuits that could have been
prevented in the first place.

 Regularity and industry of ship facilities inspection

According to Cruise Lines International Association (CLIA), cruise ships have

approximately sixty (60) safety, environmental, and health inspections each year
(www.landrykling.com). Such inspections, when done by the company’s own staff may tend to
be fuelled by bias or sometimes overlooked. There is a need for an honest and thorough
inspection, both from external and internal assessors, on every facility of the ships ranging from
engines, navigation equipment, fixtures, and every single facility there is especially those that
have the highest risk for accidents like glass walls and harnesses.

 Install better safety equipment and fixtures especially in potentially high-risk areas

Safety inspections will never suffice a company’s need to improve quality service if there
is no active response on the result of said inspections. Every business should always act upon
every issue, be it minor or not, with proper diligence taking into consideration the possible ways
on how to minimize or solve problems especially those relating to technical issues. In one of the
cases presented, a window was left open in a kids’ area which became one of the causes of a poor
 child’s untimely death. In order to prevent similar cases like this from happening, safer choices in
fixtures putting greater safety measures in areas where kids spend a lot of time at should be
considered. Windows in these areas should preferably be shut at all times or childproofed as
much as possible. Said fixture may also be changed to a regular fiber glass wall instead of a
window that can be opened anytime. Sturdier safety equipment such as more stable harnesses has
to be installed especially on various recreational facilities like bungee jumping and parasailing
among others. All of these measures are directed towards limiting the risk of history repeating
itself.

 Always adhere and even surpass safety and security standards of authorities

In 2010, the U.S. government passed the Cruise Vessel Security and Safety Act which
put in place several new safety protocols and crime reporting requirements
(www.landrykling.com) . This law requires cruise ships to report all on board crimes so they
wouldn’t go unnoticed due to the lack of proper jurisdiction in international waters. Other
addendums to security measures include minimum railing heights, access control, closed circuit
TV, medical preparedness, crime allegation reporting and crew training. The company has
claimed in its website that it has adhered to and even went above and beyond said standards to
achieve optimum quality service (www.royalcaribbean.com). However, the cases that the
proponents of this study have presented, may manifest the irregularity and inconsistency of the
company to live up to what they claim. This is a manifestation of issues as to when business
models and service models often are in conflict when a company’s goals and its customers’ needs
and wants are not aligned with that of the actual service rendered. It is highly important for every
business, to strictly adhere to the official standards set by authorities in the industry as to which
one’s business is associated with. Aligning these with one’s goals, customer preferences, and
service quality will play a very pivotal role towards the betterment of one’s business.

 Health and medical practices have to be done with due diligence

Alongside the security and safety of customers, comes the need for a more diligent health
and medical practice. The necessities of the guests and customers in terms of health care and
issues while on board, regardless of how simple or serious they can be has to be fully attended to
by competent and ethical doctors and medical practitioners. Both basic and advanced, for more
serious issues, medical tools, equipment, and facilities have to be present in the ship’s infirmary.
First aid kits have to be included in every guest’s and crew’s cabin as well. Medical check-ups for
guests with certain medical conditions have to be performed before, during, and after sailing.
(B.) Prevent, mitigate, and address the risks of facing lawsuits through the following measures:

 Observe due diligence in contracts and other engagements

Any business agreement should be incorporated in writing and witnessed by an attorney. Be it

in the form of employee job contracts, waiver of liabilities and the likes, every business should take
into account such methods to mitigate and prevent further litigation. In this case, prior to selling
cruise line tickets to their customers, a contract presenting the terms and conditions of said
undertaking specifically those pertaining to the potential risks on board should be provided to
customers for their own awareness knowing the extent of the liability that the company should be
held for in cases of accidents and other unfortunate events.

 All business undertakings have to be grounded on ethics and morality

The ultimate protection against corporate lawsuit is ethics and morality. When a business and
its entirety is founded on integrity and values, one should not worry of facing lawsuits as one need
not feel guilty of something he or she did not do in the first place. As presented in the first few pages
of this study, Royal Caribbean Cruise Ltd., in its past lawsuits have been branded as a company with
a “criminal culture”. Even though this has not lowered the company’s profit through the years, it has
casted a negative image on the company which is a potential threat to its relations to the public. It is
important for the company to observe proper ethical standards in its operations in order to avoid
getting sued by customers and worst, the government.

 Keep records and ensure its accessibility

Every business should develop a system of record-keeping, not just in the financial aspect but
in this case, closed-circuit television (CCTV) records as well. Since the issue involves an accident in
the premises of the company’s ship, a copy of the CCTV video is essential to be assessed for further
evidence as to who really is at fault taking into consideration that the record is pure, raw, and free of
tampering. Make such record accessible to any person who demands it limited only to the aggrieved
party, their lawyers, and the court. In general, any form of record, be it in paper or digital format, can
protect a business in case of disputed issues.
  Always try to avoid litigations as much as possible

Lawsuits are both costly and time-consuming which may adversely affect one’s business
operations (www.forbes.com). It is important to note that litigations should be the last resort in every
case. Always find legal and appropriate ways to settle disputes without the need for litigation such as
reaching out to the aggrieved party and conversing with them in order to hopefully arrive at an
agreement that would be beneficial to both parties as much as possible. In this case, Royal Caribbean
has, just like all of their other cases, refused to comment on any pending litigation. Various victims
have claimed that they reached out to the company prior to filing their cases; however, the company
denied them a reply. Royal Caribbean have always had the tendency to await court decisions without
taking into consideration better ways of minimizing company expenses and effort.

Conclusions

In doing business, no matter how small or widely-renowned, accidents are expected to happen
with the ever-present factor of uncertainty and inevitability. The overall welfare of the customers should
be the highest priority as they are also one of the lifeblood of the business. Alongside the inevitability of
accidents also entails with it the possibility of lawsuits filed against a company, which in this case is
Royal Caribbean Cruises Ltd.,. Upon thorough consideration of the data gathered, the proponents have
come up with the following conclusions: (a) proper enforcement and application of safety, security, and
health measures are a top priority which includes (a.i) increased presence and number of security
personnel, (a.ii) regularity and industry of facility inspections, (a.iii) installment of better safety
equipment and fixtures, (a.iv) consistent adherence to safety and security standards, and (a.v) health and
medical practices have to be done with due diligence; and (b.) prevention, mitigation, and addressing the
risks of lawsuits that include (b.i) diligence in contracts and agreements, (b.ii) ethics and morality, (b.iii)
record-keeping and its accessibility, and (b.iv.) always try to avoid litigations. Thus, overall security,
safety, and health measures have to be observed in every service undertaking, all of which are essential
towards service quality improvements and eventually, better business performance.
References

Introduction

Royal Caribbean Cruises Ltd.,.(August 12, 2019). Our Company, Our History. Retrieved from

https://www.royalcaribbean.com/ourCompany/ourHistory.do?wuc=PHL.

Reference for Business.(August 12, 2019). Royal Caribbean Cruises Ltd.,. Retrieved from

https://www.referenceforbusiness.com/history/Ro-Sh/Royal-Caribbean-Cruises-Ltd.html.

USA Today (August 12, 2019). Royal Caribbean Cruises History. Retrieved from

https://traveltips.usatoday.com/royal-caribbean-cruises-history-22079.html.

Data Presentation

Puhak, J. (July 23, 2019). Parents of Chloe Wiegand, toddler who fell from Royal Caribbean window,

suing cruise line. Retrieved from https://www.foxnews.com/travel/parents-chloe-wiegand-suing-

royal-caribbean.amp.

Ceballos, J. (June 21, 2019). Faulty Catheter Insertion on Royal Caribbean Cruise Leaves Passenger

Disabled. Retrieved from https://www.miaminewtimes.com/news/couple-files-negligence-

lawsuit-against-royal-caribbean-after-faulty-procedure-by-doctor-11199470.

Moniuszko, S.M. (April 10, 2019). A man is suing Royal Caribbean for after he says he fell off the ship’s

trampoline. Retrieved from https://www.amp.usatoday.com/amp/3221856002.

News.com.au (August 12, 2019). Chloe Wiegand: Family blames Royal Caribbean for little girl’s tragic

death. Retrieved from https://www.amp.news.com.au/travel/travel-updates/incidents/granddad-

dropped-tragic-tot-from-royal-caribbean-ship-window-he-mistakenly-thought-was-shut/news-
story/f707178b29e2daeed9c456e819f4cfa4.
Outcomes

Interaction Design (August 18, 2019). What is service design?. Retrieved from https://www.interaction-

design.org/literature/topics/service-design.

Rubin, B. (July 14, 2014). You’re Going to Get Sued – Here’s How Not to Get Screwed. Retrieved from

https://www.forbes.com/sites/basharubin/2014/07/14/youre-going-to-get-sued/amp/.

AZBigMedia (August 15, 2019). Business lawsuits:What to know to avoid getting sued. Retrieved from

https://www.azbigmedia.com/business/law/business-lawsuits-what-to-know-to-avoid-getting-
sued.

Landry & Kling Global Cruise Events (August 15, 2019). Cruise Ship Safety Concerns. Retrieved from

https://www.landrykling.com/about-cruising-for-groups-and-events/safety-at-sea-what-you-need-
to-know/.