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The BP oil spill demonstrates that caps are wrong

2 comments

Transocean it will rely upon a law that makes the owner of a sunken vessel liable only for its value after the accident. Transocean says there was $27 million worth of oil being held on the rig when it exploded so that is the extent of its responsibility. This is a good example of caps at work.

The term "caps" refers to a relatively recent change in the personal responsibility model by providing that regardless of how wrongful or how much harm an activity caused the culpable party would pay no more than the “cap”. This is a departure from the most basic principal of American civil justice: the person or corporation who caused the injury is responsible for the resulting damages.

Historically, personal responsibility has been a bedrock of our judicial system. In olden days if I accidentally poisoned the river and it killed your cow I would owe you for a cow. Similarly, if I killed your entire herd I owed you for the herd. Diluting that rule results in third parties – tax payers or downstream ranchers – paying part of the damages. So if the cap for accidentally poisoning a river is ten cows but your 20‑head herd perishes half of the economic consequence from my activity falls on you or tax payers.

Fishermen, condo owners, seafood houses and marinas are among those who will lose billions of dollars because of the BP spill. Any law that caps the obligation of those responsible shifts the burden to the fishermen and others who had nothing to do with the cause of this disaster. That is wrong.

I note with approval that BP’s chief executive Tony Hayward has said unequivocally that BP will pay the cost of fully compensating all who have been damaged by this tragedy. I would feel more comfortable if that were the law rather than a promise. We should oppose all caps in favor of personal responsibility.

2 Comments

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  1. Mike Bryant says:
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    The question has to be: wrong for who? The person responsible gets to manage the risk, can do cost benefit analysis on human lives , and never have to be held accountable. Sounds like a good deal for them.
    Let’s see if the people responsible here take responsibility. The stories about the permits that they got, should give everyone great concern.

  2. Gerry McGill says:
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    Transocean has filed what is known in maritime law as a Limitation of Liability suit which can only be filed in a Federal Court. Essentially the law, which dates back hundreds of years to the Admiralty Courts of England, states that the owner of a vessel that is involved in a collision or other maritime disaster such as this one can limit it’s liability to the value of the vessel AFTER the disaster plus any pending freight. Fortunately, this is not automatic. The owner must show that they had no advance knowledge of any defect with the vessel or the crew.

    The owners of the Exxon Valdez filed a similar action after that super tanker went aground nearly 20 years ago in Alaska causing the largest oil spill ever, at least up to this time. In that case the limitation was denied. My recollection is that the Court that heard the action denied the limitation on the grounds that the Captain of the vessel was not competent and the owners, Exxon and Mobile Oil should have, and did have advance knowledge of that fact.

    The owner of the Titanic, the White Star Line, also filed a Limitation of Liability case in an American Court after the sinking and limitation was also denied.

    It is too early to know just what caused the current disaster as everyone is pointing fingers at everyone else, but Courts historically do not like limiting liability, especially in high profile cases. My guess at this point is that the limitation will not be granted.