BP's legal liability round-up

[Kurt_and_Hunter]

Under the law BP is responsible for the full costs of restraining and cleaning up the oil. That is not the same as being responsible for the effects of the oil.

The cost of bad effects of the oil, aka damages, will be partially paid out of the industry trust fund. ($1 billion available.)

For any damages not covered by the trust-fund $1 billion BP's total liability is capped at $75 million. (Which is almost the same as being capped at zero, given the likely scale of damages. If real damages were 10 billion then BP's liability would be capped at 0.75% of damages.)

It appears that under the law BP has reduced financial incentive to clean up the oil in a way that most reduces damages. (If they had to pay for all damages would they be thinking in terms of three-month solutions? Are there more expensive approaches that are faster but wouldn't be cost effective for BP? I don't know, but it's a question worth asking. )

The White House refrain that BP will pay for this spill is fine-print double-talk. They will pay for the spill, but not for the effects of the spill. It's like one of those bank ads with the guy double-talking little kids. "Egg management fee..."

The WH line on this has been politically wrong-headed. If you know that BP will not bear the real costs of the disaster than implying it will pay for everything becomes a time-bomb. It's not like there won't be a zillion stories about people with damages left holding the bag, and about large government expenditures to deal with economic damage.

Given the composition of the SCOTUS, it is close to 100% that changing the liability cap retroactively will be found to be unconstitutional. (The Super Fund example is probably not good precedent. Apples and Oranges. Even a liberal court might well find it to be unconstitutional but we don't have a liberal court so in real application the law is gonna be unconstitutional.)

[katandmoon]

1. K&R BP iis pointing fingers at Transocean. Does the same cap apply to Transocean and Haliburton?

[KansDem]

2. "...BP's total liability is capped at $75 million."

That was when it was strictly a corporation. Now that our Supreme Court, in its infinite wisdom, has made corporations into "people," can the government go after BP as if it were a "person?"

I mean, what would happen if an individual through negligence fouled the Gulf as badly?

[Statistical]

4. If there was a statute that limited a persons liability it would be the same.

Liability can be limited by statute and in this case it is.

There are various statutes in various states that limit liability of individuals for various actions also. Tort reform or malpractice reform are examples of limited liability protection. In some states if you lawfully defend yourself from a criminal you have immunity from financial liability (lawsuits from criminal and/or family). So limited liability isn't exactly a unique concept.

What makes this law so bad is the massive scope of the projection and the tiny (essentially $0.00) share carried by BP.

Doesn't make it right, doesn't make it fair it simply is how it stands.
The giant loophole of this stupid law is glaringly obvious to Congress now. Of course hindsight doesn't do us much good.

[jdlh8894]

3. You might want to check this

http://ifawebnews.com/2010/05/03/report-insurance-will-stem-financial-impact-of-oil-spill-for-bp/

[Kurt_and_Hunter]

5. Since they are self-insured that ends up swapping money between corporate divisions

[Statistical]

6. Unless their "insurance company" goes bankrupt.

Depending on the contracts and applicable laws that may be a way to offload any remaining liability into the shell Jupiter Insurance company and then let it go bankrupt.

"Sorry your claim is with Jupiter not BP". Not saying BP will do that or is planning to do that but I have a feeling their lawyers are already working overtime to look for ways to shed as much of the remaining liability.

[Kurt_and_Hunter]

9. Yes, they would probably do that... if they had any liabilty to evade.

[dixiegrrrrl]

7. Did you write this? If not, do you have a source for it?

[Kurt_and_Hunter]

8. I wrote it as my best current understanding of the overall situation. As for the

various parts...

This NYT article describes the industry trust-fund and liability cap:

http://www.nytimes.com/2010/05/02/us/02liability.html

There are probably a number of threads around DU with other links to articles about liability cap issues.

The political and legal analysis is mine. I think it is politically dangerous to say BP will pay for everything if they won't, and think it highly unlikely that any retroactive change in liability caps will be upheld by the SCOTUS.

But that is no reason to not change the caps for future spills, which I assume will be done.

My suspicion that BP has a financial motive to clean up the spill in the least expensive way, rather than they way that would most mitigate economic damages, is more a question than a statement, but one suggested by the liability cap.

And, as with anything I post, addition and correction is welcome.

[dixiegrrrrl]

11. Today I read in the local paper BP has already given 25 million

to the states of Fla, Ala. Miss and La. as a start in covering costs of oil containment.

And I read the link by jdlh8894 that indicates BP is defining paying for spill
damages in a broader term than what I heard you describe.


That being said, I still don't trust them, they will have to prove they can be responsible.

I believe that THEY are fully aware of the political ramifications of this disaster.

[Kurt_and_Hunter]

12. For PR purposes they may well pay more

The liability we are talking about is down the road -- when businesses that go under (fisheries, hotels, etc.) and people deprived of livelihoods try to sue

I figure they will be super cooperative today, (while the issue is hot and might lead to undesired regulation changes), then drag their feet years later when this stuff is working its way through the courts.

[Kurt_and_Hunter]

10. ...