60 minutes has a fascinating piece that illustrates many of the problems with the civil justice system today. After the Deepwater Horizon spill in 2010, BP entered into a settlement agreement in which it agreed to pay businesses for losses to that arose following the oil spill. But plaintiffs’ attorneys interpreted that clause to mean that businesses could receive compensation for any kind of losses they suffered after the oil spill, even if those losses were not caused by the spill.
One lawyer’s solitication stated, “The craziest thing about the settlement is that you can be compensated for losses that are unrelated to the spill.”
The claims administrator, who is responsible for ruling on individual claims, agrees with this assessment. He notes that BP’s agreement states that, so long as the claimed losses comport with a pre-determined formula, they are presumed to be caused by the spill. However, as Supreme Court superstar attorney and counsel for BP Ted Olson points out, claimants must also sign a statement under penalty of perjury asserting that they suffered “economic loss due to the spill.”
Some of those interviewed by 60 minutes think that the terms of BP’s contract are unfair, but BP should be held to the terms of their contract. Of course BP argues that those were not the terms it agreed to at all. But others assert that there’s nothing fundamentally wrong with forcing BP to pay for damages that had nothing to do with the oil spill. Attorneys call this the “deep pockets” theory of the law, and we often see it being peddled in the context of products liability lawsuits. For example, it has been argued that one producer of asbestos should have to pay for injuries caused by another company’s asbestos, or that a manufacturer of a brand name pharmaceutical should be liable for injuries caused by the generic version of the drug.
We often participate in these cases to argue that not only is this bad policy, it’s fundamentally unfair. In BP’s case, the company was forced to pay $60,000 to a group of colorectal surgeons located 300 miles from the coast. It was further ordered to pay $8 million to companies that clean up properties after hurricanes after those companies suffered losses because no hurricanes made landfall that year.
There’s no doubt that BP is responsible for a terrible disaster, and it should be held legally and financially liable for losses attributable to the spill. But tort law should not compensate people for harms attributable to wholly different entitites, or worse, good weather.