Exxon Valdez, punitive damages and the environment

Nearly twenty years ago, in the Prince William Sound off the Alaskan coast, the Exxon Valdez super tanker struck a reef and disgorged eleven million US gallons of crude oil into the sea. Eleven million is the generally accepted figure; the Exxon Valdez was carrying 53 million gallons and some believe that far more was spilled.

It was an accident which Exxon did not intend. Later, an American Court held that Exxon had been negligent and ordered it to pay various Alaskans (both individuals and companies) who suffered loss around $507 million to compensate them for the losses that they have suffered. Most of the money was paid by Exxon’s insurers and what was not paid was probably written off the tax, as is the wont with multinationals like Exxon.

As is the way in the United States of America damages often extend beyond the compensatory principle. In virtually every country in Europe when you sue for damages from a piece of negligence the courts adopt almost exclusively a principle that the purpose of damages is to compensate the person who suffered a loss, for that loss, not to punish the wrongdoer for the accident.

It is an odd thing, that a country like the USA which prides itself on self reliance should have adopted punitive damages so enthusiastically.

In the USA courts punitive damages were awarded against Exxon in the amount of $5 billion. That is to say after all the plaintiffs in the case were compensated for the actual losses that they had suffered they were awarded ten times that amount in order to punish Exxon.

That makes no sense to me; it is not possible to fix an amount of money for every wrongful act for which you can sue; some amounts – such as for hurt feelings, distress and so forth have to be awarded on a basis that is not as scientifically calculable as say loss of earnings. Punitive damages transcend all that. They become a nice little earner for the Plaintiffs and their lawyers.

In Exxon case punitive damages reward people in an unmerited way. If Exxon had be so negligent so as to deserve punishment their officers should have been prosecuted under the criminal law and if a financial sanction was thought appropriate Exxon should have been fined.

Obviously Exxon (or their insurers) baulked at the prospect of paying punitive damages of $5 billion and they appealed and as appeals go it wound its tortuous route through various courts until it reached the United States Supreme Court. Last Wednesday that august body decided that $5 billion was stretching things too far and they reduced the punitive damages to the same amount as the actual damages. This means that the average Alaskan Plaintiff who has already got $15,000 will now get another $15,000 instead of $150,000.

If you do business in the USA the existence of punitive damages makes it costly to insure. Although in the UK we are becoming more litigious (and will continue this trend) we should not compensate people beyond the losses that they have suffered in order to punish someone. If someone needs punishment then the criminal law is the place for that.

In the case of the Exxon spillage it seems that the ship’s captain was an alcoholic who downed plenty of vodka on the fateful night and as a result crashed his ship, damaging 1300 miles of coastline and its wildlife.

In the meantime we should remember that the Exxon spill damaged one party that cannot sue – the environment.  The clean up operation cost $1.28 billion, sea otters and sea birds were saved but it is believed that the oil still lies at the ocean bed and is damaging the wild life there.

As for punitive damages – the environment has been punitively damaged, but for the oil we burn to make electricity, to make fuel and to provide us with luxury. It is not surprising that ultimately we will suffer the punishment, no matter who pays the dollars.

2 Responses

  1. […] bookmarks tagged punitive Exxon Valdez, punitive damages and the environment saved by 2 others     evilgerbilish bookmarked on 06/29/08 | […]

  2. DUBAI, United Arab Emirates — In a dramatic escalation of high-seas crime, Somali pirates hijacked a Saudi supertanker loaded with crude oil hundreds of miles off the coast of East Africa — defeating the security web of warships

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