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Oil, Water and Liability

Why does pouring oil on the sea make it clear and calm? Is it for that the winds, slipping the smooth oil, have no force, nor cause any waves?

Plutarch, Natural Questions, IX

Every now and again lawyers and insurance companies team up to demonstrate that no matter what is going on in the world around them, they can keep their eyes on the ball. And the ball on which they gaze has the fetching name of “Limit Liability.” So favored is this mantra that one might almost think that limiting liability is what makes the world go ‘round.

If you have the misfortune to be standing on a sidewalk on an icy day waiting to cross an intersection and a car sliding on the ice bumps into you, the insurance company’s advice to the driver is to acknowledge no responsibility. Apology from driver to victim is proscribed by the company lest the pedestrian get the idea that the accident was the driver’s fault. Such defensive footwork has fertilized many a lawsuit and has now been demonstrated in connection with the ongoing spewing of oil into the Gulf of Mexico. (Although no one has yet suggested that the tragedy was the fault of residents of the Gulf Coast living on the shore of the Gulf that defense may be raised later in the proceedings.)

As this is written, a great deal is unknown about the oil pouring into the Gulf such as the cause of the explosion and because of whose negligence (if indeed the event was inspired by negligence rather than the insurance companies’ best friend “Act of God”) how much oil is being spewed into the gulf, how great the environmental damage will ultimately be, how and when the spill will be contained, etc. In a brilliant legal maneuver, however, the lawyers and the insurance companies for one of the participants, have concluded that what is needed in the extant sea of uncertainty is certainty. The certainty needed is not that wild life will be miraculously saved by extraordinary methods, but that the fortunes of insurance companies and at least one of the participants in the disaster can be saved.

In a public relations moment that outdoes the Vatican by several nautical miles (viz. the Vatican tried to turn anger against the church over sex abuse to anger against the media for reporting it), Transocean Limited, the company that owned the rig that now rests quietly on the bottom of the ocean, has gone to court to invoke the aid of the Shipowner’s Liability Act of 1851. That Act, it hopes, limits the liability of a company in Transocean’s position. It says that the owner of a vessel is not liable for more than the value of the vessel and “her freight then pending.” According to Transocean, the amount in this case is $26.8 million. How that figure was arrived at is slightly mysterious, as things legal often are. Transocean was quoted in the Associated Press as saying it expects to receive $650 million in insurance money for the loss of the rig. Apparently Transocean can value the rig at $26.5 million for purposes of limiting its liability but $650 million for purposes of collecting from its insurer.

There is a reason Transocean has gone to court. If things keep going as they are, there is no way of knowing how it will all end. Just as there is no way of measuring or preventing billions of dollars of damage to the environment or putting an immediate end to the oil flow, without prompt action by Transocean, it believes there will be an untold number of lawsuits seeking unlimited amounts of money from the company (and its fellow miscreants.) All Transocean and its lawyers are trying to do is introduce a tiny bit of certainty into what is a very uncertain situation. They would be the first to acknowledge that they wish with all their hearts that similar certainty could be inserted into the lives of the millions of other beings that are affected by their negligent conduct. That, sadly, is beyond their power or the powers of the courts. By this very prudent course of action, however, they are fulfilling their obligations to one very important group of people who deserve all the sympathy we have left after considering others Transocean said it “believes this step is necessary to protect the interests of its employees, its shareholders and the company.”

Although that might cause an outsider to wonder about the company’s priorities, I’m confident its concern for the environment and all living things affected by the disaster is not far behind its concern for its shareholders and employees.

CHRISTOPHER BRAUCHLI is a lawyer in Boulder, Colorado. He can be e-mailed at brauchli.56@post.harvard.edu.

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