Personal Injury Law

BP Creates Injury Settlement Fund to Pay Victims of Gulf Oil Spill

By Michael

As the oil continues to gush into the Gulf of Mexico, BP is worried about a potentially costlier spill. The inevitable tide of personal injury lawsuits from those harmed by the accident poses a grave financial threat to the oil giant.

Anticipating future lawsuits, BP recently agreed to pay $20 billion into an escrow account to be managed by an independent administrator. While this account provides hope for swift relief for those injured by the oil spill, it may also prove beneficial to BP.

What This Means for BP

At first glance, the $20 billion price tag seems like a loss for the oil company, especially since it was likely coerced by the government. Even worse for BP, this amount far surpasses the previous liability limit of $75 million established under the 1990 Oil Pollution Act.

However, The Wall Street Journal recently reported that the move is not all bad for BP, as it will help the company avoid lengthy legal battles. More than 200 plaintiffs, ranging from Gulf fisherman to people whose health has been threatened by exposure to the oil, have already filed suit against BP. Aggressively defending itself against every claim would prove very costly to the company.

In addition, establishing a sizeable escrow account serves as a sign of good faith to federal prosecutors. The multi-billion dollar account also shows that BP has little intention of digging in their heels and aggressively defending itself against every claim. The company likely prefers to avoid decades of costly personal injury lawsuits.

What This Means for Injured Parties

The good news is that there is a guaranteed pot of $20 billion to be distributed to those hurt by the massive spill. Moreover, the established account means that litigants will probably gain relief in a much quicker fashion.

This could prevent nightmare scenarios similar to those experienced by litigants after the Exxon Valdez oil spill in 1989, when claimants had to wait as long as two decades before reaching personal injury settlements.

The news, however, is not all positive for future claimants. The Louisiana State Treasurer, John Kennedy, believes the account may be woefully inadequate.

According to Reuters, Kennedy estimates that the total environmental and economic damages resulting from the spill could total $100 billion. Thus, by limiting their damages to $20 billion, BP may have saved itself several billion dollars, potentially harming thousands of Gulf residents who have legitimate injury claims.

However, reports indicate that the escrow account will not prevent claimants from filing environmental suits against BP for damage to the Gulf?s coastlines. As a result, the possibility for litigants to win large punitive sums from BP remains in play. Thus, like the spilled oil, BP is not out of the water yet.

Full post as published by The Injury Blog on June 22, 2010 (boomark / email).