2010-05-18
By Editor, CIR
BP could be liable for as much as $10bn in damages resulting from the rig explosion in the Gulf of Mexico on April 20.
The group has already confirmed that it will meet all costs of containing and cleaning up the resulting oil spill, in accordance with legislation passed after the 1989 Exxon Valdez oil pollution incident in Alaska.
However, a cap of $75m applies to all other damages resulting from an oil pollution incident. President Obama has indicated that he supports the initiative by Democratic senators to increase this maximum figure to $10bn. Reports suggest that there have been more than 50 incidents in the past 20 years where the present cap was exceeded.
The cap does not apply in cases where the offending company is judged to have been grossly negligent, to have engaged in wilful misconduct or conduct that violates federal regulations.
BP has insisted that the current cap is academic. "We would expect to pay more and we are willing to do so. We don't think the cap is particularly relevant," it stated. The group has pledged to honour small damages claims quickly and has made claims forms readily available on a disaster response website.
Reports suggest that the clean-up cost for the Gulf of Mexico spill will be the most expensive since the Exxon Valdez and up to $1.5bn will be borne by insurers. Although the figure is relatively modest against losses caused by hurricanes in recent years, it could push up renewal costs in the energy insurance market. Although May 1 renewals are unlikely to be affected, many programmes fall due for renewal on July 1.
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