When people hear BP (BP) promising it will pay "all legitimate claims," they probably assume it means BP is promising to deal fairly with those its Great Gulf Disaster harmed. Unfortunately, BP can uphold the letter of that promise, if not the spirit, by paying the family of a rig worker killed in the Deepwater Horizon explosion a mere $1,000 as compensation for the death.

That's because deaths on the high seas -- three nautical miles or more from any state, which the Deepwater Horizon was -- are governed by the aptly named Death on the High Seas Act.

The act was once considered a progressive statute, forcing companies to compensate seamen's widows, who previously would get nothing. But now it's an archaic law that means the families of people killed by employers' negligence on land get far more compensation than those killed by negligence at sea.

Reform Sunk by the Cruise Lines

Why does the statute impose outdated limits on liability, and why, when it was last amended, in the wake of the TWA Flight 800 crash, were those limits lifted only for airline victims? According to a story published on the Atlantic's website, the answer is simple: the cruise-ship industry's lobbying muscle.

On Monday, members of Congress heard testimony from the widows of workers killed on the Deepwater Horizon and reportedly vowed to change the law. If Congress delivers on that promise -- and that's a big if, since the Atlantic story notes the cruise industry successfully defeated an attempt to repair the law only a year ago -- will the fix be another narrow exemption, or will Congress really address the problem despite the ire of the cruise lines?

Why is the cruise industry so vociferously opposed to fixing the legislation? Well, the Atlantic piece has one tragic tale of a cruise ship disappearance, but the Guardian makes clear the case isn't unusual. Apparently, 34 passengers and two crew members went missing or were lost overboard on cruises from 2003 through January 2007. Those numbers don't include known suicides or other known deliberate jumpers. Thus, the strict liability limits of the current law essentially provide a kind of um, liquidated damages for so many potential claims that the current law is invaluable to the cruise industry.

One Way to Calculate Deepwater Horizon Payouts


Nonetheless, a liability cap applies to how much a party can be forced to pay. If it wanted to, a negligent employer (such as BP appears to have been) could give the families of its killed workers far more than the Death on the High Seas Act requires. Surely the PR value of such a decision is worth something to BP.

If the oil giant decided to honor the spirit of its "pay all legitimate claims" promise and dole out amounts above the cap included in Death on the High Seas Act, how high should it go? Well, the Atlantic notes that at a land-based site, BP paid injured workers and the families of those killed $1.6 billion.

Perhaps the company should use that case as a scale for the Deepwater Horizon tragedy.

Increase your money and finance knowledge from home

Finding Stock Ideas

Learn to do your research and find investments.

View Course »

Asset Allocation

Learn the most important step in structuring an investment portfolio.

View Course »

Add a Comment

*0 / 3000 Character Maximum