Legal Commentary

Preventing the Next Oil Spill with Liability

By Jonathan H. Adler

The University of Chicago?s Richard Epstein argues against liability limits for environmental accidents, like BP?s Gulf oil spill in today?s WSJ.

Tort remedies are essential to protect people (and their property) who do not have contractual relations with defendants from harms such as air and water pollution. The legal system should never allow self-interested parties to keep for themselves all the gains from dangerous activities that unilaterally impose losses on others?which is why the most devout defender of laissez-faire must insist, not just concede, that tough medicine is needed in these cases. . . .

A tough liability system does more than provide compensation for serious harms after the fact. It also sorts out the wheat from the chaff?so that in this case companies with weak safety profiles don?t get within a mile of an oil derrick. Solid insurance underwriting is likely to do a better job in pricing risk than any program of direct government oversight. Only strong players, highly incentivized and fully bonded, need apply for a permit to operate.

BP may have agreed to pay all legitimate claims, despite the Oil Pollution Act?s statutory limit on damages, but we should not assume future tortfeasors will act in a similar fashion.  And while there are serious questions about the advisability and constitutionality of altering BP?s liability after-the-fact, there is no reason not to remove statutory limits on damages going forward. A more sensible ? and strict ? set of liaiblity rules can do more to safeguard environmental values than muchprescriptive regulation.

Nate Oman has another take on Epstein?s op-ed at CoOp.

Full post as published by The Volokh Conspiracy on June 17, 2010 (boomark / email).