Insurance 101 – Chapter 11 – Volume 6 – Punitive Damages Test

Punitive Damages Test

In 1989, Exxon’s supertanker grounded on a reef off Alaska, spilling millions of gallons of crude oil. The accident occurred after the tanker’s captain—who had a history of alcohol abuse and whose blood still had a high alcohol level 11 hours after the spill—inexplicably exited the bridge, leaving a tricky course correction to unlicensed subordinates. Exxon spent some $2.1 billion in cleanup efforts, pleaded guilty to criminal violations occasioning fines, settled a civil action by the US and Alaska for at least $900 million, and paid another $303 million in voluntary payments to private parties. Other civil cases were consolidated against Exxon, the captain, and others to recover economic losses suffered by those suing Exxon. The trial jury awarded $287 million in compensatory damages to some of the plaintiffs; others had settled their compensatory claims for $22.6 million; awarded $5,000 in punitive damages against the captain and $5 billion against Exxon. The Ninth Circuit ultimately remitted the punitive damages award against Exxon to $2.5 billion.

The following video was adapted from my book, “Insurance Claims A Comprehensive Guide” Published by the National Underwriter Company and is available at the Zalma Insurance Claims Library

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