A US court ruling that awarded almost £500,000 damages to a smoker who contracted lung cancer has knocked billions off the stock market value of US tobacco companies. British tobacco companies are set to suffer the same depreciation.
On Friday, a jury in Florida ruled that American Tobacco, a subsidiary of the British tobacco giant, BAT, had been negligent and had made a dangerous and defective product.
The court awarded the lung cancer victim, Mr Grady Carter and his wife Millie, $750,000 in damages. It has led to speculation that US tobacco companies will be inundated with similar claims.
Mr Carter, a retired air traffic controller, had smoked Lucky Strike cigarettes from 1947 to 1991 when his lung cancer was diagnosed. He said tobacco advertisements had portrayed smoking as safe. He was awarded damages of $500,000 while his wife received $250,000.
"I'm well pleased, it was a just verdict," he said.
The damages award came just five minutes before the New York stock market was due to close on Friday night but after hours selling sent the value of tobacco shares plummeting.
Philip Morris shares fell over 10 per cent to $91 1/2 while RJR Nabisco shares fared even worse plummeting almost 14 per cent to $27/4.
BAT, one of the world's largest producers of cigarettes and the owner of the insurance and investment companies, Eagle Star and Allied Dunbar, would see its shares plunge by 66p from Friday night's close of 509p, if they dropped by a similar amount. That would wipe over £2 billion off its value. It is the eighth largest company on the market with a price tag of £15.8 billion.
But the BAT subsidiary pledged to appeal the ruling and BAT spokesman Mr Michael Prideaux said: "This is a setback, but investors will hopefully bear in mind that, in 40 years of these cases in the United States, the industry has never ended up paying out."
Any appeal against the decision of the Florida court should be heard within a year. Mr Prideaux said the trial judge might overrule the jury's decision in the 20 day review he is allowed for comment on the case.
A previous US court ruling disallowed "class action" suits.
