Inadequate Emergency Claims
Half of BP oil spill damages claims ‘inadequate’, says payout chief
Ken Feinberg expects to pay out only $2.3bn in emergency claims over Gulf of Mexico oil spill from $20bn fund
BP‘s damages bill for the Gulf of Mexico oil disaster could be much smaller than expected after it was revealed that half the claims made so far to the $20bn (£12.7bn) compensation fund either have no supporting documents or “woefully inadequate” ones.
Ken Feinberg, appointed by the White House to run the claims process, announced the figures today, adding that BP would be able to automatically challenge any individual claim of more than $500,000.
Although BP has set aside $20bn to pay all “legitimate claims” from the biggest accidental offshore oil spill, privately it thinks that its final compensation bill will be significantly lower.
Tuesday was the deadline for emergency claims covering the last six months. The fund will now start accepting final lump-sum claims, which require recipients to waive the right to sue BP.
Feinberg said he would end up making $2.3bn of emergency payments to 175,000 claimants. Before he took over the process from BP in late August, the company had paid out less than $400m in four months.
The fund has received 450,000 claims in the last three months. Many of these are from fishermen or others involved in the fishing industry, which was banned from operating in large parts of the gulf before the leaking well was capped.
Feinberg said that of these claims, 125,000 were submitted with no accompanying documents, such as tax receipts to show proof of typical earnings. A further 100,000 were submitted with “woefully inadequate” documents, while a further 1,000 suspected fraudulent claims have been referred to the Department of Justice.
Many fishermen and oyster catchers in the gulf are from the largely unassimilated and poor Vietnamese community which has settled in Louisiana. Many do not speak English and do not keep records of income or pay tax, typically selling their catch for cash. They are unlikely to receive any damages, Feinberg has indicated, even if their claims are legitimate.
Most fishing restrictions in the gulf have been lifted, with only about 1,000 square miles nearest to the damaged well remaining closed. Oyster beds have been severely damaged and it may take at least three years before the crop returns to pre-spill levels.
Those involved in the tourism industry – such as owners of beach homes – have also filed claims. Beaches in the gulf are now clean but some resort owners still expect takings to be down by as much as half next summer.
Daniel Becnel, from New Orleans based Becnel Law Firm, said: “Feinberg wants to give the money away. That is what it’s there for. Most people are going to stick with Feinberg. He is being fair. But fishermen, oystermen and other people in the food industry are screwed because most operate on a cash basis and don’t keep sales or tax receipts.”
Becnel added that he expected most claimants to apply for final lump sums based on estimated future damages or lost earnings related to the spill over the next three years. Claimants can also opt to receive quarterly cheques over the next three years instead, until the fund is wound up, leaving them free to sue BP for extra damages.
Feinberg said that BP had not yet exercised its right to appeal against any claims made over $500,000. He added that it was possible that BP could recover all payouts from other companies if they are found to be responsible for the spill.