By John Campbell and Richard Malafy
Attorneys at Law
The Deepwater Horizon oil spill could prove to be one of the most devastating environmental and economic disasters this country has ever seen. The environmental and economic impacts of the Deepwater Horizon disaster will undoubtedly have rippling effects throughout the entire nation, and perhaps the world. While we are yet to see actual oil here in the Keys, the public perception that oil has already affected us has begun to wreak havoc on the economic well being of our local businesses and individuals.
In a sea of bad news surrounding the oil spill, there is now some potentially good news for those adversely impacted by the threat of oil here in the Keys. BP has accepted liability and agreed to set aside $20 billion dollars over the next four years to compensate individuals and businesses for losses related to the Deep Water Horizon disaster. Until now individual claims had to be filed with BP. Previously, BP processed the claims and BP itself made a determination of whether and how much to pay. Victims dissatisfied with BP’s decision were forced to file a lawsuit or file a claim with the Federal Oil Spill Liability Trust Fund (a fund that was established by Congress after the 1989 Exxon Valdez oil spill). Either process was likely to be long and complicated. The $20 billion trust fund extracted by President Obama is a game changer. Henceforth, Kenneth Feinberg will administer private claims – free from interference from either BP or the administration – under a so-called “Independent Claims Facility.” Feinberg also administered the funds for the victim’s of the 9/11 terrorist attacks, TARP and the Virginia Tech Students Fund.
The stated goal of the new claims process is to be “fairer, faster, and more transparent” than the BP process. While it is still unclear how the independent claims process will actually be administered, there are some basic questions that we can answer right now.
1. Do I have a claim? BP had said that it would pay all “legitimate claims”. The new fund is intended to compensate individuals and businesses harmed by the oil spill, including all private claims by fishermen, hotels, restaurants and many others. If you can show losses, you should be compensated. Claims by local, state, tribal and federal governments, will still be filed with BP and will be handled separately.
2. What is a legitimate claim? Feinberg has been tasked with quickly developing standards for recoverable claims. In an interview with Matt Lauer on NBC’s Today Show, Feinberg admitted that he is yet to evaluate every variation –or “collateral causation” –that would enable individuals to be compensated from the fund. But Feinberg cited his previous experience administering the 9/11 Victim’s Fund and asked all potential victims to file their claims. “One thing we learned from the 9/11 fund, you’ll recall, Congress passed that law and said that when it comes to whether or not a financial injury was caused by the terrorist attack, look to the local law of the state where you live.” It appears Feinberg intends to do the same in administering the BP claims.
3. How do I file a claim while the new process regarding the Fund is still being developed? The administration has said the switch from BP processing will be “seamless.” For now, it appears victims can still use the current BP claim forms.
4. What should I do to prove my claim? The best answer to this is you can never have enough proof. Tax records, bank statements, receipts, detailed notes, statements from customers, statements from employees, etc. In short, document everything and plan as if you are going to have to go to trial.
5. When should I file a claim? Feinberg says, “Time is of the essence. I urge all those who have suffered financial loss as a result of the oil spill to file a claim as soon as possible.” Furthermore, those in need of immediate money, can now apply for emergency funds, which are separate from the $20 billion compensation fund, and which theoretically will be paid on a quicker basis.
6. What if I have signed a release to BP? At the meeting last week, arranged by the Marathon Chamber of Commerce, BP representatives said that they would not seek to obtain a release from individuals filing claims, nor would they seek to enforce releases that had already been obtained. Whether or not the new claims process requires a release of claims is yet to be seen as discussed below.
7. If you accept payment from the Compensation Fund do you lose your right to sue BP? It is not exactly clear at this point. Feinberg agrees that no one should sign away their rights to sue BP at this time since the details of the compensation fund are unclear. In fact, during a recent CNBC interview Feinberg agreed with the comments of a lawyer, who said that he would advise his clients not to sign away their right to sue BP since details are unclear. Feinberg stated that “One of the goals I’ve got in the next few weeks and months is to make it very clear.” CNBC reported “he plans to clarify the process so that claimants understand the process and exactly how much money they will be receiving, should they choose to accept payment from the $20 billion fund.” With that said, it does appear that the new claims system is headed in the direction of requiring those who actually receive funds from the Compensation Fund to give up their right to litigate against BP.
Conversely, CNBC recently reported that “Separate from the $20 billion compensation fund, those affected by the disaster can now apply for emergency funds, without forfeiting their right to sue BP at a later date.”
8. How often can claims be filed? With the vastness of the spill’s impact still unknown, the plan anticipates victims will file multiple claims based on ongoing losses.
9. What happens if I am dissatisfied with the decision of the independent claims process? A dissatisfied claimant has a right to appeal to a panel of three judges. BP can only appeal awards over $500,000. If after the appeal the claimant remains dissatisfied, the claimant retains all legal rights. It can reject the proposed payment and proceed with a claim in the courts or seek payment from the Oil Spill Liability Trust Fund.
10. How quickly will claims be paid? While one of the stated goals of the IFC is to be “faster”, it has not yet offered a specific time frame. The White House blog simply states, “The facility will decide all claims as expeditiously as possible . . .”
11. What if the $20 billion isn’t enough? White House officials say the fund is not intended to be a cap in BP’s liability. So, BP (and/or others) will be required to post additional money.
12. Will the new system be perfect? Probably not. Will it be better than the one currently put in place by BP? Well, let’s put it this way, BP’s CEO Tony Hayward has often been quoted saying that BP “will honor all legitimate claims for business interruption.” Yet, when asked by the London Times for examples of illegitimate claims, he responded: “I could give you lots of examples. This is America — come on. We’re going to have lots of illegitimate claims. We all know that.” Only time will tell, but the independent process sure sounds better than that response.
This new claims process is evolving daily. Every situation is different and you should consult a lawyer prior to entering into any agreement that could terminate your rights to be compensated for losses resulting from the Deepwater Horizon disaster.
Last week, Richard Malafy (left) & John Campbell addressed concerns raised by Marathon residents at Business Claims and Recovery Seminar sponsored by the Greater Marathon Chamber of Commerce.