Friday, February 18, 2011

Miracle or Miracle: when BP oil spill chief reshapes the payment rule?

Keywords or Terms: Gulf Coast Claims Facility; Claims Report; Change; Plan Payment; Feinberg; BP

Since April 20, 2010, when BP oil spill became the talk of town, many people have wondered whether there is ever going to be justice with respect to how compensation are to be made to affected parties from the disaster. Local authorities and citizens of the Gulf Coast felt like captives when the disaster turned into a nightmare as many people lost their jobs, businesses and incomes. Around August 2010, the federal government entered a negotiated plan with BP to dole out 20 billion dollars as down payment for the size of disaster and compensation to affected entities, persons, businesses and states, in the impact area of the disaster, and people had a sigh of relief.

The Gulf Coast Claims Facility (GCCF) was inaugurated as the official body for delivering filed claims against the oil discharges from the Deep-water Horizon well; a well belonging to British Petroleum. However, things have not gone as anticipated. The administrator of the fund, Kenneth Feinberg, who spearheaded a similar pay plan for the September 11, 2001 victims, had a formula for paying out claims from the BP oil spill that has been criticized for being sluggish, inadequate and sometimes degrading to the affected parties. The blog tonight wants to address a few points regarding the announcement today that the central payment formula will remain unchanged from a proposal released earlier in the month.

BP Claims Report:

In an earlier BP claims report, only 32% of affected parties agree that the application forms for filing claims were easy to fill; over 73% of the same persons indicated that getting information about the claim process was difficult; Over half of the claims facilities employees were considered as underperforming; about three quarters of the affected parties believe that the length of time to receive a payment or denial was too long and more than 80% of claimants, believe that the administrator of the fund was not keeping to the promise and seems to be basically saving face for British Petroleum ( A somewhat retooling or readjustments in the process was expected to help smoothen out many of these inadequacies or misconceptions. To counter the negative assessment of the performance of the GCCF administrator and to be responsive, the administrator released the following advice, if one is impacted and feel he or she is being short changed:

1. Send additional documentation of your losses. The GCCF administrator says one of the main reasons for claims going unpaid is lack of documentation. If you can find additional receipts or records to back up your claim, sending them to the GCCF should speed up your payment, and improve the odds that you will be paid the amount you have claimed. Write a letter and tell them you are sending additional proof of your losses. Put your claim number on all the paperwork. Be sure to keep the original papers in case you need them later.

2. Amend your application to add any losses you may have forgotten to list on your original application. It’s not unusual for people to fill out forms and later remember other losses they failed to claim. If you have losses you didn’t list on your original application, send in an amended claim. List your additional losses. Once again, send a copy of any records proving your losses. Hold on to the original records.

3. Contact a law firm. If you have a regular attorney you use for business or financial matters, contact him or her. You can also contact a law firm involved in the BP litigation. Some of these law firms are experienced in handling mass tort cases, which are more complex than run-of-the-mill lawsuits. Some of these firms will review your BP claims free-of-charge, and will assist you during the BP claims process(

Last November, Mr. Feinberg indicated that roughly 71,000 claims had been paid out. However, criticisms persisted and many affected parties claimed that months after initial filing of claim forms, his administration had not gotten back to them. Mr. Feinberg fought back and indicated that where claims had been denied, they were justifiable denial. He cited that in all the 254 claims denied, the appeal process with U.S. Coast Guard had sided with the fund.

Notwithstanding, blame still persists regarding the way the administrator has been handling the compensation process. There are criticisms that the administrator of the fund is still stalling and prolonging claims process; despite all the accolades that the fund administrator has associated with how Gulf Coast Claims facility is delivering its task. With one claimant indicating that he was seeing a disaster as huge as the original spill in the way the administrator had gone about paying out claims. There are other insinuations from the affected individuals that BP would like to forget about the plight of the affected parties, knowing how desperate they have become after suffering a double jeopardy and that, some of them may be at the brink of trading their circumstance for lesser money or compensation.

To assuage further criticisms, Mr. Feinberg released additional addendum to his earlier released plan at the beginning of the month, indicating that:

• Claimants would receive twice their documented 2010 losses;
• Oyster harvesters and processors will collect same payments, which is four times their documented losses for 2010.

While this new release today seems as another effort to address dissatisfaction with how the facility and its administrator had met the promise to deliver fast and equitable claims, there are no indications that his addendum had made any significant change to the plan on how payments are to be made or how grievances are to be addressed with respect to payments and possible readjustments for insufficient payments. The administrator continues to maintain that the process of making payments to aggrieved parties are working well and the issues of inconsistencies and lack of transparency that have been levied against the fund are all but misconceptions and or fallacies. To become more transparent, to become more open, to address the concerns of more than half of the claimants at this time and to become a better partner rather than a perceived aggressor, Mr. Feinberg must find a way to work with all the aggrieved parties in the claims he has settled. It is possible that many of these affected parties may resort to legal battle to further settle their claims and feel whole all over again.

Whether we like it or not, it is a fact that the administrator of the fund has been doing a difficult job under a difficult circumstance. A lot of people affected do not agree totally with the compensation they have received though, because so many of what they consider as legitimate claims had been turned down. Incidentally, some lawmakers from the area are indicating to the White House that it ought to step in and complete more oversight of the work done by Mr. Feinberg; including, streamlining the claims process and making it possible for more generous payments to claimants.

Focus on Change

With the administrator’s release today, it is obvious the plan or rule he released earlier in the month will largely remain. To get a sense of fairness, it may be necessary to work out a much responsive claims adjudication process, where the claimants will feel they are better treated than what is going now. It is hard to imagine that after what all those residents of the Gulf Coast went through for five months, there could still be a difficulty in addressing their claims to mutual satisfaction. Once the GCCF gets past those filing illegitimate claims, the process of making out payments that will be considered as making the affected parties whole shouldn’t be as difficult as some of them are now claiming. GCFC has no competitor for the allocation of the fund, so to a large extent, it is the judge and jury in this process of delivering fairness to the aggrieved parties from the BP oil spill from the Macondo well. Maybe that is why the facility needs to be a little bit more flexible.

There are indications from press releases that the claim process is fraught with red tape and there is room for huge improvement in the way the facility continues to do its work. Yes, a little over three and half billion dollars have been paid out for some 190,000 claims; this is actually less than one quarter what was set aside for this compensation. The threshold of error is largely small and this may be the reason why many of the claimants are asking why the excessively stringent rule in the way compensation has been paid out to them. Is the rule of compensation designed to punish the aggrieved parties, or is it designed to appease British Petroleum? None of the aggrieved parties from this disaster expect huge compensation; and if there are some, they are too few to defraud the facility, if the staffs are doing their job. However, the facility does not want to find itself in a position where the aggrieved parties believe that they are being short changed or that the Gulf Coast Claims Facility is holding brief for British Petroleum.

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