The Gulf Oil Spill of April 20, 2010, was an unprecedented catastrophic event caused by man. It has taken a toll on the environment, the previously ravaged Gulf Coast, and the livelihood of its people. The enormity of the impact is still being determined as the claim process continues, which begs the question: What is happening now with the key players involved in paying claims?
This event was the first time in history that a U.S. President became involved in a catastrophic event in that President Obama actually made a statement ordering BP to make use of a third-party administrator in order to expedite the payment of claims. BP named Daryl Willis to manage the claims, who previously spoke candidly about his role in the claims process.
Mr. Willis advised that BP had hired the Worley Group to handle claims. He had confidence in their abilities and their resources to meet the growing needs of those affected by the spill. Mr. Willis also said that he and BP would be around “as long as it takes to make things right.” Mr. Willis was contacted for a follow-up interview but could not be reached. He still works out of the Houston, Texas office for BP.
NEXT: WORLEY CATASTROPHE'S CEO DISCUSSES HIS COMPANY'S CONTINUING ROLE
Shortly after the spill in 2010, Worley Catastrophe’s CEO Mike Worley said he was positive about his company’s ability to get the job done after having been selected to handle claims stemming from the oil spill. He also said that if a natural disaster struck during the 2010 storm season that his company would be adequately staffed in order to service existing clients. As we know, this would not become an issue, since the 2010 hurricane season had very few land-falling hurricanes.
When contacted recently, Worley advised that his company currently has 800 adjusters staffing the Gulf Coast Claims Facility (GCCF). When asked what he had learned from handling an event of this magnitude and nature, his said:
“Every assignment requires adjustments that yield greater efficiency, and this event was not an exception,” said Worley. “The magnitude and nature of this event have required rapid deployment along with establishing a physical and technological infrastructure on a scale that this industry has never before attempted. I expect that the adjustments made in facilitating this event will yield greater capacity and capabilities, which will be more evident in future catastrophe responses.”
Worley advised that since the event and the assumption of duties by Mr. Ken Feinberg, who created and oversees the GCCF, BP’s role in the claims handling process has been removed. However, Worley Catastrophe Response remains in constant contact with the administrators of the GCCF. They work closely with GCCF to maintain communication with state and local government entities.
Mr. Worley also said his company’s involvement in the Deepwater Horizon incident and the GCCF claims process “increased our exposure within the industry in a positive manner and contributed to the additional growth of our adjuster base and management team. This, in turn, will likely increase our capacity and capabilities for servicing future clients and events.”
NEXT: PAY CZAR KEN FEINBERG PROVIDES AN UPDATE ON CLAIM PROCESS
When I first spoke to Ken Feinberg, the pay czar appointed by President Obama to handle the Gulf oil spill claims payment process, he struck me as someone who willing to take on a seemingly insurmountable task with knowledge, past experiences, and a real determination to get the job done. He was unfaltering in his answers as to what was going to take place with the processes he has since put into action.
Back in 2010, Feinberg estimated that it would take three years to handle all of the claims stemming from the disaster. He also stated that his plan was to make the process more “transparent.” He was complimentary of the job that had been done at that point by Worley Catastrophe but said, “They deserve credit for what they have done, but it is not efficient enough. The process needs to be quicker.” He had criticism for the handling of the business claims at that point, and he was in the early days of putting his plan into place.
When revisited, Mr. Feinberg discussed the developments since then, including his release of the “final payment instructions,” for which he came under harsh scrutiny. He carefully explained the process and how he arrived at the payment options he set forth.
A payment of $5,000 to individuals or $25,000 to businesses is being offered to the 168,000 claimants who were previously approved for an emergency claim that was submitted. If the quick settlement of $5,000 or $25,000 is accepted, there will be no requirement for further documentation. Turnaround time for payment of the claims is two weeks. GCG — formerly known as Garden City Group — is responsible for issuing checks to claimants.
If a quick payment settlement is made, a will-not-sue waiver is required to be signed. The 232,000 claims that have been previously denied are not eligible for the quick settlement; only those that were previously paid claims.
Mr. Feinberg further explained that if the quick settlement option is not accepted, claimants may ask to receive quarterly interim payments. This option does not require a waiver to be signed. The interim payments will run through August 2013.
Mr. Feinberg states that the claims operation has paid out about $2.5 billion to claimants since Aug. 23, 2010, when he took over. He stated that he is also going to offer free legal advice to those who may need assistance. When asked how he would go about offering aid, he said that he is interviewing and negotiating with local and state level pro bono legal assistance in order to offer this option to claimants.
Mr. Feinberg stated that Worley Catastrophe is still maintaining the Gulf Coast Claim Facility’s offices. He is also assisted in this process by GCG (a subsidiary of Crawford & Company), Brown Greer, PLC, and PricewaterhouseCoopers. The fees for these companies and their services are paid by BP and are not paid out of the $20 billion fund previously established by the company.
Mr. Feinberg maintains that he is “cautiously optimistic that the fund will cover all of the losses presented.” He said he is in constant contact with BP as to the status of the claims and payment process. He still believes that the claims will be concluded within three years of the spill. At the time of this article, according to claims facility data, 70,000 quick pay claims have been filed.
Here is the current information supplied by BP:
About 300 lawsuits have been filed over the spill; more than 150 of them in federal court and many of them class actions. Plaintiffs include the families of the 11 rig workers who were killed when the rig exploded, injured workers, landowners, fishers, hotel owners, shareholders, and environmental groups. Their claims range from wrongful death and personal injury to property and environmental damage.
It will likely take years to determine fault for damages. Defendants now include, but are not limited to: British Petroleum PLC, which leased the rig; Transocean Ltd., the owner of the rig; Cameron International Corp., which made the blowout preventer that was supposed to avert a spill; and Halliburton Energy Services, which performed cementing operations, among others.
NEXT: THE LEGAL REACTION
“It’s probably the largest economic disaster our country has ever faced,” said Brent Coon of Beaumont, Texas, whose law firm is handling several hundred cases related to the oil spill.
Mr. Coon has been critical of the process implemented to handle the claims that have arisen from the oil spill. He believes that “the issues involved in these claims are complicated scenarios,” and that there are going to be many frustrating issues.
He believes that Mr. Feinberg is a “hired gun” that the government, large corporations, and other entities rely on to come in when they do not have the infrastructure set up to handle claims.
“They rely on him to develop and set up a claims handling process and infrastructure,” said Coon. “[Feinberg] grossly underestimated the complexity of setting the system into play that you would need to evaluate cases. The fact that there is no cap on it creates more problems and issues with the tort system, and the fact that the damages are ongoing adds to the complications.”
On a positive note he states that “at least [BP and the GCCF] have gotten some money in the hands of some people in acknowledgement that there would be other issues to evaluate. “ He also believes that the will-not-sue waiver will stand up but he does not believe that the $20 billion fund will be sufficient.
For the insurance, claims, and legal industry this event has brought new challenges, including but not limited to: risk assessment, environmental issues, coverages, licensing, processes, claims handling, bad faith, damages, jurisdictions, litigation, and policy.
On the national level, the spill has prompted the government to push for regulation of off shore drilling to make oil companies more financially responsible for the spills that they cause. The National Oil Spill Commission unanimously endorsed 15 recommendations to the oil industry, Congress, and the Obama administration for preventing another large-scale oil spill. Most require action by Congress, but some could be done independently by the Obama administration.
Congress "must take action this year to prevent another catastrophic spill through smart regulation, and by giving regulators the tools and resources they need to do their jobs effectively," said Senate Majority Leader Harry Reid. He has endorsed the raising of liability caps on oil companies, which BP waived after the Gulf disaster. He stated that it was "to ensure that taxpayers are never again on the hook for the damages caused by BP or any other oil company's missteps."