The Gulf Oil Spill, One Year Later

What can you tell us about the current status of Gulf claims?

Feinberg: As of the one-year anniversary—April 20, 2011—$2.6 billion has been paid out to 268,000 people during the emergency claim period running from August 23rd to November 23rd of 2010. We have received about 278,000 additional claims, and thousands continue to pour in each week. We have since paid out an additional $1.3 billion to those claimants. In terms of our progress, we have processed just about 75 percent of the claims. Of those, 110,000 received quick payment; more than 16,000 received final payments; and some 7,000 received interim payments. There has been more than 850,000 claims submitted. This includes claims filed from across the 50 states. Still, more than 100,000 claims have not been processed.

To what are you referring when you use the term "processed"?

Feinberg: That refers to claims that have been paid and closed.

How would you evaluate your progress thus far?

Feinberg: I think that statistics clearly indicate that money is flowing and that we are being as generous as possible in compensating eligible claimants. Having said that, we do not get a perfect score. Because of the sheer magnitude and volume of claims, there have been insufficient hands in some respects to address individual claimants, some of whom feel frustrated by the process. We have, however, taken steps and executed mid-course corrections. This includes adding local staff and liaisons with claimants, making the program more transparent, making the letters distributed to claimants more specific and detailed so that they understand why they were paid what they were paid, or why a certain decision was rendered.

Critics have raised concerns pertaining to the claims process being so widely spread amongst so many states. What should these naysayers know from your standpoint?

Feinberg: Well, I realize that criticism 'goes with the territory' so to speak. When you have more than 800,000 claims and so many people clamoring for money—with BP saying there is $20 billion to be had—then you are going to have to create a claims structure capable of qualitatively and quantitatively processing claims as quickly as possible. In regard to criticism that there is bureaucracy and that there are people in different states, I think that is inevitable to support the magnitude of the process.

Why are some claims being denied? Is fraud a concern?

Feinberg: There are 65,000 claimants that have been told that their claims are insufficient or lack proof. I will not pay claims that cannot be substantiated. In terms of fraudulent claims or suspected instances of fraud, about 8,000 claims have been deemed suspicious, with about 1,000 then sent on to the Department of Justice, Criminal Fraud Department.

What ensures success in handling claims of this magnitude?

Feinberg: To [accurately] process this large scale and number of claims in such a concentrated period of time, having the appropriate staff and resources available is a key ingredient. Notwithstanding the criticism, I go down to the Gulf Coast every other week or sometimes weekly, to meet with the claimants on the Gulf Coast and listen to their tales of woe and frustration. You cannot do this from Washington, you have got to be down there.

Would you give us an idea of the resources in place to handle the claims?

Feinberg: About 3,200 people are working the spill claims, including claims adjusters, claims processors, accountants, and lawyers. Such a large infrastructure is crucial to keep up with the processing of these claims. Although I cannot divulge the amount of monies paid out, or cost of handling the claims, I will say that it is an expensive program. The claims process will remain in place until August of 2013, downsizing as the situation of recovery continues.

How are you measuring the program's effectiveness? Is the amount of litigation a factor?

Feinberg: "The success of the program will not depend on the number of claimants, who, now in this final phase take the "quick pay." Rather, a [more accurate yardstick] will be the number of claimants participating in any part of the program (in any form) that choose litigation."

"There are thousands of lawsuits that have been filed, with most of them being consolidated into Federal Court in Louisiana. It is too early to tell what percentage of claims will eventually fall into the litigation category, though. At the end of the day, this program will only be viewed to be as effective as the claimants believe it to be. Even though hundreds of thousands have been compensated, there is still work to be done."

When I asked Feinberg about his expectations a year from now, he said that he fully believes that "on the two-year anniversary that the Gulf Coast Claims Facility (GCCF) will have processed 100 percent of every claim filed, paying all eligible parties who have proven their claims.

Though much criticism has and continues to surface, we must listen to what Mr. Feinberg is saying. In many ways, it is no different than what we as claims professionals experience and deal with every day. We encounter customers, media personnel, claims, processes, and logistics. We need enough staff and resources to handle even the largest event. We need for claimants, customers, and all of those affected to understand the process. Communicating the process in a clear way is one step, while creating efficient processes is the next. Appropriate processes must be in place to address complaints and failures in the system in order to make processes more expedient and efficient in the ever-changing claims landscape.

Are you prepared for media reports and criticism? How will you accentuate positive results in an unfortunate catastrophe? What checks are in place to identify fraud while ensuring that claimants are complying with the protocols necessary to prove their losses?

It is evident that the insurance and related industries can learn from this catastrophic situation. How it is ultimately handled will help claims professionals improve processes and handle disastrous events in the future gracefully.