The newly hired Gulf of Mexico oil spill claims manager said during a trip to the state capital Friday that his top priority assignment from President Barack Obama is to speed up payments to those losing income as a direct result of the Deepwater Horizon accident.
People or companies affected indirectly, such as restaurants missing business or oil service workers laid off from the drilling moratorium, might have their claims judged on the basis of Louisiana tort law.
Washington lawyer Kenneth Feinberg, who chaired the compensation fund for victims of the Sept. 11, 2001, attacks, met with Gov. Bobby Jindal to discuss the new private claims system he will operate with a fund of $20 billion paid by BP over the next four years.
“I got an earful from the governor of Louisiana and the governor of Mississippi about what is working and not working,” Feinberg said.
Jindal said he communicated to Feinberg that he expects to see progress in the coming days as the new system replaces BP’s current process.
“We expressed our frustrations and concerns to Mr. Feinberg about the flawed and dysfunctional current claims system run by BP that is not properly compensating many of the workers and businesses deeply affected by this spill,” Jindal said. “He said he would address those concerns and create a transparent and functional system that will process claims for our people in an efficient and timely manner.”
For the past seven weeks, BP has taken charge of hearing claims for damages to property or lost wages and income from individuals and private companies along the Gulf coast impact area. Through private contractors, the company has hired 670 claims adjusters and a 140-person phone staff.
BP has written 28,000 checks totaling more than $95 million, including $50 million for claimants in Louisiana, where the company has set up 14 claims centers, said company Vice President of Resources Darryl Willis, a New Orleans native who is leading BP’s claims process.
State officials have complained about inadequate compensation, especially to businesses, and a refusal by BP to share data about the claims that would help the state plan for the economic impact.
On Wednesday, Obama and BP agreed to a new system operated by an independent facility overseen by Feinberg, who was nicknamed the “pay czar” when enlisted by the government to control executive compensation at companies receiving federal bailouts during the 2008 financial crisis.
Willis said BP presented a list of suggested names to the president to fill the position. Feinberg said he will operate as a private, independent agent on contract with BP. His pay and the costs of the new facility will be provided by BP directly and will not come out of the $20 billion claims fund, he said. If either the president or BP is dissatisfied with his performance he will walk away, he said.
BP should be financing the position because there is no other good choice, Feinberg said. Neither the government nor the victims of the spill should have to contribute money to pay for the administration of the claims program, he said.
The new facility will not have jurisdiction over claims from federal, state or local governments or for clean-up costs and natural resource damages. Those issues will still be left between the governments and BP, he said.
Perhaps the most critical role Feinberg will play in the next few weeks will be to decide the standards for paying claims for both those affected directly and indirectly by the oil spill catastrophe.
Feinberg’s focus will be to resolve claims from individuals and businesses for economic loss, personal injury and death. He can also try to settle lawsuits, he said. A set of standards under the 1990 Oil Pollution Act is supposed to be guiding BP’s claims process.
“I think those standards for OPA claims are very important and are likely to be continued,” Feinberg said. “We have to take a look at that and integrate the OPA process into this new claims facility.”
Claims by those put out of work by the president’s drilling moratorium or others suffering because of a less direct impact are a “very, very different issue,” Feinberg said.
“The attenuated claims, the long-term, indirect ripple-effect claims: now we have to decide how we’re going to deal with that, because those claims could be in the millions,” Feinberg said. “One way we may deal with that is to adopt what we did in the 9/11 victim compensation fund, and to say an eligible claim must be causally connected to the spill. And to determine whether it is reasonably connected to the spill, look to state tort law.”
He said if a person in a restaurant thinks that they’re losing business because of the spill, would the Louisiana courts recognize that tort?
“If so, we should. If not, we shouldn’t,” Feinberg said. “It’s one possible way. It worked very well in the 9/11 victim compensation fund, and it might be the best way to deal with it here.”
Walt Leger, a noted Louisiana tort law attorney who has served on the post-Katrina Louisiana Recovery Authority board, said he and others assisting clients with oil spill claims are watching to see which standards will be set by the new facility and how it will make decisions about which claimants were directly affected.
A potential pitfall of using Louisiana law as a guide would be that claimants under similar circumstances might be treated differently from state to state. Whether the OPA standards would be better for a claimant than Louisiana law would likely depend on the specific case, Leger said.
The new system will be operated by the Independent Claims Facility, or ICF. There is no relation to the company called ICF that managed the Katrina Road Home program.
The facility will develop and publish standards. A panel of three judges will hear appeals of facility decisions. Dissatisfied claimants have the right to go to court or apply for relief from the federal Oil Spill Liability Trust Fund.