Paying Gulf oil spill claims not cut and dried, Feinberg admits

Gulf oil spill claims administrator Ken Feinberg acknowledged recently that it has been hard to figure out whether or not to pay certain claims. It’s no wonder, given that top legal minds struggle to define what it means when the Oil Pollution Act says damages must be paid if they are “due to” the BP oil spill.

A new report by a leading Harvard University law professor says the courts are unlikely to make BP or other defendants pay claimants whose losses aren’t directly tied to the closures of fishing areas and beaches, or stem from actual damage to nearby natural resources.

According to pProfessor John C. P. Goldberg, businesses that suffered from a perceived danger of oil but never got their beaches or fisheries fouled won’t get relief from the courts. Neither will those who have lost clients who are directly affected, or those who supply coastal businesses. And yet, Feinberg is paying some of those claimants and is considering paying others as he promises to be more generous than the federal law, passed in 1990 to set the bounds of liability for spills.

The down-side of Feinberg’s liberal stance has been the delay and uncertainty it has caused for many claimants, whose petitions for relief have been kept in limbo for weeks. More than 100,000 claims — nearly a quarter of those filed to date — are “under review” by Feinberg’s Gulf Coast Claims Facility, which administers the $20 billion fund BP set up to pay claims and other spill costs.

One of those is LaTanya Manning of New Orleans. She and her colleagues who work at a local day-care center have applied for lost wages because, she said, their hours were cut nearly in half when clients who work in hard-hit restaurant and seafood-production jobs were laid off and stopped using the facility. Manning can’t understand why her claim has been pending for two months while others who filed more recently have been either approved or denied.

“I don’t even know in which direction to go with this now,” Manning said. “They say they have all the documentation they need. I just keep waiting for a decision.”

Manning and other claimants like her now have the option to force Feinberg’s hand by filing a final claim. By seeking a final lump-sum payment, she would force Feinberg to make a determination within 90 days and give a reason for any denial or reduction in her award. On the other hand, she would have to sign away her right to sue BP or other responsible parties if she wishes to accept Feinberg’s final payment offer.

Critics, led by Alabama Gov. Bob Riley, have blasted Feinberg for forcing anyone to sign a waiver, calling it “extortion.” Feinberg responded with a phrase he’s gotten used to saying: “No good deed goes unpunished.”

But even those claimants who were rejected outright when they filed emergency claims have the option of trying again, either by filing a final claim or seeking an interim payment to cover up to three months of actual losses.

Deanna Gilmore, a wine distributor known as the “Sunshine Wine Diva,” said she was denied when she presented Feinberg with her losses in August. Her territory covers most of the affected Gulf Coast and she works on commission. Bars and restaurants stopped buying her wines because fewer tourists were showing up. But while she was denied, the bartenders who suffered reduced hours and tips were getting big checks, she said.

Feinberg said he couldn’t comment on specific files, but suggested Gilmore could take another shot by filing a final claim to see if he might change his mind about wholesalers and suppliers.

Goldberg’s analysis of the Oil Pollution Act, provided at Feinberg’s request, certainly suggests Manning and Gilmore will have a tougher time getting paid in court.

Goldberg described 16 hypothetical claimants and analyzed their chances of collecting under the law. Commercial fishers, Gulf Coast hotel owners and their employees are no-brainers, Goldberg said. But, it would take an extremely liberal reading of the law for a dockside restaurant, a beachfront real estate agent or a store owner in a coastal tourism town to win lost earnings in a suit against the spill’s responsible parties. All three of those examples are already being paid by Feinberg.

Goldberg’s analysis was even less favorable to other hypothetical claimants, such as the owner of a beachfront inn 100 miles from the nearest oil, the inland fireworks business that isn’t seeing as many customers because of reduced tourism traffic or the charter boat that operates in clean waters but suffers from a misperception that oil is in the area.

Given that assessment of the law’s limitations, it’s remarkable that claims like Manning’s are still in play through Feinberg’s process.

“I think Feinberg’s being straightforward and conscientious,” said Carl Tobias, a law professor at the University of Richmond. “He’s not bound to follow what the law might be in a particular jurisdiction. He has very broad discretion of what should be compensated and what’s not. Still, there will be people who are dissatisfied.”