Dramatic Slowdown in Claims Payments Arouses New Concerns and Frustrations in Gulf Communities


We were warned: Exxon Valdez victims told us that the claims strategy in Alaska was to make seemingly random payments to some while short-changing or denying most – creating a perpetual chaos mixed with the desperate hope of being one of the lottery winners. In the Gulf, we’re seeing that same troubling strategic pattern as payments ebb and flow on the whims of a claims process devoid of both transparency or accountability.

Dan Murtaugh at the Mobile Press-Register has a report from the front lines of that strategy. His piece begins: “After a flurry of large payouts in late September and early October, the Gulf Coast Claims Facility has noticeably slowed the money flow in the past two weeks, much to the chagrin of officials on Alabama’s beach communities.”

“We had that great uptick, and then it just died,” says Orange Beach Mayor Tony Kennon. “I feel like I’m back in the dark. The payments have shut off, denials are going up, and we have no communication and no answers.” Says Mr. Murtaugh: “The dissatisfaction is just the latest shift in a season in which people have teetered back and forth between hope and despair when it comes to the oil spill claims process.”

Meanwhile, we keep hearing all those numbers about claims being paid. The Press-Register found one of those “success stories” in Pedro Mandoki, who owns a company that manages 608 lodging units on Alabama’s Fort Morgan peninsula. Mr. Mandoki told the paper he filed a claim in August for roughly $1.4 million in lost earnings. He received a check last month for $14,000 – that’s one penny paid for every dollar in damages claimed. He and his accountants have been trying to get Feinberg’s adjusters to reconsider ever since then.

Here are the raw numbers from the Press-Register: After Alabama officials and residents raised hell, Feinberg made rule changes in late September that resulted in faster turnarounds and larger checks. The facility went from paying out $11.1 million a day from Aug. 23 to Sept. 23 to $48.8 million a day from Sept. 23 to Oct. 14. Since Oct. 14, though, the facility has only paid out $15.6 million a day, according to data.

Predictably, Amy Weiss, a spokeswoman for Feinberg, said the drop in payments is due to a lack of claimants who can credibly prove their damages. Right – it’s interesting how political pressure briefly cleared up the documentation issues and now in the absence of that sort of pressure, the problems are back.

Another example: Remember when Mr. Feinberg announced he was hiring local people to answer the deluge of claimant questions? That was a shock to those who naturally assumed those people would already be in place – even BP had them. Well, it’s a month later and Ms. Weiss, the claims system spokesperson, says they’ll be hired soon. One month later…the lack of urgency here is disturbing to say the least.

The Press-Register talked to an accountant working on claims who explained that “… one of the biggest problems he encounters with the system is a lack of available information. He said that people have trouble getting any information about their claims until adjusters approve, deny or determine they need more documentation… and when claims finally are paid, there’s no information about how the amount of the check was determined.”

That’s how you mix lottery-style payouts with chaos and frustration to create false hope, which keeps buying time until the disaster moves a bit farther from the public spotlight. It’s hard to imagine a more depressing or cynical process.

The excellent reporting from the Press-Register is here: http://blog.al.com/live/2010/10/oil_spill_claims_complaints.html

© Smith Stag, LLC 2010 – All Rights Reserved

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Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
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