Spill Fund May Prove as Challenging as 9/11 Payments


At first blush, it would seem that Kenneth R. Feinberg, the man tapped to dole out BP’s $20 billion oil spill compensation fund, has been down this path before.

As the special master who administered the $7 billion Sept. 11 Victim Compensation Fund, he wrestled with visceral questions of how much money each victim of the attacks was entitled to, endured the occasional emotionally charged taunts and criticisms from widows and grieving relatives, and succeeded in persuading the families of a vast majority of the victims to accept cash settlements rather than file lawsuits.

But some analysts say his new assignment could prove even trickier.

“Although he had a very difficult time placing a dollar value on human life, in some way that was a more straightforward job than estimating the long-term harm to a shrimper’s business,” said Richard A. Nagareda, a mass torts expert and law professor at Vanderbilt University.

The attacks of Sept. 11 were largely fixed in time and place, killing almost 3,000 in a morning and raining destruction on three distinct areas: Lower Manhattan, the Pentagon and a field in Pennsylvania.

The oil spill, by contrast, is more open-ended. When the Deepwater Horizon rig exploded, 11 workers were killed and oil was sent gushing into the Gulf of Mexico for months, damaging the environment and the economies of at least four states for what could well be years.

The two funds are different, too. The Sept. 11 fund was created to compensate people who were injured in the attacks and the families of people who were killed, while the oil spill fund will largely compensate people and businesses for lost income.

So Mr. Feinberg, a prominent Washington lawyer who has been chosen to untangle all sorts of thorny problems over the years, will have to sift through claims that will require him to estimate the amount of money that people in off-the-books jobs like fishing were earning, as well as the amount of income they stand to lose from a disaster whose long-term impact is still unclear.

Protocols that will guide the distribution of the oil spill fund, which Mr. Feinberg will administer independently even though it is being paid for by BP, place a premium on geographic proximity to the spill. So a gulf shrimper who was kept out of the waters should have an easy time getting paid, but the owner of a Memphis seafood restaurant who was forced to absorb higher seafood prices all summer will not.

Then there is the added potential for fraud. Of the 7,300 claims he processed for the Sept. 11 fund, Mr. Feinberg has said, only 35 were fraudulent. But most of those claims were fairly easily checked. “You’ve got verification of death,” he said in an interview earlier this year.

In the gulf, by contrast, he must consider thousands of claims from people who will have little documentation to prove how much they earned.

The uncertainty over the long-term effects of the spill adds another wrinkle. The idea of the spill fund is similar to that of the Sept. 11 fund: persuade people to accept settlements up front, rather than wait years for results of potentially costly litigation. But if people in the gulf accept settlements and waive the right to sue, and the long-term effects of the spill prove to be much worse than anticipated, they could find themselves in trouble down the road.

And comparing the dollar figures of the two funds can be misleading. The $7 billion Sept. 11 fund was only for those who died or were injured. Businesses separately received at least $23.3 billion, largely from insurance claims for property damage and interrupted business, but also through low-interest loans, government grants and tax breaks, according to a 2004 study by the RAND Corporation.

Deciding how much businesses were entitled to receive was not Mr. Feinberg’s headache then. It is now.

The source of the money he is about to begin giving out is also different. The Sept. 11 fund was paid by taxpayers and set up by the federal government in part out of fears that mass lawsuits would cripple the country’s airline industry. The oil spill fund will be paid by BP — which agreed to set it up under pressure from the Obama administration — and any of its partners that it can persuade to defray some of the cost. White House officials have said BP could be liable for more than $20 billion.

One thing is already clear: just as Mr. Feinberg found himself at times a lightning rod for the stinging criticism from Sept. 11 widows and grieving relatives — though he was ultimately given high marks for his handling of the fund — he is already getting a taste of the anger and emotion of many residents of the Gulf Coast.

“I mean, 9/11 was valuing lives that were traumatically extinguished, 3,000 of them,” Mr. Feinberg said in an interview on “The Charlie Rose Show” on PBS shortly after he was chosen for the new job. “Here there are 11 dead, 11 too many, in the rig explosion. But do not underestimate the emotion, the anger, the frustration that people in the gulf convey to me, this curveball. ‘Why this accident? It wasn’t my fault. I’m an innocent victim. Why wasn’t this prevented? Why am I now suffering financially?’ ”

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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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