On September 28th, it was reported that the local government of Panama City, Florida had retained attorney services to assist them with the BP claims process. As part of their services, it is expected that forensic accountants and economists will build a financial model for the city to determine what their sustained losses are to date as a result of the oil spill. In Tallahassee, members of Florida’s Cabinet have also expressed frustration about the claims process recently. To date, the Gulf Coast Claims Facility reports that it has resolved 14,443 claims of the 26,127 that it has received in Florida since it began operations for a total of $213.3 million dollars.
The Gulf Coast Claims Facility and it’s $20 billion dollar escrow fund started operations today to independently handle the personal and business claims of oil spill victims. Gulf Coast Claims Facility (GCCF) administrator Kenneth Feinberg has issued guidelines for “Emergency Protocol”, which outline the procedure for those wanting to file for advance payment on their claim. The emergency protocol procedures are intended to get a claims check, equaling six months of claims payments, out to individuals within 48 hours and businesses within seven days.
“BP is out of the claims processing business…..as to individual and private business claims”, Mr. Feinberg said at a recent press conference before the Gulf Coast Claims Facility began operations this morning. BP has reported that it paid out a total of $368 million dollars before transferring it’s claims responsibilities to the GCCF, which amounts to only a fraction of the $20 billion dollar fund that has been assigned to Mr. Feinberg and his staff to begin dispersing today.
Earlier this week, BP announced its decision to defer its decisions on thousands of claimsto the new Gulf Coast Claims Facility and its administrator, Kenneth Feinberg. Many of the claims that are being deferred are from seafood, restaurant and tourism related businesses that are not directly on the Gulf Coast. BP has paid out $227 million dollars so far in oil spill claims. The Gulf Coast Claims Facility is set to take over the claims process on August 23rd after BP has now made their first deposit into the $20 billion dollar escrow fund.
Local county and city governments across the Gulf region are seeing significant reductions in year over year sales tax revenues since the Gulf Oil Spill began on April 20th. While BP has paid out $245 million dollars in grants so far in Alabama, Florida, Louisiana and Mississippi, local governments say that the compensation is not enough to cover losses and that the process is difficult. The spill has been projected to curb $1.2 billion dollars in economic growthon the Gulf Coast by the end of 2010. It remains unclear if the new Gulf Coast Claims Facility and its $20 billion dollar escrow fund will handle the BP claims from local governments once it begins operations next month.
BP recently posted the statistics on the claims that have paid so far and the data indicates that only 28% percent of filed claims have been paid. According to the data, as of July 20th, over 119,000 claims have been filed under the current system and only 33,300 have been paid. Since the disaster began on April 20th, BP has processed and paid claims though its own system, which has amounted to just over $200 million dollars paid to victims. In early August, the new and independent Gulf Coast Claims Facility is set to begin processing claims through the $20 dollar fund that has been set aside for oil spill victims.
In a recent interview with CNN, the $20 Billion BP Claims Escrow Fund administrator Kenneth Feinberg said that the new and independent Gulf Coast Claims Facility has “got to get the claims out quicker, we’ve got to get them out with more transparency so that claimants understand what the status is of their claim”. When asked about a claim made by a Louisiana fisherman who has made with the current BP claims process, Mr. Feinberg said “I can’t speak for BP. I’m running an independent facility.” and that “Whatever it takes, these individuals and businesses must get paid.”
Earlier this week, BP announced that it would be applying stricter standards to its oil spill claims process moving forward. For future BP claims to be eligible for payment, victims will be required to submit more documentation to the claims center, including tax returns, pay stubs or trip tickets. BP also announced that there will be no more $1000 dollar “good faith payments” after July. This means that, under the current claims system, claimants must submit all of their income documentation before any payment will be made. We will make every effort to provide you with information about the upcoming changes to the claims process as it becomes available from the Gulf Coast Claims Facility.
In an interview with Fox News Sunday, BP Claims Fund Administrator Kenneth Feinberg stated that he would work as an independent voice despite being hired by the Obama Administration and being compensated by BP. In his interview, Mr. Feinberg said “I work for the people in the Gulf Region” and “I answer to neither BP nor the Administration”, and that “The $130 million that has been paid out (by BP to the victims) so far is not part of the $20 Billion”.
The New York Times published a very interesting article yesterday that outlines where the money has gone to so far from the current BP Claims Fund and outlines some of the changes that are needed in the new, government administered claims fund.
To date, more than 80 percent of the claims fund money has gone to self employed workers. This includes boat captains, shrimpers, oystermen and waterfront rental property owners who can easily show that the Gulf Oil Spill has affected their profit. Far less larger businesses have been compensated on their claims because of the complexities of proving their losses.
It remains unclear how homeowners will be compensated for losses in real estate values resulting from the spill. At a hearing before congress last week, BP Claims Fund Administrator Kenneth Feinberg stated that “On the one hand, those people are suffering; they deserve some help,” and “On the other hand, there’s not enough money in the world to pay every homeowner wherever they live on the Gulf Coast who says my property is down because of the oil spill.”
In an interview with New Orleans City Business, BP Claims Fund Administrator Kenneth Feinberg offered insight on how the people and businesses affected by the Gulf Oil Spill may be compensated by the $20 Billion Fund. According to the article, Feinberg is considering a two phase process for the claims process.
During the initial claims phase, which would last until the oil well is capped, affected individuals and businesses could receive lump-sum payments from the fund to cover between three and six months worth of losses. Accepting this initial payment from the fund would not waive the claimants right future fund claims or to sue BP in the future. Mr. Feinberg has also said that initial lump-sum payments from the fund will be expedited and will not have a predetermined limit.
Once the well is capped and the flow of oil has stopped, the second phase of the claims process would begin. In this phase, individuals and businesses filing claims would receive payments for all losses in the future and would waive their right to file future claims.
More details about how the fund will operate will be finalized soon. We will keep this column updated as the details about the new BP Clams Fund process is made public.
