Oil Spill: Tracking BP’s Problematic Claims Process

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After the oil spill, BP promised to make the Gulf right—and a big part of that was going to be its claims process. Gulf residents affected by the spill—like fisherman who could no longer fish, or seafood restaurant owners whose business had cratered— could visit one of BP’s 25 claims centers sprinkled throughout the Gulf coast region and make a damage claim. BP’s army of adjusters would act on it in a matter of days, providing emergency income to help Gulf residents keep going in the midst of the worst environmental disaster in U.S. history. By August 3 BP claimed that it had paid out $277 million on 140,000 separate claims. “I was born and raised in Louisiana,” BP vice president Darryl Willis, who heads the claims process, said in one oft-repeated ad. “I volunteered for this assignment because this is my home. I’ll be here in the Gulf as long as it takes to make this right.”

Problem is it’s never really worked out that way. Since the beginning of the claims process in May, the media has been flooded with complaints about slow payments, byzantine bureaucracy and insufficient funds, especially for the businesses hit hard by the spill and struggling to make payroll. Even BP’s official claims statistics show that only 28% of those 140,000 claims have received at least one payment. On my reporting trips to the Gulf, I repeatedly heard stories about how difficult it was to get a claim sorted—and how the money that was flowing wasn’t flowing fast enough.

But given the sheer confusion and chaos going on in the Gulf—the simple number of people who might have a damage claim—it’s hard to find solid, independent data on the claims process. The investigative nonprofit ProPublica is trying to change that, however. In its latest collaborative reporting initiatives, the website—working together with a number of newspapers and online news sites, mostly from the Gulf Coast—recently launched a callout for stories and data from people experiencing problems with their BP spill claims. (If you have a story you want to share, you can contact them here.)

The project is beginning to pay dividends. A ProPublica story posted this morning found that BP appeared to be purposefully delaying decisions about the validity of whole categories of spill claims, essentially punting the problem to Kenneth Feinberg, the independent administrator who will be taking over the claims process in mid-August:

The company’s claims process is guided by the Oil Pollution Act, a 1990 federal law that holds oil companies responsible for repaying direct “removal costs and damages” caused by a spill. But many claims are for damages that are not explicitly covered by the law — such as ruined start-up companies and lost income from commission payments — and many of those are in limbo.

The delays seemed especially acute for people who worked on commission—like real estate agents, who’ve repeatedly lobbied Feinberg for more recognition—though it was hard to tell how much of the delay was due to BP’s own decisions, and how much was due to paperwork problems. (BP’s own records indicate that the company has held up 43% off all claims for insufficient documentation, more than the total number of claims that have actually been paid out.) But then later today BP put out a press release indicating that it would indeed be deferring a number of categories to the Feinberg and the independent fund, which was set up with $20 billion of BP’s money. Specifically excluded from BP’s last few weeks in charge of the claims are restaurants and tourism businesses not near an oiled beach; workers affected by the offshore drilling moratorium; seafood processors outside the Gulf; and the value of property not near an oiled beach.

So score one for ProPublica for forcing BP’s hand. The problem is that Feinberg has said repeatedly that those types of claims will have a hard time being paid by him as well. At a meeting with Florida businesses in the panhandle resort town of Destin, I heard Feinberg say that proximity to oiled beaches, the type of industry and dependence on the natural resource of the Gulf would be the main factors in deciding whether a claimant gets paid. “That’s the $64 question,” Feinberg told a group of Florida resort owners. “Who’s going to be eligible? You don’t have to be on the beach—but how far away from the beach can you go?”

Feinberg has said repeatedly that he believes BP has been too slow on claims payments—and that he will do much better. But Feinberg is keeping most of BP’s structure—including all those claims centers and even Daryl Willis—and while he’s promised to make six-month payments, rather than just one month at a time as BP did, it’s not clear how he’ll prove a better judge of what makes a fair claim than BP. This is one part of the spill story that is just beginning.