Oil Spill: Is the Claims Process Fair?

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Twice over the past month and a half I’ve sat with groups in Louisiana and Florida while Kenneth Feinberg—the booming Boston lawyer who is running the multi-billion dollar oil spill compensation fund—made his pitch. The audiences couldn’t have been more different—worried and wary fisherman in the tiny Louisiana village of Port Fourchon and platinum real estate agents and hotel managers in the gilded Florida resort of Duedin—but Feinberg’s message was the same. He would offer emergency payments—equivalent to six months of lost income—faster and better than BP’s justifiably criticized claims process, and that money would come without strings. But if claimants decided to take an additional lump sum payments—meant to fully compensate them for the economic losses created by the spill—they would have to forego their right to sue BP for damages. Nor would claimants get everything they wanted—Feinberg made it clear that issues like proximity to the coast and dependence on the Gulf as a resource would be taken into into account when determining the validity and value of damage claims. But ultimately, Feinberg argued, he wanted to make the claims process clearly superior to the courts, to convince the people of the Gulf coast that they’d be better off trusting him than trying a lawsuit. “I work for you,” Feinberg told the fishermen in Port Fourchon back in July. “And I want to make the claims system work for you.”

Feinberg may be confident—he oversaw the $7 billion compensation fund for the 9/11 fund, and generally won plaudits for his performance—but sorting out the hundreds of thousands of claims that will likely be filed over the oil spill will be incredibly difficult, and people will end up unhappy. That much was obvious on Friday, when Feinberg released the initial rules for the claims process. (BP has been running the claims fund for the past few months—and not very well, according to many Gulf residents—but starting today Feinberg and his team have taken over.) Fishermen who worked for BP during the clean-up process were angry that their income from those weeks would be deducted from any claims they were granted. Business owners who depend on Gulf resources—like seafood for a restaurant far from the coast—were angry that Feinberg will take into account proximity to the coastline when evaluating claims. Homeowners were angry that they would receive no compensation for any drop in property values due to the spill. State and local governments were unhappy that they couldn’t make damage claims through Feinberg’s process.  And just about everyone felt that was something fundamentally unjust in giving BP—and potentially other companies involved in the spill, though that’s less clear—a shield from further lawsuits.

In the short-term at least, however, Feinberg can’t help but do better jobs with the claims process than BP has. He has said that individuals will be able to get their emergency payments within 48 hours of filing a claim, and businesses within 7 days—you can file a claim online here—and just given his experience, he should be far better equipped to make this process work. He’s pledged that there will be one adjuster per claim—Gulf residents complained of frequently being shuffled around to different offices under the BP process—and has promised that he’ll accept a minimum of documentation, especially for emergency claims. Given his experience running the 9/11 fund, there’s probably no one in the U.S. better prepared to take over this process than Feinberg.

But that doesn’t it will be fair. By comparison, 9/11 was a relatively straightforward problem—Feinberg had to calculate damages for the survivors of the attack and the kin of those who died. That meant calculating lifetime income based on known metrics—a stockbroker killed at age 30 could be expected to earn a certain amount of income over the course of their life. It wasn’t easy, but there was precedent. By contrast, the total damage—ecologically and economically—from the oil spill is still unknown. Right now the government is feuding with independent scientists over just where much of the oil from the spill has gone. No one really knows, nor can anyone be sure of what the long-term damage to fisheries or the coastline might be. The environment could rebound fairly quickly—or there could be lasting problems with the Gulf itself, and with the fish who depend on it. Even if fishing seems to bounce back right away—which seems to be happening with shrimp in the Gulf—there’s no guarantee there couldn’t be further issues down the line. That’s what happened after the Exxon Valdez spill, where fish populations crashed four years after the accident.

That uncertainty will make it all the more difficult for Gulf residents and businesses to make the right choice on a claim. If a fisherman can’t accurately predict what the spill will do to his business four or five or six years down the line, how can he make an informed decision on a compensation claim? Feinberg mitigated the uncertainty somewhat by giving claimants up to three years to decide whether or not to accept a final claim, but that still may not be enough time. And since many people in the region are hurting right now, they may not be able to wait years to find out how serious the spill really was, or spend the money to fight BP in court, as one Alabama lawyer told the New York Times:

“A lot of people are desperate,” said Jere Beasley, a lawyer in Montgomery, Ala., who represents more than 1,000 people seeking damages. “BP realizes that they can take advantage of a person’s desperation to pay the bills and feed a family. It’s a callous approach.”

Still, it may be the only approach that can work—even a little bit. The alternative—hundreds of thousands of individual lawsuits against BP—would be even worse, and would probably only benefit lawyers in the end. That’s largely what happened in the agonizing aftermath of the Valdez spill—there was no compensation czar then, so cases made their way through the courts over the course of nearly 20 years. In the end—thanks in no small part to Exxon’s deep pockets and antagonistic legal strategies—what was once a punitive penalty of $5 billion was whittled down to around $500 million. And that money may not have been worth the mental anguish—sociologist Steven Piccou found that the single biggest factor in long-term mental stress from the spill was not how directly someone was impacted by the accident, but whether or not they were a litigant. And Feinberg himself has been clear that it’s unlikely any claimant would get a better deal from the courts than they would from him.

That doesn’t mean BP—or Feinberg, for that matter—should be given a free pass on the claims process. Journalists should be examining this fund along every step of the way—which is indeed what TIME and other publications are trying to do in conjunction with the website ProPublica. (Anyone filing a claim who’d like to talk about their experience should go to this site.) But the sad reality is Feinberg’s compensation process might be the best offer most Gulf residents and businesses will get—fair or not.