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If individuals and businesses injured by the Gulf oil spill don't have a crystal ball, they may not get full compensation for their damages, under rules recently announced by Ken Feinberg, the administrator of the $20 billion BP oil spill compensation fund.
Under the rules, those impacted by the spill may make an initial claim for their emergency needs but then are limited to a single final claim for the rest of their damages. Claimants may not make periodic claims for damages as events unfold. On the contrary, to receive payment on the second, final claim, claimants will have to release BP from any and all further liability.
These requirements are inconsistent with the compensation scheme set forth in the Oil Pollution Act, which specifically contemplates interim partial payments. As a practical matter, they create a Catch-22 situation in which many victims' dire economic straits will force them to file their final claim before they know, or can document, the full extent of their damages. They are contrary to Feinberg's statement at a recent town hall meeting in Biloxi, Mississippi, that he will "find every possible way that's legal and justified to pay eligible claims." He should reconsider these rules and adopt a more flexible claims process.
The Oil Pollution Act says specifically that "[t]he responsible party" -- here, BP -- "shall establish a procedure for the payment or settlement of claims for interim, short-term damages." The Act goes on to say that payments for interim, short term damages "shall not preclude recovery by the claimant for damages not reflected in the paid or settled partial claim," and "shall not foreclose a claimant's right to recovery of all damages to which the claimant otherwise is entitled under this Act or under any other law."
Nothing in the Act limits a claimant to a single claim for interim, short-term damages. On the contrary, the requirement to establish procedures for the payment of partial claims, and the fact that payment of partial claims does not preclude claims for other damages, makes clear that claimants may make a series of partial claims as events unfold. Congress plainly intended that those impacted by a spill be fully compensated for their damages. And Congress did not want claimants to have to wait until their damages are fully known to receive compensation. Limiting claimants to a single claim (plus some initial emergency funding) would undercut these fundamental goals.
The requirement to release BP for all its liability is also contrary to the Act. As noted, the Act provides that partial payments do not preclude recovery of other damages. If a claimant must release BP in order to receive a payment that does not reflect the full amount of the claimant's damages, the partial payment effectively precludes other recoveries.
Recent press reports indicate that the amount of oil spilled in the Gulf may be far more than the original estimates. Other reports suggest that the oil is not washing ashore in the quantities expected. Whatever the case, there is a great deal of uncertainty about the scope of the oil spill and the magnitude and duration of its effects. Until the oil stops flowing for good, cleanup operations are well under way, and all the resulting damages are fully known, it would be unfair and unwise to cut off victims' rights to seek full compensation from the responsible party. What's the rush?
A version of this post originally appeared on Mr. Shore's blog, oilspillinsurance.blogspot.com