Rethink on how Deepwater Horizon compensation claims are assessed could save company billions of dollars.
BP has secured a victory in its battle to limit payouts over the 2010 Gulf of Mexico oil spill, in a move that could save the company billions of dollars. The British oil firm welcomed a ruling by the US court of appeals that will force a rethink on how compensation claims related to the disaster will be assessed. The supreme court also ordered that payments must be stopped to people who did not suffer “actual injury traceable to loss” from the spill until cases have been properly heard and decided through the judicial process.
The rig explosion killed 11 people and caused damage to those earning a living from fishing and tourism-related businesses along the coast. But BP has persistently argued that the formula for judging claims was too generous, resulting in payments to people who had not actually suffered from the explosion, including businesses that were located far inland but still claiming economic loss.
Circuit judge Edith Brown Clement said: “There is no need to secure peace with those with whom one is not at war. The district court had no authority to approve the settlement of a class that included members that had not sustained losses at all, or had sustained losses unrelated to the oil spill, as BP alleges. If the administrator is interpreting the settlement to include such claimants, the settlement is unlawful.”
The company had set aside $7.8bn (£4.8bn) for compensation claims but by July the figure had risen to $9.6bn and was set to rise significantly without court intervention. Claims administrator Patrick Juneau said that about $3.69bn had been paid out in compensation. BP has already incurred more than $42bn of charges for cleanup costs, fines and compensation related to the spill.
BP said in a statement on Thursday: “[The] ruling affirms what BP has been saying since the beginning: claimants should not be paid for fictitious or wholly non-existent losses. We are gratified that the systematic payment of such claims by the claims administrator must now come to an end.”
Stephen Herman, a lawyer representing a group of claimants, said the vast majority of claimants would still receive compensation despite the ruling. He said: “We look forward to working with the claims administrator and the court to determine the best way to get the affected claims processed and paid as soon as possible.”
Meanwhile, the second phase of a separate trial over the spill began on 30 September. It focuses on how much oil was spilled and BP’s effort to control the flow, which are crucial questions in determining the size of the fine that BP must pay for its role in the disaster. The justice department claims that 4.2m barrels of oil flowed from the Macondo well in the wake of the explosion, with BP claiming that the true figure was closer to 2.4m barrels.
Under the Clean Water Act, the company and its partners face fines of up to $1,100 for each barrel of oil spilled if they are found to have been negligent. The fines could rise to $4,300 per barrel if the judge is persuaded that BP and its partners’ action constituted gross negligence or willful misconduct.
Related articles
