Following a meeting with the President of the United States in June 2010, the BP Board announced an agreed package of measures to meet its obligations as a responsible party arising from the Deepwater Horizon spill.
Agreement was reached to create a $20 billion claims fund over the next three years, and payments will be made to satisfy legitimate claims including natural resource damages and state and local response costs. Payments from the fund will be made as they are adjudicated, whether by the Independent Claims Facility, or by a court, or as agreed by BP.
Changes to the Fund
The new payment system was set up under the terms of a settlement reached this spring to avoid a trial on thousands of health and economic-damage claims by individuals and businesses harmed by the oil spill. The deal, preliminarily approved by U.S. District Judge Carl Barbier, was uncapped, meaning there’s no limit on how much money is available to pay damages, though BP has estimated the cost at about $7.8 billion. The settlement was not an admission of liability by BP.
These new claims facilities represent both a break from and a continuation of the Gulf Coast Claims Facility, the entity run by Kenneth Feinberg from August 2010 through the settlement in March.
Feinberg’s program paid out more than $6 billion of BP money to 225,000 claimants in those 18 months. Although the subject of much criticism from some local officials and unhappy claimants, it received generally high marks for fairness and efficiency from auditors hired by the U.S. Justice Department to review its performance.
A transition team headed by Juneau has paid another $313 million in two months to another 12,700 claimants who were already in Feinberg’s queue, mostly by sending them 60 percent of what Feinberg had offered them while leaving them the option to collect more under the new settlement process.
There appears to be widespread agreement that the new settlement claims process — which has meticulously detailed calculation formulas, clear descriptions of which types of claims are eligible and which aren’t, and court-guaranteed independence — is well-positioned to be more efficient and transparent than Feinberg’s. But the comparison may not be entirely fair.
Even some plaintiffs who complained for almost two years that Feinberg wasn’t as independent from BP as he purported to be now admit that he faced a tough task, having to create from scratch all the parameters for handling claims. Jim Roy, co-lead counsel for the settlement class, said Feinberg did the best he could.
“Mr. Juneau’s operation, as a product of our negotiations with BP, will hopefully benefit from the recognition of some of the problem areas encountered in Mr. Feinberg’s operation,” Roy said.
Feinberg said he supports the settlement and wishes Juneau the best in improving on what the GCCF accomplished. But he said he takes pride in the fact that most of the vendors Juneau is using — to staff the intake centers, review claims and process payments — are the same ones he used.
“I hope they can improve the program and will, as Mr. Juneau says, be more transparent and consistent,” Feinberg said.
Feinberg also offered Juneau this advice: “Do not raise expectations beyond that which is achievable. The population in the Gulf is very vulnerable and very emotional still. It’s very important that the claimant population not expect more than can be delivered. I learned that lesson, and it took me many months to overcome those expectations, which we did in the end.”
Feinberg was chosen in the summer of 2010 by BP and President Barack Obama to pay economic damage claims from a $20 billion escrow fund set up by BP at the White House’s behest. At the time he had an impeccable reputation for running public compensation funds like the ones set up for victims of the Sept. 11, 2001, terrorist attacks and 2007 Virginia Tech massacre. But good will faded quickly.
Based in Washington, Feinberg traveled to the Gulf from time to time. He went before crowds of fishers, shrimpers, crabbers, oyster harvesters, hospitality industry workers and small business owners and announced in a Boston accent that he would deliver generous compensation in a matter of days. Instead, initial payments took months, and most final settlements based on full losses weren’t paid for nearly a year.
By contrast, Juneau — a Lafayette native who plans to spend four to five days a week hovering over every aspect of his operation in New Orleans — comes armed with a Cajun accent that he can emphasize when necessary and his own impressive credentials overseeing big settlements in everything from chemical plant accidents to the largest product liability case in U.S. history, involving the painkiller Vioxx. Juneau said his new task far exceeds all of those cases, in both scope and complexity.
He’ll spend next week meeting with employees at the 18 intake centers from Texas to Florida and the Hammond call center, making it clear that they are to run a claimant-friendly operation.
Here, he made a clear distinction from the Feinberg operation, even though many of the employees will carry over.
“I want this program to kick off in a friendly manner and assist people. I want (the staff) to pay all legitimate, eligible claims 100 percent of what they’re due,” he said. “This is not a negotiating matter. We are not trying to negotiate lesser sums.”
Juneau said he’s heard that claim center workers under Feinberg operated more like insurance adjusters, trying to approve the lowest defensible payments.
Some adjusters who worked for Feinberg’s operation and spoke to The Times-Picayune on condition of anonymity complained that they were not fully trained and that many workers were from outside the Gulf region. Juneau said he has insisted on highly qualified, well-trained and local employees.
He said he’s confident that if a claimant has all of his paperwork in order, including W-9 tax forms, then straightforward claims can be paid very quickly after a 30-day ramp-up period.
“If they’ve got material to substantiate their claim, it will be largely formalistic,” Juneau said.
However, there are still going to be some sticky claims that require accountants to figure them out. Claims based on complex profit and loss statements, claims from failed businesses and start-ups will require a beefed-up accounting staff, Juneau said.
He also expects to get thousands of claims that are not eligible for payment because they don’t fall within the geographic limitations or come from industries excluded in the settlement.
Some excluded claimants — such as those claiming losses from the offshore drilling moratorium imposed by the Obama administration after the spill; BP-brand service stations that said their sales fell because of motorists’ anger at the company; or businesses in eastern Florida that claim they suffered from misperceptions about how far the spill’s effects reached — have already challenged the settlement’s fairness.
And even a few groups who are covered by the settlement feel they are getting short shrift. They include charter boat operators who have to give back money they earned from BP during the spill cleanup, even though shrimpers don’t; and seafood processors, who are in the settlement but don’t fall under the same rules as actual seafood harvesters.
But in the end, anyone who doesn’t get what he wants from Juneau will retain the right to pursue his claims in court.
Far from trying to tamp down expectations, Roy said, Juneau is the right man to get people paid fairly and efficiently.
“He will not let grass grow under his feet, and he will not let grass grow under the feet of anybody he’s responsible for,” the plaintiffs’ lawyer said. “I think this process will move quickly.”