Independent BP Spill Fund Begins Operations

With the launch of the Gulf Coast Claims Facility, Crawford is in, Worley remains on the job, while Philadelphia-based ESIS is no longer on the account.

By GREGORY DL MORRIS, a New York-based business journalist who has covered the global energy and chemical sector for more than 20 years

As of Aug. 23, the Gulf Coast Claims Facility (GCCF), the independent arbiter and processor of damage claims against BP for the April 20 blowout of its Macondo well in the Gulf of Mexico, is in business under the direction of attorney Ken Feinberg. The first major change under the facility is that the GCCF hired a subsidiary of Crawford & Co.--now called GCG but formerly the Garden City Group--to help with the claims process.

Insuring Public-Private Construction (11/01/11)
Irene: One Year Later (07/24/12)
Second Thoughts About the China Market (07/11/11)
Federal Flood Insurance Program Gets Extension (01/24/12)
When the Birds Bring Down the Planes (07/19/11)

Risk-management firm ESIS Inc., a Philadelphia-based subsidiary of insurance major ACE Ltd., is no longer involved. ESIS had been the claims administration contractor for BP while the oil company dealt with claims intake and processing directly. ESIS was handling directly all government claims, as well as private claims of more than $5,000 out of its office in Wilmington, Del.

Worley Catastrophe Service, based in Hammond, La., which had been acting as a subcontractor for ESIS, is now handling government claims, as well as continuing to operate the 36 claims-handling offices in five states that it had been operating for BP.

BP said that it paid a total of $368 million to individuals and businesses during the time it administered the claims process directly with ESIS as a third-party administrator.

"Worley will continue working in the field offices with their claims evaluators," said GCCF representative Amy Weiss. "ESIS is not part of the GCCF. This work will now be done by GCG and Worley. GCG will be processing the claims, and Worley will be evaluating the claims. They are being trained by Feinberg's team to follow the new facility's emergency protocol. The Gulf Coast Claims Facility will be open for business on Monday, Aug. 23."

Crawford declined to provide any details of the work it was doing for the facility. A spokeswoman for ESIS said the company is assisting with transferring the work to the GCCF.

THE BACKGROUND

On Aug. 9, BP established a trust and made a $3 billion initial deposit into a previously announced $20 billion escrow account to pay "legitimate claims arising from the Deepwater Horizon incident and the resulting oil and gas spill," the company said. An additional $2 billion deposit will be made in the fourth quarter of 2010. Thereafter, $1.25 billion will be deposited per quarter until a total of $20 billion has been deposited.

"The purpose of the escrow account was to assure those adversely affected by the spill that we indeed intend to stand behind our commitment to them and to the American taxpayers," said Bob Dudley, CEO of BP's Gulf Coast Restoration Organization. "Establishing this trust and making the initial deposit ahead of schedule further demonstrates our commitment to making it right in the Gulf Coast."

Two individual trustees have been named to the newly established trust that will administer the account: the Honorable John S. Martin, a former U.S. District Judge for the Southern District of New York, and Kent Syverud, dean of the Washington University (St. Louis) School of Law. Citigroup will serve as corporate trustee and paying agent for the account. Arrangements have been made for checks drawn on the fund to be cashed free of charge at any of the 160 Whitney National Bank branches across the Gulf Coast region.

Feinberg, who is paid by BP, will also be naming a review panel of three retired judges to hear appeals of the decisions made on claims by the facility and its subcontractors. That panel has not been named yet because, as Feinberg explained, there has been no need for appeals yet.

LAWSUITS

Feinberg has also stressed that emergency claims can be paid without a claimant waiving the right to sue BP or any of the other major parties in the spill. But he has also specified that claimants taking an additional final settlement from the Gulf Coast Claims Facility will have to waive the right to sue.

Dozens of people and businesses with claims have chosen to sue. On Aug. 1, the United States Judicial Panel on Multidistrict Litigation consolidated all of the personal injury, wrongful death and property damage actions in the U.S. District Court for the Eastern District of Louisiana under U.S. District Judge Judge Carl J. Barbier in New Orleans.

Barbier has set the first pretrial conference for Sept. 16.

The panel also severed the shareholders' securities-fraud actions and consolidated those in the court of Judge Keith Ellison of the U.S. District Court's Southern District of Texas in Houston.

August 23, 2010

Newsletter Sign-up