The $20-billion compensation fund created by BP in the aftermath of the Gulf of Mexico oil spill will begin issuing lump-sum payments to residents affected by the disaster as part of a final settlement program, Kenneth R. Feinberg, the federal official overseeing the fund, said Wednesday.
The final claims process confronts those seeking damages with what might prove a tough choice.
They can negotiate to receive money from the fund now and forfeit all future claims against BP and other companies involved in drilling the ill-fated well. Or they can hold out, take smaller interim payments if they can prove ongoing damage from the oil spill and take their chances in court down the road.
"I hope many will" seek final claims, Feinberg said in a conference call. "I hope it will be sufficiently generous to take into account the unknown future and that many will see the wisdom of taking a lump-sum payment and moving on with life."
BP created the final settlement fund in June and, according to Feinberg, it has paid out about $2.3 billion in emergency claims over three months to about 150,000 people.
Despite a backlog of emergency claims that the fund plans to clear up by mid-December, Feinberg said the fund was ready to begin processing lump-sum requests now, and that 7,000 had been submitted already.
The fund has not been without its detractors, including politicians from the Gulf Coast who have complained about too little money going to big companies affected by the spill, and individual claimants who have been frustrated by delays in claims processing.
On Wednesday, lawyers for the plaintiffs who have filed suit against BP and the other companies criticized many aspects of the final claim mechanism. Brian Barr, who serves on the court-appointed plaintiff lawyers steering committee, said that it was unusual for final claims in a disaster to be paid before all, or most, of the facts were in.
The lawyers' biggest complaint, however, stems from the fact that those who make a final claim have to forfeit the right to sue not just BP, but also other companies that might have played a role in the disaster.
Late last week, the Justice Department raised concerns about several aspects of the final claims mechanism, most notably that the release claimants have to sign forgoing the possibility of future litigation is overly broad.
Several investigations, including a criminal inquiry by the Justice Department, are still underway and have yet to deliver definitive conclusions about who was at fault for the blowout of the well and the sinking of the Deepwater Horizon drilling rig. But preliminary reports have called into question the soundness of the cement that contractor Halliburton used to seal the bottom of the oil well, and an investigation is underway into the blowout preventer built by Cameron International and owned by Transocean.
"What Feinberg is saying is that if you settle with one defendant, you're getting rid of all the other claims against all the other companies that haven't put in a single penny into the fund," Barr said. "They're getting released from any responsibility to the people they've affected."
BP could sue the others involved with the drilling operation to recoup what it paid to claimants.
Other lawyers not involved in the litigation said that a final claims mechanism that precluded future lawsuits and that permitted BP recourse with other companies was conventional practice.
Steve Yerrid, special counsel for the oil spill to Florida Gov. Charlie Crist, said that the disaster dealt such an economic blow to the region that the BP fund had to move fast, even if courts and investigations had yet to determine who was at fault.
"It was essential," said Yerrid, a trial lawyer. "We'd like a perfect world, but the fact of the matter is, there are families in jeopardy, working men out of jobs, small businesses in danger of closing. BP got a lot of things wrong, but one of the things it got right was to set up a fund to give expedited relief to those who need it."