Victims say they have no recourse as BP ends internal claims program

Four years after the Deepwater Horizon explosion devastated the Gulf of Mexico, killing 11 and gushing more than 200 million gallons of oil into the water, the company found responsible has shut down an internal claims program utilized by small business owners, injured rig workers and even casino companies affected by the disaster.

At one point, BP’s internal claims program, a separate entity from the controversial Deepwater Horizon Court Supervised Settlement Program, covered thousands of claimants who weren’t eligible to join the court-supervised settlement. It also covered those who chose to opt out because they felt the settlement didn’t offer enough, but didn’t want to go through the time-consuming, expensive process of filing an independent lawsuit.

In an emailed statement, BP announced that the program’s closure would affect very few people. “The fact is that 99 percent of the claims received by the BP Claims Program have been resolved,” said Geoff Morrell, senior vice president for the company’s U.S. communications and external affairs.

But lawyers representing Gulf Coast clients say that the company’s statement is simply not true — and that as many as 10,000 people could be affected by the decision.

Now those lawyers, as well as claimants and a congressman, are demanding the oil company pay out the funds they feel are due — even if it means reinstating the program.

“It’s quite shocking for me that a company that has admitted responsibility for an unlimited amount of money would cut off all negotiations with the thousands of victims, thousands of clients, who are not part of the class-action settlement,” said lawyer Stuart Smith, whose many clients come from Louisiana and were affected by the spill. “BP has a legal and moral obligation to expeditiously adjust and pay these claims.”

As a rig worker, Stone did not qualify to be part of the court-supervised settlement, his lawyer, Brent Coon, said. Coon did submit an open letter to BP on Stone’s behalf, asking for reparations through the internal claims program, but BP did not offer him any money, he said.

Stone said the blowout wasn’t the first thing to go wrong on the BP project. Four times in 20 days leading up to the disaster his crew had had to stop pumping mud into the wellbore hole — the process by which oil wells are drilled — and instead were forced to pump sealant into the well’s foundation to stop the cracks that were beginning to form there.

Now, according to Coon, Stone suffers from a myriad of issues including post-traumatic stress disorder and depression, which require extensive treatment — yet he has never received any money through the internal claims process.

“He barely survived. He’s acutely traumatized and can’t focus,” said Coon, who has represented more than 10,000 clients in the aftermath of the BP disaster. “He needs regular psychiatric treatment for depression.”

Stone isn’t getting the steady care he needs — he seeks help only when he can afford it. He filed a lawsuit against BP three years ago but has not received any reparations. Many oil spill victims say they have not received money because of delays in the New Orleans federal district court proceeding tasked with consolidating lawsuits pending against BP to conduct uniform discovery.

And Transocean, the company that owned the rig Stone was working on, hasn’t been helpful either, he said.

“All I can do right now is wait for my day in court,” Stone said. “It’s very frustrating  — individuals are not represented in this country.”

Stone is not alone. Coon says he has other clients who weren’t eligible for a settlement payment, such as those in the casino industry, who have lost up to $10 million in revenue but have received nothing from BP’s internal claims process.

Others, such as hotel owner David Arnsby of Sarasota, Florida, qualified for the settlement but chose to opt out.

Arnsby lost 25 percent of his revenue, or about $600,000, from Country Inn and Suites the first year after the oil spill. By now, his losses have amounted to $7.5 million, Arnsby said, and he's gone into foreclosure because he defaulted on a loan.

In June 2011, he submitted a claim to the Gulf Coast Claims Facility for $6 million, his total losses at that point. He was only offered five cents on the dollar as reparation, however, for a grand total of about $250,000. 

Arnsby refused the offer, at which point his claim was transferred to the Deepwater Horizon Settlement Program. 

But Arnsby opted out, and instead took advantage of the internal claims program. Now, he feels the program was a trap.

“They didn’t do a thing. They ignored every single claim that my attorney sent,” Arnsby said. “They had no intentions of honoring that program.”

Moreover, Arnsby said, the company's website said he would receive "interim payments" before his final reparation was issued. But those, too, have yet to reach his mailbox, he said.

Facing financial ruin and the prospect of starting over on bad credit, Arnsby said BP has acted immorally.

“I think it is their mission to financially ruin people. It’s un-American,” he said. “They want to break you down, get you on your knees, get you to try to take four cents on the dollar.”

BP initiated its internal claims process soon after the explosion to be in compliance with the Oil Pollution Act of 1990, which assigns some liability to the responsible party after a spill in an effort to protect victims. The act was signed largely in response to another oil crisis, the 1989 Exxon Valdez incident in the Prince William Sound of Alaska.

More than 100,000 claims from individuals, businesses and state and local governments were filed through the internal process right away, and more would filter in. Considered the largest accidental deep-water petroleum spill in the history of the oil industry, the Deepwater Horizon disaster left oil gushing into the gulf for 87 days and affected industries like fishing, tourism and real estate across several states.

However, the internal claims program was around for only a few months before being farmed out to the independent Gulf Coast Claims Facility, which was announced in June 2010 after a meeting between BP executives and President Barack Obama, and began accepting claims that summer.

As part of an agreement negotiated with the White House, BP brought in attorney Kenneth Feinberg, who oversaw the 9/11 victims’ compensation fund, to run the claims program. The resulting shift in the claims process occurred in part because, in Coon’s words, BP was “doing a miserable job” of managing the large number of claims that were coming in.

“They didn’t have the resources or skill sets to handle it,” Coon said. 

A BP report shows that during those 16 weeks, the internal BP Claims Program paid out on 46,500 claims of the 154,000 that officials received — just about 30 percent.

In contrast, the new Gulf Coast Claims Facility oversaw a $20 billion trust fund established by BP to settle claims arising from the spill. The fund was to be used for a range of expenses, including natural resource damages, state and local response costs and individual compensation.

Of the $20 billion, $6.7 billion went to individuals and businesses. It abruptly ended in June 2012, however, when BP agreed to a Court Supervised Settlement Program with a committee of plaintiffs’ lawyers to resolve certain economic loss and property damage claims. In the summer of that year, BP estimated the settlement would cost $7.8 billion, of which it paid out $3.8 billion between the program’s creation and October 2013, at which point it was stalled by BP's court appeals.

But the settlement left out many of those affected — including real estate developers, insurance entities and gas station owners who sold BP fuel. And so the oil company reinstated the internal BP Claims Program.

Before shutting it down, BP shelled out about $11.6 million from its claims program — a tiny fraction of the $12.9 billion the company has paid overall through the claims facility, the court-supervised program and other payment deals.

That’s because the majority of individual and business claims have been submitted to the court-supervised settlement program since it began operating in June 2012, according to BP. The company’s financial records show that by the end of April of this year, about $4 billion was paid out through the settlement program.

“Very few claims were being submitted through the BP Claims Programs when this decision was made,” BP spokesman Morrell said in a statement.

But while the oil giant acknowledges how much was paid out, company officials won’t say just how many claims were received after the settlement program was created and before the claims program was shuttered last month.

BP officials say the conclusion of the formal claims program won’t have any effect on the claimants’ rights. As the company points out, the end of the internal program will not affect the Court Supervised Settlement Program.

Moreover, those who aren’t class members, and therefore can’t submit claims under supervision of the district court, can still communicate directly with BP through contacts noted on the website, BP official Morrell said.

“BP remains committed to paying all legitimate claims,” he wrote in an email.

But Congressman Raul M. Grijalva, D-Ariz., said BP’s latest statement is just another in a string of lies the oil company has produced since the spill. He thinks the move is part of an orchestration to simultaneously restore the company’s public image while delaying, or possibly avoiding, paying reparations.

“I think they’re deliberately trying to get out of responsibility and using courts to stall payouts,” Grijalva said. “It’s very arrogant of BP, given all that happened with the accident, to take this action. But they have lied to the American people more than once.”

He finds it “no coincidence” that the company shut down the claims program after March 13 of this year — the date when the Environmental Protection Agency lifted its ban on BP’s drilling in the Gulf of Mexico.

The EPA’s decision followed a public relations campaign featuring ads with sparkling beaches and happy fishermen. Chefs Emeril Lagasse and John Besh, both of whom have signature restaurants in New Orleans, were also paid to promote Gulf seafood.

Less than one week after the ban was lifted, BP bid on and won rights to drill in 24 new blocks of the Gulf of Mexico for $42 million. In the meantime, those who suffered losses are still waiting as the internal claims process is shut down. The settlement program was delayed for months, too, by BP’s court appeals.

“All this leads me to the conclusion that this was orchestrated by the campaign to get drilling rights to go back into the Gulf, and then within three months they’re trying to get out of responsibilities,” Grijalva said. “That’s the game they played.”