As Oil Gushes Out, Damage Claims Pour In

By Allison Linn
|  Tuesday, May 11, 2010  |  Updated 7:30 AM CDT
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As Oil Gushes Out, Damage Claims Pour In

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Grassy marsh wetlands of St. Bernard Parish are seen as work continues to try to protect it from the massive oil spill on May 9, 2010 in Gulf of Mexico. The Deepwater Horizon oil rig operated by BP is leaking an estimated 5,000 barrels of oil a day into the Gulf and the slick has now reached nearby land.

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Even as oil continues to gush out of the damaged Deepwater Horizon drilling rig, everyone from Louisiana fisherman to Florida condo owners are already beginning to vie for compensation from oil company BP.

Experts say it could take decades to sort out the claims, and BP executives  acknowledge the company will have to spend more than the $75 million cap on that type of liability payment, which was set by the Oil Pollution Act of 1990.

“We believe it is inevitable we will spend more than the OPA suggests settling claims and are willing to do that,” BP spokesman Mark Salt told msnbc.com Monday.

BP has said the oil spill already has cost the company $350 million in total, including costs such as cleanup, containment and relief well drilling. The company’s top lobbyist told The Associated Press on Monday that it had already paid $3.5 million in damages beyond the cleanup costs.

Robert J. Gordon, a lawyer with Weitz & Luxenberg in New York, noted that claims from the 1989 Exxon Valdez oil spill — which precipitated the Oil Pollution Act — took nearly two decades to work their way through the courts.

The end result was not good news for plaintiffs: the Supreme Court drastically cut payouts to them in a 2008 decision.

The Gulf oil spill could end up being even more complex, since the oil slick could potentially affect a wide swath of businesses across several states. Those include fisherman in Louisiana, homeowners along the Gulf coast and restaurateurs, hoteliers and even golf club owners in Florida.

On Monday, BP said it was working to find a new way to contain the ruptured oil well, which has spewed an estimated 3.5 million gallons of oil since an explosion on the oil rig April 20. Meanwhile, blobs of tar were beginning to wash up on Alabama’s beaches, and other states girded for similar problems.

Legal wrangling under way
A multitude of lawyers have already descended on the area and begun preparing individual and class-action lawsuits against BP. Earlier this week, BP asked that more than 70 lawsuits that have already been filed be consolidated before a judge in Houston, although some plaintiffs' lawyers would prefer that they be heard in New Orleans.

But even as the legal wrangling moves forward, many acknowledge that it’s too early to say how much damage the oil slick will eventually cause. That’s because no one knows when BP will be able to stop the leak, or where the oil will eventually end up.

“There are many unanswered questions about the extent of the spill and therefore the extent of the damage,” said Gordon, whose firm is representing 500 fishermen in individual claims and who also is involved in a class-action lawsuit against BP.

Other legal battles are likely to emerge as well. A BP shareholder has already filed a lawsuit against the company. And Gordon notes that there will likely be legal wars between BP and some of the other companies involved in the operation, such as Halliburton and Transocean, as well as any insurance companies they may contract with.

There also may be legal wrangling between BP and the federal government, especially if the government moves to raise the $75 million cap in liability damages for these types of accidents. Several senators have already introduced legislation that would raise the cap to $10 billion.

Russ Randle, an attorney with Patton Boggs who wrote a legal guide to the Oil Pollution Act for the Environmental Law Institute, a policy research group, in 1991, said raising the cap by such a substantial amount would make it nearly impossible for anyone but the largest companies to afford to run offshore drilling operations.

Randle, who is updating his guide to the act, noted that the $75 million cap does not include cleanup costs and would not apply if BP was found to have committed gross negligence, willful misconduct or a violation of federal health and safety standards. He said there’s also a chance that, as BP has implied, it will not stick to that payout limit.

“BP may decide for very good reason that it’s not going to stand on its rights about that because it’s got bigger issues to address,” he said.

Still, Gordon, the fishermen’s lawyer, cautioned that there could be a big difference between what BP pledges to do now and what they end up saying in court in five years.

“They’re not going to go down quietly,” he predicted.

Already, BP has been forced to back off from a reported effort to get fishermen who agreed to help with cleanup efforts to sign a waiver offering them $5,000 in exchange for a release from liability.   “That was an early misstep," BP Chief Executive Tony Hayward told National Public Radio.

 

At the time the Oil Pollution Act was enacted, Randle said the $75 million cap was actually seen as a victory for plaintiffs and environmentalists.

“It was higher than the other numbers that were kicked around,” he said.

He said this is the first time the liability limits have really been tested but also cautioned that it could take years to sort out which claims are legitimate and how much BP will have to pay.

“This is going to go on for a very long time,” he said.

Some businesses are already starting to tally potential damages.

The Florida Restaurant and Lodging Association held a press conference last week in an effort to reassure would-be tourists that the state was still open for business. But the group acknowledged that some tourists were canceling vacation plans, and it urged members to keep detailed records so they could file compensation claims with BP.

“We know the oil spill is a threat and need to plan ahead,” Florida Chief Financial Officer Alex Sink said in a statement.

Forensic accountant John Hutson said he is working with clients in Florida to assess how much their businesses have suffered just due to the threat that the oil spill could come ashore there. Hutson said he has made initial contact with BP but has held off on filing claims until he has a better idea of the extent of the damage.

“It’s hard to grasp the dollars right now,” he said.

Gordon said he also had yet to file individual lawsuits on behalf of the fishermen he is representing. He said his firm also was talking with other potential clients including cities, counties, states, hotels and property owners who may be affected.

“Many of them are still in a wait-and-see position right now,” he said.

The Associated Press contributed to this report.

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