The Fifth Circuit Court of Appeals has recently struck down BP’s request to cancel the settlement agreement it had arranged with the Plaintiff’s Setting Committee (PSC) in March 2012. BP’s effort to get this agreement, which has been intended to compensate individuals and businesses that suffered damages as a result of the 2010 Deepwater Horizon oil spill, was initiated in November 2012, as BP began to realize the costs of the agreement could likely far exceed the company’s initial estimates of $7.8 billion (and its updated estimate of $9.2 billion).
As part of its efforts to get the settlement agreement thrown out of court, BP was also requesting that the terms for proving causation of oil spill damage claims be made stricter in order to reduce the number of individuals and businesses who would be eligible for oil-spill settlement payouts. However, with the court denying BP’s request, the U.K.-based oil company will now be on the hook for paying individuals and businesses who meet the terms of the original settlement agreement for their oil-spill damages.
Legal and financial experts who have been monitoring the progress of this case have now estimated that, with the original oil-spill settlement agreement still in place, BP could end up paying more than $15 billion to settle all of the claims. It’s important to point out that this estimate does not include the costs that may be associated with civil litigation and other oil-spill claims that are not submitted via the PSC agreement, as some individuals and businesses are not accepting the settlement agreement and are, instead, choosing to sue BP on their own.
Details on BP Oil-Spill Settlement Claims
According to the terms of the BP-PSC settlement agreement, individuals and businesses will have until April 22, 2014 (or until six months after the effective date, with the later date being applicable) to submit their claims to BP for compensation.
The claims administrator overseeing the submission of new claims reportedly has received more than 250,000 new claims as of January 13, 2014. On average, nearly 21 percent of all oil-spill settlement claims submitted to the administrator are denied (for not meeting the requirements of the agreement and/or not providing sufficient proof of damages); when claims are approved, they are generally awarded around $70,000 each. While the average number of claims submitted each month for a BP settlement totaled approximately 25,000 last year, this rate of submissions has significantly declined recently, with less than 10,000 new claims being submitted per month in recent months.
However, as financial experts have pointed out, even if the submission rate drops to about 5,000 new claims submitted monthly from now until the April 2014 filing deadline (and the rate of claim denials and average payouts remains the same), BP is facing settlement payouts of more than $15 billion.