The Obama administration took a significant step forward in helping Floridians and other Gulf Coast residents survive the devastating oil spill by establishing a new, independent process for paying damage claims. While this should have been done weeks ago, Wednesday's announcement that BP will contribute $20 billion into a claims fund administered by a third party provides some clarity for both those harmed by the spill and for BP. It should result in a fairer, faster system that provides quicker relief for thousands of individuals and small businesses struggling to survive.
It never made sense for the company responsible for this assault on the Gulf of Mexico to oversee its own claims process, decide who deserved to be compensated and determine the amount of the check. That was a conflict of interest, and the $5,000 limit applied to many claims was far too low. While more than 26,000 checks have been written for more than $81 million (including more than $11 million in Florida), more than 66,000 claims have been filed. Many businesses along the gulf are still waiting for their checks from BP or need more help to remain open.
While BP resisted creating such an escrow fund for weeks, demands from Florida officials and others for the federal government to take over the claims process — and the heartfelt pleas for help from gulf residents — finally forced the Obama administration to act. Although the new system falls short of that goal, the result should be a substantially improved claims process.
President Barack Obama made a wise choice in selecting Kenneth Feinberg as the independent claims administrator. Feinberg previously administered the 9/11 Victim Compensation Fund, and he served a similar role following the Virginia Tech shootings in 2007. In the past year, he has been reviewing the compensation plans at hundreds of financial institutions and auto companies that received federal bailout money. All of that experience suggests Feinberg is well qualified to see that the BP claims seamlessly transfer to the new process and that there is a sense of urgency to helping those most in need.
There are a number of other positives about the change. This is an evolving situation as long as the oil continues to gush, and it is impossible for anyone to guess the ultimate damage to livelihoods. The new process ensures businesses and individuals will be able to file multiple claims to reflect continuing damages as the crisis advances. There is a clearer appeals process, and there should be faster turnaround time. For BP, there is some certainty in scheduling its payments into the fund over four years while setting aside $20 billion in U.S. assets to guarantee that commitment. The company also prudently suspended paying dividends to its shareholders for the rest of this year, increasing the comfort level that it will meet its moral and legal obligation to pay for the damages it caused.
This still will be a long, hot, miserable summer along the Gulf Coast as Floridians and their neighbors endure the immeasurable losses created by the nation's worst environmental disaster. Yet Wednesday brought a sense of relief that at least there will be a fair, independent and prompt system for evaluating damage claims and sending out the checks needed to hang on.