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Article of Interest: Oil Spill

May 14, 2010

Frequently Asked Questions Regarding Oil Spill Legal Options

Below are frequently asked questions that may be of concern to homeowners and businesses along Florida's coast.

What legal options are available to individuals or businesses that are damaged by the oil spill in the Gulf of Mexico?

There are two main routes to recovery of money damages: through traditional state-law causes of action, such as negligence; and through the federal Oil Pollution Act of 1990 (“OPA”). Generally, unless oil physically makes contact with your person or property, federal law limits claims for economic damages and requires them to be filed under OPA.

What kind of claims can be made pursuant to OPA?

Under OPA, claims may be filed for a broad spectrum of economic damages, including lost profits and earning capacity, oil cleanup costs, and damage to property.

What do I have to do to file an OPA claim?

The filing of an OPA claim is a multi step process. Prior to filing suit under OPA, the claimant must comply with certain procedural requirements. The claimant must first present their claim to the responsible party as designated by the federal government, BP in this situation. The responsible party then has ninety (90) days to process the claim and either settle the claim or deny it. If no settlement is by the conclusion of the 90 days, then the claimant has the option to file a lawsuit or to file a claim with the Oil Spill Liability Trust Fund.

What is the Oil Spill Liability Trust Fund?

The Oil Spill Liability Trust Fund was created by OPA. It is managed by the federal government and is funded by taxes levied on domestically produced oil and imported oil refined in the United States as well as by penalties levied by the Coast Guard for spill prevention regulation violations. Other sources of funding include cost recoveries from responsible parties and interest earned on fund investments. The maximum size of the fund is $2.5 billion dollars.

Is the Oil Spill Liability Trust Fund solely used to compensate private individuals making claims pursuant to OPA?

No, the Oil Spill Liability Trust Fund has other uses besides paying claims made by private individuals pursuant to OPA. These include:

  • Removal costs incurred by the Coast Guard and the EPA
  • State access for removal activities;
  • Payments to federal, state, and Indian tribe trustees to conduct natural resource damage assessments and restorations;
  • Research and development;
  • and other specific appropriations.

Is there a faster way to recover for the short-term losses I have sustained?

OPA sets up an administrative scheme under which BP is required to establish a procedure for the payment of interim, short-term damages. This procedure is not for all of the damages incurred but is only a short-term remedy. BP has established interim claim centers to process these short-term damages claims.

Funds received through these centers are for “partial settlement” and will not preclude the claimant’s ability to recover the full amount of their losses.

It is certainly possible for claimants to handle this aspect of the claim on his or her own. However, it is important to keep in mind that all information provided to BP during the processing of these interim claims could possibly be used against the claimant in a later proceeding.

If I make a claim pursuant to OPA, does that mean that I am going to receive the full amount of the damages claimed?

The existence of the OPA does not guarantee that any person can be compensated for all economic losses. There are important risks inherent in the OPA scheme that may prevent a full recovery. Some of these include:

  • The value of the claim is initially evaluated by the responsible party, which may undervalue the claim or deny it entirely. BP has promised to pay “legitimate” claims but has not yet given guidelines for what that means. If suit must be filed, there is a risk that a court would not agree with the valuation and the suit could be partially or completely lost.

  • It may take a very long time to resolve the claim, particularly if suit must be filed and protracted litigation begins. Some claimants are still awaiting full payment from the Exxon Valdez disaster in 1989.
  • There is a risk that BP or other responsible parties will run out of money to pay claims, enter bankruptcy, or otherwise be unable to satisfy all damages. If litigation is needed, this risk increases.

  • There is a cap on each responsible party’s total liability pursuant to OPA. For BP, the cap is $75 million plus clean-up costs, and there is an as-yet undetermined amount for other parties. These limits apply to the total value of all claims to be paid out by the responsible parties, meaning that, for example, BP’s $75 million might be divided up among all claimants in the Gulf of Mexico (or might be fully disbursed before claims can be filed).

    Fortunately, the cap can be lifted if gross negligence or a violation of an applicable federal regulation can be shown. Also, although this has not yet been confirmed in writing, BP has indicated that it will not assert the cap as a defense to paying its full share of damages. However, these statements are not binding.

  • All suits must be filed within three years of the incident.

What type of information is needed to support a claim for damages made pursuant to OPA?

Each claimant must prove damages. Therefore, everyone with a potential claim should begin gathering and saving evidence documenting his or her losses.

Claimants should think about how best to show past income compared with present income, and secure these papers while still available. Going forward, claimants should keep good records of income and losses. Claimants must also avoid incurring future losses to the extent it is possible. This is also called “mitigating damages.” For example, if a business normally sells hot dogs to tourists, but the beach is closed and it is known that business will be down, the business should avoid buying the usual number of hot dogs if they will go unsold and have to be thrown out later. As another example, if a person can reasonably remove property such as a boat from contact with oily water, he or she should do so. As another example, a fishing business that is shut down due to fishery closure in a certain area should consider traveling to unaffected waters if this can reasonably be done. In general, anything that can be reasonably done to avoid losses now should be done. The cost of loss avoidance should be documented because these costs may be compensable.

Is OPA the only basis for recovery of damages caused by the oil spill?

In the event that oil comes into contact with property, state-law causes of action may assist in recovering damages. These causes of action could apply in addition to damages provided under OPA. Thus, in addition to the remedies provided under OPA, there may be other ways to recover.

Helpful Links:

Deepwater Horizon Response

Governor’s Commission on Volunteerism/Oil Spill

Oil Spill Academic Task Force

Apalachicola Riverkeeper (Franklin County Specific)