The BP Deepwater Horizon drilling rig exploded on April 20th and sank in the Gulf of Mexico two days later.
Settling business interruption claims related to the recent oil spill in the Gulf of Mexico is not going to be as simple as British Petroleum made it sound. Many businesses have been, or will be, adversely affected by this event. These businesses may be making claims for their economic damages through:
- First party insurance.
- Oil Pollution Act through the National Pollution Funds Center.
- Direct claims to British Petroleum (BP).
- Lawsuits against BP, Transocean, or others.
The one thing in common between all of the above options is the need for a solid measurement of damages. With regards to damages, the claimant must identify, quantify, present, and be prepared to defend their damage valuation.
Early in the process, I warned many people that claims to BP would not be a cakewalk. Many have already ignored my advice and taken BP representatives at their word that BP would quickly pay all damages resulting from this incident. That was BP’s position last week.
Over the weekend, BP’s attorneys obviously grabbed their PR people by the collar and gave them a good shake. Today BP is saying, “Where legitimate claims [of damages] are made, we will be good for them” and BP will pay for, “legitimate and objectively verifiable” claims. This is a far cry from the statements last week and a wakeup call for those who thought they would have an easy time with these claims.
The inclusion of the words “legitimate” and “objectively verifiable” indicates that that these claims will be scrutinized. They will be stringently reviewed for causation and damage quantification. I anticipate that the consultants usually hired by large insurance companies will be retained to review and tear down any claims.
In short, BP has already changed course. Any damage valuations on behalf of businesses should be prepared by a credentialed forensic accountant in order to ensure that the valuations will stand up to scrutiny. The time to involve a damages expert is sooner rather than later.
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