Navigating The BP Fund – Will BP Payments Cap Ensuing Lawsuits And Insurance Claims?
August, 2010
The extent to which the escrow account BP recently agreed to fund will compensate those affected by the DEEPWATER HORIZON blow-out is unclear. The BP Oil Spill Victim Compensation Fund ("Fund") administrator has not yet detailed the Fund’s claim process to the public. Even then, confusion and debate will likely ensue as to the implications of the Fund’s payment for oil related loss and/or damage upon a claimant’s right to further litigate against BP and other third parties or, if applicable, to make claim under insurance policies affording first party property coverage. As a preview to the developing compensation issues, here is a general rundown of what’s known so far regarding the BP Fund claim process: Based on preliminary authoritative pronouncements to date, claimants who receive emergency payments (as described above) under the Fund are not precluded from further litigating against BP or other potentially responsible third parties for additional compensation. Under OPA guidelines, claimants who have insurance that may cover oil removal costs or damage are not required to use it; however, in any claim submission to OSLTF (and presumably the BP Fund), claimants must report that they have insurance and/or have received an insurance payment for some or all of the damage sustained. This is because OPA specifically preserves "subrogation" for insurance companies and prohibits double indemnity payments for the same loss and/or damage. Whether insurance will cover any of the claimed losses caused by the oil spill will depend upon the specific scope and language of the particular policy upon which claim is made. Emergency funds issued by ICF to a claimant based on "minimum corroboration" may challenge an insurer’s investigation and assessment as to which elements of claimed loss under the insurance policy are not duplicative of amounts previously paid under the Fund or from third parties. Confusion over the scope of multiple payments and risk of double indemnity may be avoided if the claimant maintains a record that adequately describes what payments are coming from what sources for which damages. A claimant’s full release of BP from any and all present and future liability in exchange for full compensation for loss and damage could be problematic in a separate and subsequent claim presented for coverage under a first party property insurance policy. Many policies prohibit an insured from prejudicing the insurer’s right to recover from a third party legally responsible for loss. The insured’s release of BP for all claims may violate this provision. The implications of a claimant’s full release of BP on subsequent first party property insurance claims must consider the specific policy language, applicable statutes and underlying facts in determining whether or to what extent the insurer’s subrogation rights have been affected. The full impact of the DEEPWATER HORIZON blowout on the people and businesses of the Gulf states and beyond is unknown – and it likely will take many years to sort out the various liabilities and identify what resources are available to respond to the losses. The implications of disbursement of Fund payments are twofold: (1) a signed release may only cap BP’s liabilities but not necessarily prevent a claimant from making a separate claim for additional monies from its insurer(s) or other third parties; and (2) BP Fund payments, whether emergency or final in nature, may serve as a setoff to any claim asserted by a claimant against its insurer and/or other third parties for the same loss or damage. One thing is for sure – the drive to tap all available sources of payment for claimed property loss and damage has only just begun.
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