March 5, 2012 by Canadian Underwriter
British Petroleum (BP) has reached a $7.8 billion settlement with the plaintiffs’ steering committee (PSC) for the economic loss and medical claims stemming from 2010 Deepwater Horizon accident and oil spill.
The settlement is subject to final written agreement.
BP estimates that the cost of the proposed settlement to be $7.8 billion. The settlement is divided into two classes of claimants, those with medical claims and those with economic claims.
According to a BP press release, $2.3 billion of the total settlement has been earmarked for economic loss claims related to the Gulf seafood industry. The proposed agreement to resolve economic loss claims includes the financial commitment for the Gulf seafood industry and a fund to support continued advertising that promotes Gulf coast tourism.
The proposed agreement to resolve medical claims involves payments based on a matrix for certain currently manifested physical conditions, as well as a 21-year medical consultation program for qualifying class members. BP would also provide $105 million to improve the availability, scope and quality of healthcare in Gulf communities.
Alexis Flynn, a writer with the Wall Street Journal, posted a blog suggesting that by “prioritizing a settlement with the people who bore the brunt of the spill, BP has made a sensible move,” with two important consequences.
The first, it takes a lot of the emotion and spectacle out of the process. “Not only does it save time and likely make the litigation more streamlined, it saves BP a repeat of 2010’s rolling stream of negative headlines,” Flynn wrote.
The second is that it shows U.S. authorities that it isn’t planning to “wriggle out of this.” By addressing the smaller claimants, it has likely bought itself the goodwill that will allow it to negotiate a less punitive set of fines, she continued.
Flynn also noted that if the U.S. government pursues criminal environmental penalties against BP, the potential penalties could reach $17 billion to $40 billion. Potential civil penalties, based on the amount of oil spilled but increased by any finding of negligence, could add an additional $20 billion.