BP gets stricter with claims

By Catherine Clifford, staff reporter
July 09, 2010: 02:15 PM EDT

BP is becoming increasingly stringent with its demands for documentation from victims filing claims for lost wages and income in the Gulf region.

Immediately following the spill, many initial payments were distributed in uniform amounts with minimum documentation based on estimates. Now, BP will make payments based on each claimants’ documented losses.

As a result of the tightened standards, some claimants could get more money than the standardized industry check they have been receiving while others could get less.

And those claimants that are already in the claims system but have yet to submit the necessary documentation will get a $1,000 “good faith” check for July as they continue to gather papers, but they will not get full payment until proper documentation has been submitted.

Once a claimant submits the necessary documents, if they show that the victim is due more than the $1,000 advance payment for July, BP said it will provide a supplemental payment to make up the difference.

Claimants can submit documentation – tax returns, trip tickets or pay stubs – to BP through the mail, by fax or at one of the 35 claims offices located throughout the Gulf.

“If individuals have not given us supporting documents, we need them,” said Darryl Willis of BP’s Claims Team, in a company statement released Wednesday. “For many it has been 45 to 60 days, and we would like to ensure that we are paying them for the income they have lost.”

There will be no “good faith” payments after July. To be paid in August and beyond, claimants must provide verification of their income with documentation.

BP is not shutting the door on filers, however. If a claimant gets all of the documentation together in October for losses incurred in June, for example, BP will honor the backdated claim. “From our point of view, people can backdate claims as long as they want,” said Max McGahan, BP spokesperson. “If they have documentation, we will pay out the claims.”

Even if BP is patient, however, a claimant needs to be aware of local statute of limitation laws, which vary on a state-by-state basis.

In the first months after the oil spill, BP cut checks to victims based on estimates without requiring extensive documentation. For example, boat captains that ran a crew got a $5,000 initial check and deckhands got $2,500. But starting with advance checks cut for July, dollar amounts will be much more specific.

“We are going to make a more precise payment which reflects their actual loss,” said McGahan. Checks “will also reflect the seasonality of the fishing industry.”

Fishermen earn the bulk of their annual pay in a few peak months that vary depending on the particular seafood being caught. When they submit their paperwork, those variations will be accounted for.

BP has paid out $157.6 million in nearly 51,000 checks as of Thursday. More than 100,000 total claims have been submitted to BP, but meanwhile, more than 45,000 claims are sidelined, awaiting further documentation.

As BP tightens its demand for documentation, the company insists it is not trying to shortchange any claimants.

“The idea is not to reduce how much we are paying out in claims. We are trying to make a more sophisticated system,” said McGahan. “To do that, we need some documentation; it has to be based on something.”

Even as BP works to refine its process, it won’t be in charge for that much longer. The former special master of the September 11th Victim Compensation Fund, Kenneth Feinberg, has been appointed to oversee the claims process.

Calpers calls for meeting with BP


Anger at BP PLC’s handling of the Gulf oil spill is prompting one of its largest U.S. shareholders to call for changes on the company’s board.

The California Public Employees’ Retirement System, the biggest U.S. public pension fund, is conferring with BP officials next Wednesday amid criticism from some institutional investors that the board’s response to the spill has been too passive.

A person familiar with the situation said Calpers, which held 60.6 million BP shares as of June 30, is concerned about the “quality and competence of the board” and will urge changes in its makeup. The person described directors’ response to the spill, the worst in U.S. history, as “disastrous.” A BP spokesman declined to comment.

BP has denied accusations that its directors have been passive-or have kept too low a profile-during the crisis. BP Chief Executive Tony Hayward said last month he had received “extraordinary support” from the BP board, adding that two nonexecutive directors, William Castell, former head of GE Healthcare, a unit of General Electric Co., and Paul Anderson, an ex-CEO of BHP Billiton Ltd., had been on extended trips to the U.S. to witness BP’s emergency response to the spill first-hand.

But some investors still feel the board has failed in its duties-especially in regard to oversight of BP’s U.S. operations. BP suffered a string of mishaps in the U.S. prior to the Macondo well blowout, including a fatal explosion at its Texas City refinery in 2005 and an oil spill in Alaska the following year.

The person familiar with the situation said one of the questions Calpers executives will likely raise when they speak to BP officials next week is whether the board took adequate corrective steps in the aftermath of Texas City. Calpers hasn’t decided yet whether to seek a replacement for BP Chairman Carl-Henric Svanberg or Mr. Hayward.

Calpers is one of many big shareholders hammered by the Gulf crisis. BP’s shares have lost about $82 billion in value since the start of the spill, triggered when a drilling rig the company was leasing in the Gulf of Mexico exploded and sank nearly 12 weeks ago. BP is still struggling to plug the leak and cope with its escalating liabilities, which some analysts have estimated could reach $80 billion.

In the face of intense political pressure in the U.S., BP agreed last month to set aside $20 billion to cover compensation claims, and dismayed investors by suspending its dividend for the year.

BP shares have recovered somewhat in recent weeks, rising around 22% since hitting a 14-year low on June 25 amid growing optimism that the company might be close to capping the leaking Macondo well. The first of the two relief wells BP is drilling should intercept and kill Macondo some time in August, and possibly earlier.

The stock has also been buoyed by reports that sovereign wealth funds in the Middle East may be interested in buying stakes in the company.

Messrs. Svanberg and Hayward have been holding several meetings with investors in recent weeks, as part of a charm offensive designed to reassure them “that we approach the situation [in the Gulf] from a position of strength,” a spokesman said.

However, many investors suspect that once the well is capped and the company has a better handle on its liabilities, BP may jettison both men. One U.K. institutional investor, who met with Mr. Svanberg late last month, said he didn’t expect either man to remain once BP caps the well, but is reluctant to press for management changes until then. Another said he didn’t expect a clear-out until a full inquiry had established the precise causes of the Gulf disaster.