Relief Ahead: Key Asset Recovery Options Available to Gulf States in Aftermath of Deepwater Horizon Oil Spill

Author:Mr Richard Shore
Profession:Gilbert LLP

Originally published May 18, 2010-05-28

CRISIS AND RESPONSE: States and localities in the Gulf coast are in crisis response mode as they deal with the unprecedented oil spill that threatens their shores. It is crucial that these states take quick and aggressive action to assess and pursue resources available to them to help deal with this catastrophe. Likewise, Members of Congress and state and local government officials can play a key role in ensuring that their constituents have the knowledge and tools necessary to maximize recovery of assets to deal with the consequences of the spill.

Gilbert LLP partner, Richard Shore, specializes in recovering insurance and other assets for mass disasters and mass torts, emphasized the importance of focusing on asset recovery early in the crisis response effort: "Given the billions of dollars in damages that are predicted here, insurers and the Oil Spill Liability Trust Fund will be inundated with claims. It is important that anyone impacted by the spill be at the front of the line and actively manage the claims process from that vantage point – not simply throw their claim into the hopper and hope for the best."


FRAMEWORK: The Oil Pollution Act allows claims for oil removal costs and damages to be made against the "responsible party" and the Oil Spill Liability Trust Fund. The liability of the "responsible party" for damages is capped at $75 million (caps do not apply in certain cases). In response to a request by the Obama Administration for clarification of previous statements concerning the cap, BP recently stated that it is "prepared to pay above $75 million on these claims and . . . will not seek reimbursement from the U.S. government or the Oil Spill Liability Trust Fund." Claims against the Oil Spill Liability Trust Fund are subject to a $1 billion per-incident cap. TYPES OF CLAIMS: States can recover against the "responsible party" or the Fund for removal costs incurred to clean up an oil spill. Removal cost claims against the "responsible party" are not subject to the caps set forth above. States and their political subdivisions also can recover natural resource damages, increased costs of public services, and lost revenues due to oil spills in the Gulf. Private parties can recover for property damage, lost income and profits, and the like.

LEGISLATION TO RAISE RECOVERY CAPS: On May 3, 2010, Senators Robert Menendez (D-NJ), Frank Lautenberg (D-NJ), and Bill Nelson (D-FL) introduced legislation...

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