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Winter 2012
IN THIS ISSUE
d&G Lawyer News
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Deepwater Horizon Oil Spill Economic Loss?
By: Kristin Y. Melton & Nicolas Q. Porter
On April 20, 2010, BP’s Deepwater Horizon drilling rig exploded in the Gulf of Mexico, leading to the largest accidental marine oil spill in world history. Unprecedented environmental and economic harm occurred as a result of the spill. Subsequently, numerous class action lawsuits were filed against BP and other entities involved in the spill, seeking compensation for those harmed by the spill. Those lawsuits were ultimately consolidated into one case, and a settlement was reached regarding economic and property damages suffered as a result of the spill.
For businesses suffering an economic loss, all claims must be submitted on or before April 22, 2014 or 6 months after the effective date of the settlement, whichever is later. In order to address economic losses, coastal areas on the Gulf of Mexico reaching from Texas to South Florida were divided into four zones, based on the predicted severity of economic impact resulting from the spill. Businesses must identify which economic loss zone they are located in to determine the demonstration that must be made to recover damages under the settlement agreement. Some businesses are entitled to a presumption of causation and therefore do not have to provide additional documentation demonstrating business economic loss. These are mostly limited to businesses based in seafood, tourism, and charter fishing or businesses located in Economic Loss Zone A, which includes coastal Louisiana, a portion of the Florida panhandle, and the Florida Keys.
Other businesses may also recover damages for economic loss, but must provide a demonstration that economic harm resulted from the spill. Many coastal areas of Florida on the Gulf of Mexico are located in Economic Loss Zone C, while the east coast of Florida and any inland portions are in Economic Loss Zone D.
Businesses not entitled to the causation presumption must demonstrate causation by meeting one of three different types of revenue patterns and submitting the required proof, such as 2011 federal tax returns. The three different types of revenue patterns businesses can use to demonstrate loss include different standards depending on which economic loss zone the business is located in. The business is required to show a baseline period to measure its historical financial performance and may select from several different baseline periods. From that baseline, the businesses must show some type of decline in revenue over 3 consecutive months between May 2010 and December 2010 compared to the same months in their chosen benchmark period.
For example, businesses in Economic Loss Zone C and D must submit the required monthly financial statements and other documents to demonstrate revenue fluctuations were a result of a spill-related effect. Essentially, each of these sets of documents include monthly financial statements demonstrating the requisite percentage decline in revenue for three consecutive months between May 2010 and December 2010 compared to the same months in the benchmark period followed by a later increase in aggregate revenue for the same 3 month period in 2011. Alternatively, the business can show a decline-only revenue pattern if they also identify factors outside the control of the claimant that prevented recovery of revenues in 2011 and one of several factors related to the oil spill.
Please do not hesitate to contact de la Parte & Gilbert if you have any questions regarding the claims process.
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