BP hires Cozen O'Connor to devise compensation plan in Deepwater Horizon spill

BP has established a $20 billion fund to compensate victims of the Gulf Coast disaster.
BP has established a $20 billion fund to compensate victims of the Gulf Coast disaster.
Posted: August 13, 2010

The BP gulf-compensation fund has hired Center City lawyer Stephen Cozen to draft rules on how the $20 billion fund will be distributed to businesses and individuals who suffered losses from the oil spill.

Although BP has been paying out limited emergency claims, the compensation fund will begin formally evaluating losses in about a month, said the fund administrator, Kenneth Feinberg.

"There is no one else in the nation who has Steve's grasp of these issues or his experience," Feinberg said in an interview Thursday.

Cozen has spent much of his career litigating disputes over huge business losses, often on behalf of insurers. Typically, that has involved assigning a value to business losses sustained through fire or other calamity, and then defending those findings in court.

His firm, Cozen O'Connor, has handled disputes over losses in some of the biggest disasters of the last few decades, from the 1980 fire at the MGM Grand Hotel in Las Vegas to the 1981 Hyatt Regency skywalk collapse in Kansas City, Mo., and the 1991 fire at One Meridian Plaza, a 38-story Center City tower that burned for 19 hours, killing three firefighters.

The firm also is suing Islamic charities based in Saudi Arabia and other alleged financiers of terrorism on behalf of insurers to recover damages from the 9/11 attacks.

In the One Meridian fire alone, the firm recovered $110 million for the owner, ER Associates, and the manager, S. Richard I. Rubin & Co.

The issues facing Feinberg in compensating victims of the gulf oil spill bear similarities to the fallout from other disasters, but they also differ in significant respects.

As a condition for accepting compensation, spill victims must agree not to sue BP. Damages will be awarded based on the decisions of claims evaluators working for Feinberg from rules drafted by Cozen and other lawyers at his firm, not by judges and juries.

Feinberg has had long experience with this kind of compensation approach. He was the administrator of the 9/11 compensation fund established by Congress to reimburse victims and their families of the terror attacks.

As with the gulf fund, those who suffered losses in the attacks had to agree not to sue in exchange for accepting payments.

But the issues facing the gulf-compensation fund are, in a way, more complex because the fund must measure business losses in likely thousands of cases. That involves a projection of what businesses might have earned had there been no spill, and had the businesses continued to operate.

In broad brushstrokes, Cozen said he anticipated that businesses would need to establish some geographic proximity to the spill and show that they had been directly impacted. So, a Gulf Coast restaurant that specialized in local seafood that couldn't sell it because of the spill likely would be able to make a case.

On the other end of the spectrum, Cozen said, "You might have a restaurant in Boston that serves Gulf Coast shrimp. Those businesses are not going to be eligible for anything."

Cozen said nine lawyers at the firm were working on the assignment from several practice areas, including the firm's energy, litigation, maritime, and insurance groups. The firm declined to disclose its chargeable rate for work for the BP fund, but partners at Cozen typically charge between $400 and $600 an hour. In addition to drafting the terms under which claims will be paid, the firm also will write manuals for claims evaluators and train the evaluators.

BP's Gulf of Mexico Macondo well blew out April 20, destroying the offshore drilling rig Deepwater Horizon and claiming the lives of 11 rig workers. Until it was effectively but temporarily capped July 15, officials say, the well spewed nearly five million barrels of oil into the gulf, tarnishing wetlands, spoiling beaches, and damaging the gulf's prodigious tourist and fishing industries.


Contact staff writer Chris Mondics

at 215-854-55957 or cmondics@phillynews.com.

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