Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

As the November 23, 2010, deadline to file a claim for an emergency advance payment approaches, the next step is still unclear. On October 6, 2010, the Washington Independent published a question and answer interview with Feinberg, in which he indicated that interim payments, rather than binding final payments, may be an option. Interim payments would be the just solution, as the extent of the damages will not be clear for several years.

The panel assigned U.S. District Judge Carl Barbier to preside over the multidistrict litigation (MDL). The cases will be transferred to the Eastern District of Louisiana. In determining the location, the MDL Panel stated:

Without discounting the spill’s effects on other states, if there is a geographic and psychological “center of gravity” in this docket, then the Eastern District of Louisiana is closest to it.

The MDL Panel issued a second order consolidating and transferring all shareholder actions against BP to the Southern District of Texas.

Dan Reynolds, from the insurance industry on-line news, Risk & Insurance ran a story, La. Insurance Commissioner, ESIS Deny Claims-Hiring Rumor. He did a terrible job investigating the facts if he wanted to get it right. He helped BP white wash an investigation of the claims process by interviewing only Donelon and then the company in charge of the process, ESIS. He failed to do what any reasonable junior investigative reporter would have done--dig for the other viewpoint and their information. As such, the story is a sham and reflects poorly on an insurance industry news publication that people should be able to rely upon for accurate information.

The article noted:

The claims-adjusting blog Dimechimes ClaimSmentor was one online source that on June 7 mentioned a rumor that BP had instructed ESIS, the oil company's TPA for Deepwater Horizon oil spill damage, not to hire any adjusters with experience resolving claims from the Exxon Valdez oil spill of March 1989.

"It's the first I've heard of it," James J. Donelon, the insurance commissioner for the state of Louisiana, said when Risk & Insurance® queried him on the rumor on June 16.

More experienced claims adjusters were subsequently hired, according to a June 9 post from Dimechimes ClaimSmentor.

Over the past two weeks, BP has booked full-page ads in newspapers and television featuring claims representatives to reassure claimants that it is fairly and timely resolving claims.
...

Donelon said that members of his staff have investigated some BP-related claims centers throughout Louisiana. "We have done some visits to claims centers and found them to be operating smoothly, but that is not all of the claims centers and I do not know how many adjusters there are." he said. A surge of complaints would trigger an examination of the claims operations, Donelon added.

Because BP is self-insured, however, an insurance company is often not the ultimate payer of the claim. As a result, Donelon said, it is possible that irate claimants may not be bothered with alerting Louisiana regulators about poor service.
...
"We can share that the claims professionals working with or for ESIS are experienced in crisis situations and distributing funds to people affected by catastrophes as quickly as possible," Carla Ferrara, a Philadelphia-based spokeswoman for ESIS parent company ACE USA told Risk & Insurance® in an e-mailed response to questions.

Donelon said his department has become skilled at knowing when claims are mishandled given the department's experience of settling claims related to hurricanes Katrina and Rita in 2005. "We had a million claims in connection with Rita and Katrina five years ago, so yeah, we do know when things are not being handled as they should be, I believe, and we are knowledgeable and experienced and staffed enough to monitor this situation from an insurance regulatory perspective, no doubt," he said." (empahsis added)

Two weeks ago, I wrote Is BP Hiring Ignorant Claims Handlers with Little Dollar Authority to Pay Claims? That following Monday night, I was in Destin, Florida, for an emergency City Council meeting and wrote about my thoughts in Oil and Hurricanes: Here Comes the One Two Punch:

I am writing this post late Monday night, flying home from Destin, Florida. I was in Pensacola earlier, and debated for BP contributing to a $20 billion oil spill trust fund on Fox Business News. Cash is the lifeblood to businesses. If BP does not get money it owes to Gulf Coast businesses soon, business death in the form of bankruptcy will quickly occur to many businesses with resultant harm to employees and their families.

In Destin, the City council convened an emergency meeting which I attended. Fishermen reported oil slicks 4.5 miles from Fort Walton Beach. Given this development, Destin City Hall was the scene of democracy in action. Out of frustration, the Okaloosa County Commission defied federal officers and voted to take self help measures to preserve their water and beaches, claiming they would willingly go to jail, rather than do nothing.

For those who may be critical of President Obama for alienating the British regarding the BP Oil Spill, I suggest that the people of the Gulf Coast really don't care. The Gulf Coast way of life has been damaged and more is threatened by BP's lukewarm reaction. Earlier in the evening, elected County officials joined the angry crowd and took measures into their own hands. They voted to take action not approved by the Federal Government. One official threatened use of their own police to implement their own remedy and battle BP oil spill responders.

Others not from the southern coastal states should get the feeling that many local leaders and people of the Gulf Coast don't care who is upset. They require any action which will keep the oil out of their local waters and off their shores. They are tired of hearing nothing can be done to fight the oil. A comment was made at the emergency meeting that people from Washington D.C. and Chicago don't enjoy or go on the water or beaches, but spend their time in fancy restaurants. To say that there was "anger in the air" caused by frustration would be an understatement.

If Insurance Commissioner Donelon or reporter Dan Reynolds attended these type of meetings, they would hear numerous examples of delayed and inept claims handling. The group of attorneys that we are working with on our class action cases obtained a recording of that meeting, and just this one example of dozens that indicate the claims payment problems and disconnect between those damaged by BP and the BP claims administrators:

My name is Steve Travin, I am a small business owner and I have some direct questions for Jay, BP. I want to know when they are going to stop spending their multi-millions on their image and advertisements and pay the poor fishermen, the people who work the docks, the waitresses and for everyone and all the hoops that they make you jump through, you go through their office and they make you file paperwork 10 times over and everyday they have another piece of paper for you to file, we get no money to pay our bills. We get promises and we get nothing back out of that. I have a boat that I have put in with BP and I cannot even get a call me to put the boat back in the water.

BP Claims Rep (Jay Prothro): I do understand the frustration of the vessels of opportunity program, it has not been without many faults. It is on its 5th or 6th iteration right now trying to improve the process because it has been just a big calamity of errors. There have been issues with contracts, issues with activating existing vessels, issues with the commercial vehicles versus the private owned vehicles that are just pleasure boats. All of those things are being addressed and they are attempting to call out the pleasure boats now. They are attempting to create a situation where they rotate boats so that the boat owners and the commercial folks who has not had an opportunity to get in the program yet that can be rotated in, that they boats and vessels can be used and they can earn some money as well. We do understand there are some problems with it, and what I would like to suggest, is if you have had an issue with the VFO program that you contact us at the office in Fort Walton and we will do everything we can to help you straighten out those issues.

President Obama understood the problems after meeting with people who live and work in the Gulf, and he forced BP to put $20 Billion in a claims fund and independent review of the claims program. How could any reporter or Insurance Commissioner miss the problems? Numerous other journalists wrote articles on the these problems that were supported by Congressional testimony, as explained in BP Trying to Limit its Payouts, Lawyers Say:

But, in a letter Tuesday to BP head Tony Hayward, Allen expressed "ongoing concerns related to delayed processing times for larger loss claims, claims pending with no action taken, payment calculations for individual loss of income claims (particularly for seasonal workers), translation of claims material and accessibility for the hearing-impaired." Allen also told Hayward, "We would like more information about BP's plan for continuing loss of income claims, the mediation program BP is putting in place, and BP's placement of claims coordinators in each state and how these liaisons will engage with local officials."

Allen also informed BP he was appointing Tracy Wareing, who has been working as part of the National Incident Command, to oversee the claims process. Wareing met with BP officials Wednesday and on Thursday reported progress in making the claims process more responsive and open.

"During the meeting, we directed BP to provide clear public information on the entire life cycle of the claims process that they have produced, and ensure that we have greater accountability for the American people," Wareing said.

On the length of time it takes to pay businesses for losses, she said, "we indicated that -- and they recognize -- that their previous approach of waiting until basically after the books have closed for each month to calculate losses will not work. It won't get dollars out quickly enough for the businesses that are struggling on the ground."

She said BP promised "a more expedited claims process for these larger-loss business claims that will basically take into account the ability to allow for those businesses to pay their expenses for the upcoming month as opposed to reflective to the last month."

She said Willis, who was at the meeting, would be participating with her in a series of meetings across the Gulf in the next several days to hear concerns about the process.

And she said that they are going to meet with BP's claims contractor "to ensure that we can make some changes to better explain to the American public what claims are being paid, what the status is of pending claims, and ensuring that they're being paid timely and fairly." (emphasis added)

I think there has been some progress on getting larger lost income claims paid. Our firm is following up with those success stories, so accountants can learn to put together claims packages that will be approved and paid quickly, for much greater amounts.

Following my speech on Understanding Valuation Issues of Gulf Oil Spill Claims Thursday in Atlanta, an accountant thanked me for explaining that BP needs to hire a legion of accountants who understand and can quickly calculate the amount of money businesses are losing as a result of the oil spill. He then told me that a hotel for which he calculated a lost income analysis was denied a claim because BP’s claims representative thought lost revenue projections had to be performed on a room by room basis. That is a stupid demand and it shows the ignorance of the BP claims representative. Significantly, the claims adjuster did not use the "D" word for denial, but asked for it to be "resubmitted." No wonder BP can claim it has not denied any claims.

Until our elected officials and the reporters get on the ground in the impacted areas and talk with enough people involved with the particular issue, it is hard to get a story correct. Of course, if you want a white wash for BP propaganda purposes, Donelin and Risk & Insurance have done a marvelous job of portraying BP as running a "smooth" claims process. 

The economy along the northern Gulf Coast is being destroyed because of unnecessary tourist cancellations and vacation plan changes. The truth is that the BP Oil Spill has not physically impacted the islands or beaches in Florida. Instead, the media coverage caused by the spill is impacting the Gulf Coast economy. Florida's leaders from Miami-Dade and Broward County may want to consider this the next time they place themselves in the media to show concern about the crisis. They may want to make their preparations in a more quiet way or damn the people they are trying to help.

The condominium shown in the video, Edgewater Beach Condominium, is a lead client of ours in the class action lawsuit we have filed. We have added a distinguished class action attorney, Adam Moskowitz, and his firm, Kozyak Tropin and Throckmorton, to the team of lawyers with the notable Florida panhandle firm of Keefe, Anchors Gordon & Moyle. On Friday, we amended the class action complaint and also filed an emergency motion for injunctive relief.

The other condominium shown in the video is one of a number of individual commercial clients we represent that have been economically damaged by the oil spill. The recurrent property insurance coverage question people are asking is 'what happens if a hurricane pelts my property with oil?' My first response is that people should not worry about perils that may never occur, except to have the most broad coverage they can obtain. Second, I am not certain whether the scenario will happen, because the oil probably would not fly into a structure, but only get carried in the water as part of the storm surge. I anticipate that many carriers would claim that the cause of the loss would be flood rather than wind, and we would be in the same wind versus water quagmire that plagues us in so many other hurricane events. We can speculate on those coverage issues later. My suggestion today is to buy flood insurance now.

In the meantime, visit and enjoy the sun and water along Florida's beaches. We'll take care of the dragons.

My friends and attorneys at Levin, Papantonio, Thomas, Mitchell, Echsner, Rafferty & Proctor, P.A. are doing it right. I had the pleasure of working with them as co-counsel on a great number of Hurricane Ivan matters, and they were kind enough to attempt to refer some major business income claims to me following Hurricane Katrina. My understanding is that they have decided to not charge clients for work to recover money that BP will voluntarily pay as a partial damage claim, and they will charge attorney fees only on claims that are denied or have disputed amounts. That is fair. There are some businesses that will need help right away to prepare and present these claims, and the fees for those services should be far lower than the one third of any recovery that some attorneys have been quoting.

Bob Glasser sent me the following article, that I minimally edited, which will help some insurance and BP claimants in their future first and third party claims.

How to Capture Hotel Lost Profits Today Due to the Gulf Oil Spill
in Order to be Reimbursed by the Responsible Party

With uncertainty and concern surrounding the impact of the Gulf oil spill to the coastline from Florida to Texas, many companies are asking what needs to be done to quantify and document lost income for future claims. Many businesses are considering filing insurance claims. Others may be looking at the potentially responsible parties for direct reimbursement. Regardless of the source of indemnification, proper documentation of claimed losses is critical.

Quantifying and documenting lost revenue has been a complicated undertaking for the hospitality industry. On one hand, documenting cancellations in connection with booked rooms is relatively straightforward. On the other hand, identifying lost demand prior to a booking can be quite subjective.

Capturing cancellations with appropriate and supportable documentation to withstand future audit can happen only if specific protocols and procedures are put in place now. The process needs to be properly documented and communicated to the relevant employees. Documentation objectives include memorializing discussions and correspondence among hotel sales personnel or reservation agents with guests, potential guests, corporate booking agents and wholesalers, for the purpose of identifying the reason for a cancellation. Loss documentation prepared today should be reviewed by a seasoned financial professional to increase the likelihood it will withstand challenge by an adverse party. Date, time, conversation or action reported contemporaneously, and person making the entry should be made as it is done and collected at least daily.

The protocol for associating lost income from cancelled bookings to the oil spill may include refinements to existing sales software or the use of a database/spreadsheet to include the group name, group contact, intended date of stay, number of rooms, F&B revenue, room revenue, ancillary revenue, date of cancellation and reason for cancellation as well re-booking date if any and where the group moved, if known. Additional recommended procedures to be implemented include but are not limited to the following:

1. Reservation call centers should be provided specific instructions on how to document lost demand when guests ask about oil spill conditions.
2. Properties should identify any group discounts they offer to either appease a group with complaints due to the oil spill or to maintain a group reservation that was considering cancelling due to the oil spill. These discounts would be considered a mitigation strategy to curtail future lost revenues.
3. Any extra expenses incurred for marketing promotion or additional advertising over the normal operations to negate a loss of occupancy due to the oil spill should be documented.
4. Subsequent drops in occupancy rates from historical levels attributable to the oil spill should be recorded. Therefore, pre-oil spill occupancy, ADR and RevPar reports must be archived and maintained for future documentary support of decline in revenue.

The ability to submit and ultimately settle a claim for lost revenue with either an insurance carrier, BP, or another entity will be predicated on the culmination of many hours of dedicated recordkeeping and consistent application of data accumulation protocol. The critical lesson learned is that when an organization is able to execute the above steps, the likelihood of proving a loss and recovery is substantially increased.

Those making a third party claim or insurance claim should consider obligations of mitigation and consult with competent legal counsel and trusted business professionals.

About the Author
Bob Glasser is a managing director at BDO Consulting, a division of BDO Seidman, LLP, in the New York office. Mr. Glasser is a certified public accountant, a certified fraud examiner and a certified insolvency and reorganization accountant, with more than thirty years of diverse financial management and accounting experience at public and private companies.

Mr. Glasser, who is also known as “B.I. Bob,” leads the firm’s New York Insurance Claim Services practice, assisting insured businesses—including hotels, manufacturers, distributors and service organizations throughout the world—to prepare and substantiate business interruption and property damage claims resulting from physical damage due to hurricanes, floods and other perils. Mr. Glasser has also been involved in forensic investigations of employee theft in the hospitality and retail industries.

EDO hold a variety of certifications, including CPA, CFE, MAI, ASA and MRICS and can be accessed at www.bdo.com
.
Robert Glasser, Managing Director
(212) 885-8173
rglasser@bdo.com

Less than 24 hours later, as BP’s second containment box is moved into place in an effort that Gulf Coast residents pray will help stop the seemingly endless pouring of oil from the ocean’s floor, the beginning of the “cascade of failures” which led to this disaster has been revealed.

Many have questioned what BP and others knew about the failed blowout preventer and when it knew. This was a focus during the House hearings this morning. According to Representative Henry Waxman, D-CA., the Committee had uncovered documentation that showed BP and others knew that the blowout preventer on the Deepwater Horizon had a leak in a crucial hydraulic system. This leak is likely one of the predominate causes of the blowout preventer’s failure to stop the oil leak.

BP records also show that the oil well had failed negative pressure tests less than 20 hours before the explosion which sank the mobile offshore drilling unit, killing 11 people, and caused more than four million gallons of oil to be spilled into the Gulf of Mexico. Records show that there was a breach in the well integrity which allowed methane gas and other hydrocarbons to enter the well and likely caused the explosion.

Unfortunately, BP and others did not take these failures seriously, and its neglect has ultimately led to a disaster which threatens the way of life for individuals in more than four states.

While everyone along the Gulf Coast scrambles to find a way to protect his livelihood and property, BP and the others involved continue to “promise” to “pay all legitimate claims.” While this sounds good in a five-second sound bite on the national news channels, many are wondering when this payment will come and whether it will be sufficient to keep their businesses open and their employees on the payroll.

Unfortunately, nobody can answer these crucial questions except for BP and the others involved, and they will not be giving clear answers any time soon. One thing that is clear, however, is that the effects of the Deepwater Horizon oil spill will be felt for years to come.

Business Insurance indicated in part the following:

BP will bear the cost of the cleanup, which could top $3 billion, experts say. In addition, at least 70 liability lawsuits have already been filed seeking damages from BP; Zug, Switzerland-based Transocean Ltd., which owns the rig; Houston-based Halliburton Co., which cemented the oil well; and Houston-based Cameron International Corp., which manufactured the wellhead equipment.

Of those firms, legal experts said BP likely would foot much of the bill. But it's also possible that a government fund, financed through taxes on energy companies, could pay some of those damages, because U.S. law currently limits energy companies' liability to $75 million per spill.

Companies exposed in the accident are insured for $1.4 billion in losses under business interruption, general liability, pollution liability, control-of-well, property and workers compensation coverage, according to the New York-based Insurance Information Institute.

The spill likely will generate extensive claims from downstream entities affected by the pollution, including fishing and tourism operations. In addition to damages sought in litigation, many also may file claims under their own business interruption, contingent business interruption and similar policies, legal experts said. Generally, claimants are entitled to liability damages only if pollution touches their property, said Richard Hobbie III, president of New York-based underwriter Water Quality Insurance Syndicate. Business interruption claims might not have such a restriction and could arise further downstream, such as a New England restaurant that imports seafood from the Gulf Coast, he said.

The Gulf of Mexico produces more seafood than the entire East Coast from Maine to Florida, according to the Corpus Christi, Texas-based Harte Research Institute for Gulf of Mexico Studies. The institute estimated conservatively that the oil spill endangers $1.6 billion of tourism, recreational and commercial fishing, and economic benefits from coastal wetlands.

Business interruption policies typically appear within a commercial property policy, so such claims will depend on the definition of property, which often excludes land, such as a beach at a coastal hotel, said Marshall Gilinsky, a New York-based attorney and shareholder at Anderson Kill & Olick L.L.P. “If the only thing damaged at the resort is the waterfront, I won't be surprised if the insurance company argues, "We don't insure the water offshore of your property and therefore...your property insurance policy is not triggered, including business interruption,'” Mr. Gilinsky said. (emphasis added)

I think the losses will be far in excess of this figure unless BP figures out how to stop the flow of oil immediately. Over the weekend, the containment dome failed. In addition, while it has not been determined where they came from, tar balls started washing up on Alabama's Dauphine Island. Here is a YouTube video:

I also agree with Gilinsky. I noted in First Party Property Coverage for the Oil Spill to Shoreline Owners that:

A second major issue will be whether "physical damage" to "insured property" has occurred. Many policies define "property not covered" to include "roadways, other paved surfaces, land, and foundations." Direct damage to "insured" or "covered" property is generally a requirement to trigger coverage. So, even if the property policy may provide some limited coverage for the extraction of the oil, most can anticipate litigation over whether the property and economic loss is covered under the property and business income forms and whether the oil damage to property is not covered because it was uncovered "land."

Still, a number of attorneys in our firm are questioning whether the oil, spilling from the oil well, is a "polluntant," as defined under various property insurance policies. The FC&S has an excellent article, Homeowners Pollution Exclusions: The ISO and AAIS Forms. I suggest that coverage counsel subscribe to this service and carefully read the entirety of it. The policies define "pollutants:"

Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. Waste includes materials to be recycled, reconditioned or reclaimed.

I imagine many will argue that unrefined oil is not a "pollutant," as defined in the policy. The article does not say whether oil is or is not a "pollutant." Instead, its conclusion tends to indicate exactly what the title to this post implies:

Pollution, how it’s defined and how courtsview the policy exclusions are still large issues for the insurance industry. Many of the cases referred to in this article have been disagreed with by other cases, but the net result is that the courts are still divided on the definition of pollution and the application of the exclusion in homeowners policies. The definitions of pollution and the exclusions have changed over time; but the issue remains unresolved.

This insurance coverage issue is going to be a messy and a very costly one.

Based on most news reports, the oil rig had an "explosion" and a "fire" and "oil" is spewing into the sea. The Insurance Service Office (ISO) has standard forms that do not provide coverage for property damage caused by release of "pollutants" unless the discharge, dispersal, migration, release, or escape is from a "specified cause of loss."

"Oil" may fall under the definition of a "pollutant," which is generally defined as:

"any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. Waste includes materials to be recycled, reconditioned or reclaimed."

So, what are the "specified causes of loss?" "Specified Cause of Loss" is limited to the named perils of fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles; riot or civil commotion, vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; falling objects, weight of snow, ice, or sleet; and water damage.

I can imagine a number of policyholder readers exclaiming, "Eureka!! We have explosion and a fire. And, if a hurricane drives the oil into the insured property, we have a windstorm as well. The oil damage is covered!" Whether insurers will agree that an explosion released the oil and caused the damage will probably determine whether coverage payments are promptly made.

The ISO CP 00 10 form also provides coverage of $10,000 for expenses to extract "pollutants" from land or water at the insured premises, if the discharge, dispersal, seepage, migration, release or escape was caused by a "covered cause of loss." "Oil" may be a "pollutant," although it has not touched or damaged any "insured" coastal property that I am aware. Forms should be reviewed to determine if greater amounts above the automatic $10,000 were purchased by endorsement. BP should expect subrogation from insurers paying on these claims under this form. Insurers should remind their agents of this standard language and prepare for adjustment.

A second major issue will be whether "physical damage" to "insured property" has occurred. Many policies define "property not covered" to include "roadways, other paved surfaces, land, and foundations." Direct damage to "insured" or "covered" property is generally a requirement to trigger coverage. So, even if the property policy may provide some limited coverage for the extraction of the oil, most can anticipate litigation over whether the property and economic loss is covered under the property and business income forms and whether the oil damage to property is not covered because it was uncovered "land."

I can also imagine a number of policyholders wondering how a "property" insurance policy can exclude "land" as "covered property" since most think of "land" as the ultimate form of "property." Welcome to my world. 

Most of you who read this blog picked up on the qualifying term in the foregoing paragraph immediately. “We will pay all legitimate claims.” To the average person, this does not sound like a problem. After all, nobody should take advantage of the system and obtain relief that they are not entitled to after a disaster. Unfortunately, as most people who have dealt with these types of situations already know, the word legitimate is used as an escape hatch for large companies who want to boost their public perception while at the same time minimizing the damages that they pay to those who are affected by a disaster.

BP’s stance on what damages it will pay for the disaster caused by its oil varies, depending on what time of day you watch the news. One broadcast on the 5:00 p.m. news shows a BP spokesman saying that the company will take full responsibility for the damages caused by the oil; at 11:00 p.m. the same day, another spokesman says that the disaster was not BP’s fault.

Thankfully, some officials are not fooled by the warm and fuzzy reassurances of BP and others involved in the recent oil spill. “We don't know what is a legitimate claim. That's lawyer speak at a time when we need straight talk and clear answers,” said Alabama Attorney General Troy King.

Florida Senator Bill Nelson has also filed federal legislation to raise the 75 million dollar cap to 10 billion dollars to make sure that those responsible for the current crisis are not off the hook. He follows Attorney General King’s position that “[w]e will do whatever is necessary to make the people of Alabama [and Florida] whole.”

While the current public sentiment is that BP and others responsible for the drilling should be held accountable for the damages their oil spill has created, those companies also know that the tendency is for the public to quit paying attention to these types of stories after a few months. The longer those responsible hold out, dodge tough questions, and avoid answering whether or not they will pay ALL of the economic damages incurred as a result of this spill, the more likely it is that BP and others will avoid full responsibility. Attorney General King is right, this is a time for “straight talk and clear answers,” which can’t come soon enough.

This area of Florida is extremely vulnerable to natural disasters like hurricanes and the current oil spill. In areas like Destin, Fort Walton Beach, and Panama City, economies are largely based on tourism. Because of the oil spill, the phones at local hotels have been ringing off the hook with tourists cancelling reservations for the upcoming months due to the uncertainty that looms. While sitting in one office this morning, I heard more than five calls from concerned renters requesting that their reservations be cancelled and their deposits be refunded.

The consequences of the current oil spill will continue long after the spill is stopped or contained and will affect almost every aspect of life in this area. It seems inevitable that the oil slick will reach this area at some point, and the timing could not be worse. A decline in tourism during the summer months will almost surely cripple the condominiums, hotels, restaurants, beach services, retail shops, and many others who depend on the influx of vacationers during this time of year to make a living.

The question I have been asked most often during the numerous phone calls and meetings today is “what can we do to protect our business and our employees?” First, it is important to realize that even though the oil has not made landfall, its effects are far from small. From day one, the spill has created documented damages to businesses and homeowners, and these losses will grow exponentially.

Second, it is crucial that condominiums and other business diligently document the losses that are incurred. If a renter calls to cancel a reservation, the reservationist should specifically ask whether the cancellation is due to the oil spill. If so, the potential renter’s information should recorded and saved in order to document the lost income.

Also, everyone should be proactive in protecting the financial security of the association and the other businesses that are being adversely affected by this disaster. Many condominium associations and other businesses have already contacted the Merlin Law Group and we are in the process of filing a class action lawsuit in order to protect the livelihoods of the hundreds of thousands of people in this part of the country who depend on tourism to survive.

This Tuesday, May 4, 2010, we will be hosting an informational seminar at the San Destin Hilton in Destin, Florida. Beginning at 1:00 pm, a select group of attorneys, accountants, and other professionals will be on hand to answer questions about the steps that are being taken to protect this fragile economy and environment. So far, we have had over 100 businesses, associations, and individuals express interest in this event and we hope that you will be able to join us as well.

In order to deal with the current crisis, we have started a new website to keep the public informed. If you have any questions or wishes to speak to us about representation, you can contact us at the number listed on the website, or you can contact me directly at 813-373-9598.

The Gulf of Mexico oil spill could be leaking at a rate of 25,000 barrels a day, five times the government's current estimate, industry experts say.

Basing their calculations on government data and standard industry measurement tools, the experts said the Gulf spill may already rival the historic 1969 Santa Barbara, Calif., and 1989 Exxon Valdez disasters.

Ian MacDonald, professor of oceanography at Florida State University who specializes in tracking ocean oil seeps from satellite imagery, said there may already be more than 9 million gallons of oil floating in the Gulf now, based on his estimate of a 25,000 barrel-a-day leak rate. That's compared to 12 million gallons spilled in the Valdez accident.

Interior Department officials said it may take 90 days to cap the leaking well. If the 25,000 barrels a day is accurate and it leaks for 90 days, that's 2.25 million barrels or 94.5 million gallons.

Mr. MacDonald and his colleagues at the Earth, Ocean and Atmospheric Science Department have worked jointly with National Oceanic and Atmospheric Administration in the past on oil spill tracking, and have shared their estimates with NOAA scientists. He said the NOAA scientists didn't dispute the calculations.

A NOAA spokeswoman said the government estimate of 5,000 barrels a day leaking from the BP PLC deep sea well was based on collaborative assessments produced by BP, NOAA and the U.S. Coast Guard. NOAA scientists weren't immediately available to comment.

The 5,000-barrel figure was first announced late Wednesday and marked a five-fold increase from the previous estimate. News of the higher estimate ratcheted up the pressure on officials to take more-aggressive steps to contain the spill and heightened concerns about potential environmental damage and disruption to the Gulf Coast economy.

Climate Now called this an Oilpocalypse Now! That blog provides a detailed report on the serious issues confronting Gulf Coast states.

In Safety Device Questioned in '04, the Wall Street Journal also noted that safety devices could have been better:

Some newer rigs have blowout preventers with two separate pairs of shear rams—providing an added safeguard in case one shear malfunctions or hits an obstruction in the pipe. The Deepwater Horizon had a single pair of shear rams.

The Interior Department's Minerals Management Service, which regulates offshore drilling, questioned whether shear rams were strong enough to shear through a pipe.

In two offshore incidents in 2001, the rams didn't work as expected. The agency issued new rules in 2003 instructing the oil industry to make sure the rams would work reliably.

In 2004, a study commissioned by the MMS raised significant questions about the ability of rams to cut through the stronger pipes used in deep-water drilling. Those thicker pipes—as well as the shear rams—must withstand the enormous pressures found at 5,000 feet below sea level.

The study noted there was no agreement on how to determine if the sheer rams would work properly in deep-water conditions. Only three of 14 newly build rigs had blowout preventers that were able to squeeze off and cut the pipe at the water pressure likely to be experienced at the equipment's maximum water depth, the study noted. (emphasis added)

I will be flying over the Gulf of Mexico to Galveston on Hurricane Ike litigation matters as many are reading this post. I am certain that the spill will be even more unbelievable to see than this past Thursday when I last flew over the disaster. The Gulf Coast needs a reprieve from these heartbreaks. The recent post in Slabbed, “We interrupt this interruption of our regularly scheduled disaster blogging to report that levees have failed above Memphis” – said the Editilla this soggy Sunday morning, is sadly accurate of what we have been experiencing lately.

“We have already been retained for business losses because customers of clients are now canceling plans for travel to the Gulf Coast,” said William F. “Chip” Merlin, Jr., president of Merlin Law Group. “If something does not change soon, this disaster has the potential to be much worse than most hurricanes. Of course, although we all earnestly hope that this catastrophic spill does not continue to make its way towards other areas of the Gulf Coast and Florida, our clients want to be prepared with a plan of action. Prompt and full accountability for those responsible for this tragedy is important. A class action lawsuit will be filed on Monday morning by the Merlin Law Group in conjunction with our co-counsel Keefe, Anchors, Gordon and Moyle, P.A.

We have a great deal of experience with widespread catastrophe claims and have retained others with experience in these oil spill disasters that understand the proof required to make claims that will be paid by the oil industry and those responsible for the harm."

Attorneys with the Merlin Law Group have been speaking with clients about what they need to do now in order to prepare their property against damage and in the unfortunate event that a claim will have to be filed. Many of those calling are condominium associations, restaurants and hotels anticipating and already experiencing major interruption in their business as people who had considered vacationing in along the Gulf Coast and Florida are cancelling plans in face of the real possibility of the destruction of beaches by the spill. Also of great concern for the law firm’s clients is possible evacuation should the oil cause the presence of toxins in the air and in the water. As the law firm prepares for litigation on behalf of its client, attorneys are taking a close look at the liability and negligence issues with the event.

In addition to offering legal advice and representation, Merlin Law Group will be hosting an educational town hall meeting, along with Keefe, Anchors, Gordon and Moyle, P.A (KAGM). to help those who may be affected from what is being described as the worst environmental calamity in US history, in understanding what they need to know about the oil spill and how it may affect their bottom-line. Gulf Coast Oil Spill Catastrophe: An Educational Town Hall Meeting is expected to be heavily attended by those unsure as to what this catastrophe can mean to their lives, will be held on Tuesday, May 4th at 1:00 PM in the Emerald Ballroom at the Hilton at Sandestin, 4400 South Sandestin Boulevard, Destin, Florida 32550.

The Merlin Law Group and KAGM are strongly encouraging property owners, business owners, government entities, and residents to attend the town hall meeting on Tuesday in Destin to learn such things as what to do in advance to protect their property and any potential claims filed against their insurance policy as well as explaining the federal legislation the Oil Pollution Act of 1990. Other experts and those with experience from prior oil spills will be on hand to offer insight into the potential effects of the spill and what is being done to assist those in the areas that are and will be affected.

In the meantime, those with legal concerns about the ramification of the Gulf Oil Spill should call Merlin Law Group at 1.877.449.4700.

Yesterday, Time Magazine reported in an article, Gulf Oil Spill Swiftly Balloons, Could Move East, that:

The Coast Guard conceded Saturday that it's nearly impossible to know how much oil has gushed since the April 20 rig explosion, after saying earlier it was at least 1.6 million gallons....Even at that rate, the spill should eclipse the 1989 Exxon Valdez incident as the worst U.S. oil disaster in history within about a week. But a growing number of experts warned that the situation may already be much worse.

The oil slick over the water's surface appeared to triple in size over the past two days, which could indicate an increase in the rate that oil is spewing from the well, according to one analysis of images collected from satellites and reviewed by the University of Miami. While it's hard to judge the volume of oil by satellite because of depth, it does show an indication of change in growth, experts said.

"The spill and the spreading is getting so much faster and expanding much quicker than they estimated," said Hans Graber, executive director of the university's Center for Southeastern Tropical Advanced Remote Sensing. "Clearly, in the last couple of days, there was a big change in the size." Florida State University oceanography professor Ian R. MacDonald said his examination of Coast Guard charts and satellite images indicated that 8 million to 9 million gallons had already spilled by April 28.

Doug Suttles, BP's chief operating officer for exploration and production, said it was impossible to know just how much oil was gushing from the well, but said the company and federal officials were preparing for the worst-case scenario. Oil industry experts and officials are reluctant to describe what, exactly, a worst-case scenario would look like — but if the oil gets into the Gulf Stream and carries it to the beaches of Florida, it stands to be an environmental and economic disaster of epic proportions.

The Deepwater Horizon well is at the end of one branch of the Gulf Stream, the famed warm-water current that flows from the Gulf of Mexico to the North Atlantic. Several experts said that if the oil enters the stream, it would flow around the southern tip of Florida and up the eastern seaboard.

"It will be on the East Coast of Florida in almost no time," Graber said. "I don't think we can prevent that. It's more of a question of when rather than if."

Our firm will file our first BP Oil spill lawsuit tomorrow morning. We will do so with our long term co-counsel in the panhandle of Florida, Keefe, Anchors, Gordon & Moyle, P.A. Michelle Anchors is proudly a fervent environmentalist, and she wrote the following in her Blog:

Those of us who grew up on the Emerald Coast have been around the block a few times watching the Weather Channel and waiting to see where the hurricane would land. Most of us have never watched an oil slick to see whether and when it would land. Waiting for a hurricane seemed to be a lot more fun. Maybe we would get out of school. Maybe the electricity would go out. Maybe the wind would bring good waves for the surfers. And now that I represent clients who have to fight their insurance companies after a hurricane, maybe I would even get some business. But waiting for the oil spill of the Deepwater Horizon to reach our coast is gut wrenching. I don’t want the business.

During the last few days, I have received calls from some of my clients asking if we can help them prepare for this potential disaster. Not to be unnecessarily alarmist, but the potential consequences are grave. Emotionally, environmentally, and economically, Northwest Florida has everything to lose. So we have mustered our troops and our resources and we are going to fight BP, who could have and should have taken more actions to prevent this devastating event. This is not like a hurricane that the forces of Mother Nature unleashes without any human or corporate control. This is an oil company that apparently did not take the precautions necessary to protect us all – this is an underwater Chernobyl.

With oil coming ashore, there will be massive income and loss of use claims. Those have already started and will only increase as the oil permeates a community. As a result, Merlin Law Group hired an environmental attorney who has extensive experience with pollution litigation. We also retained a consultant who managed claims from the oil industry's side following the Exxon Valdez disaster. We also hired Trial Exhibits, which photographed and documented damage for a oil transport company following a 1993 oil spill off St. Petersburg and Clearwater. We will do our best to help and serve our clients. I look forward to working with Michelle Anchors and others as we work through this unprecedented catastrophe.

Oil spills, clean up and recovery are topics of discussion at my family gatherings. My father helped start the Marine Spill Response Corporation operations in the Gulf Coast at Lake Charles, Louisiana. After his retirement there, he has taught oil spill clean up and recovery for the State of Louisiana and throughout the Gulf Coast. I am certain that many of the people trying their hardest to stop the spread of this spill have been taught by him. There is only so much that can be done if the flow of oil is not contained.

Underwater robots failed to activate a cutoff valve on the ocean floor to stop the leak. BP is hoping a plan to cover the well with a steel cap and capture the leaking oil will avert an environmental disaster. But that will take four weeks, and by then more than 150,000 barrels could have spilled. If the steel cap does not work, BP will have to rely on stemming the flow by drilling a relief well, which would take two to three months. If it takes that long, the spill could be even larger than the 258,000 barrels leaked in 1989 by the Exxon Valdez.

Estimates of the damage are already in the billions. In BP Vows to Pay All Gulf Coast Oil Spill Damage Claims, the National Law Journal reported:

BP Plc will compensate all those affected by an oil spill from one of its wells in the Gulf of Mexico, its Chief Executive said, accepting the disaster could hit plans to open new areas off the U.S. coast to drilling.

"We are taking full responsibility for the spill and we will clean it up and where people can present legitimate claims for damages we will honour them. We are going to be very, very aggressive in all of that," Tony Hayward told Reuters in an interview on Friday.
...

The cost to the fishing industry in Louisiana could be $2.5 billion while the impact on tourism along Florida's Paradise coast could be $3 billion, Neil McMahon, analyst at investment firm Bernstein, said in a research note on Friday.

On the way to Houston on Thursday morning, I was amazed to look out the window of our plane and see the size of the oil spill. As far as I could see, oil was there. This will not end anytime soon. There will be significant claims, losses and litigation involving this tragic event.