March 3 (Bloomberg) -- BP Plc reached an estimated $7.8 billion settlement with businesses and individuals damaged in the 2010 Deepwater Horizon oil rig disaster that killed 11 people, removing one of three major litigation fronts facing the company over the biggest offshore spill in U.S. history.
The settlement, the amount of which both sides said may increase, will be paid out of a $20 billion trust set up to compensate spill victims, BP said yesterday in a statement. Lawyers for the plaintiffs said the accord, which must be approved by a judge, will resolve most claims for economic loss, property damage and injuries. The trust has about $14 billion remaining, and victims’ lawyers noted there isn’t a cap on damages BP must pay under the deal. BP said if the trust is exhausted, it will pay additional funds directly.
“This settlement will provide a full measure of compensation to hundreds of thousands,” Stephen J. Herman and James P. Roy, the plaintiffs’ co-liaison counsel, said in a statement. “It does the greatest amount of good for the greatest number of people.”
Billions in Fines
The U.K.-based energy company still faces as much as $17.6 billion in fines for pollution law violations in a suit by the federal government, which will now take the lead in any trial over the spill. U.S. District Judge Carl Barbier in New Orleans yesterday put off the trial scheduled to start March 5 in light of the settlement.
“The proposed settlement represents significant progress toward resolving issues from the Deepwater Horizon accident,” BP Chief Executive Officer Bob Dudley said in the statement.
Barbier said he will schedule a status conference with lawyers to discuss the settlement and set a new date for the trial, which will determine which companies are liable, and for how much, in the explosion aboard Transocean Ltd.’s rig.
Under the terms of the settlement, two groups of plaintiffs will be eligible to receive payment for their claims. The first will be those whose businesses or properties were damaged by the spill, and the second will include those who suffered injuries from spill exposure, three people familiar with the accord said.
BP may face as many as 200,000 claims from people who contend they are suffering medical problems as a result of exposure to oil or chemicals used to clean it up, two of the people said.
Judge Oversees Payouts
A claims administrator appointed by the judge will oversee the payouts, and in some cases, plaintiffs may have to prove their damages were caused by the spill, the two people said. The settlement will cover federal-court claims consolidated in New Orleans that are overseen by the Plaintiffs Steering Committee, said the people, all of whom declined to be identified because the talks were private.
BP’s Gulf Coast Claims Facility, which was set up to resolve spill claims more quickly than through litigation, will be shut down and pending claims will be transferred to a “transitional entity” administered as part of the settlement, the people said. The closing of the claims fund could come as early as March 5, two of the people said.
Also under the proposed accord, claimants who weren’t in line for payments under the existing BP claims facility, such as workers hired to clean up the oil spill, will be eligible for recovery, two of the people said.
Slap On Wrist
The settlement was hailed by Representative Edward Markey of Massachusetts, the top Democrat on the House Natural Resources Committee, who urged federal prosecutors to continue litigation against BP under the Clean Water Act.
“This is a victory for the people of the Gulf, and hopefully indicates BP’s willingness to accept financial responsibility for the rest of the penalties it owes,” Markey said in an e-mailed statement. “Billions more dollars are still outstanding for the U.S. laws broken and Gulf environment damaged by BP, and our government must not let the oil giant off with a slap on the wrist.”
John Kostyack, vice president for wildlife conservation for the National Wildlife Federation in Reston, Virginia, said the terms of the settlement appeared favorable to spill victims.
“It’s a step in the right direction, but we still have a long way to go,” Kostyack said in an interview, pointing to the government’s outstanding claims for Clean Water Act and other federal law violations. “Justice still hasn’t been done for the Gulf of Mexico.”
Jason Kenney, an analyst at Banco Santander SA, called the proposed accord “a positive step” and “within the rational range of claim amounts assumed already in provisioning by BP.”
“While there are still settlements to be made with key plaintiffs, the reality is that sensible estimates for claims have been made,” Kenney, who has a buy rating for BP, said in an e-mail. “With the worst case scenario analysis looking increasingly unlikely, the discount in BP’s share price can also begin to unwind.”
BP rose to a 13-month high above 500 pence in London trading early this week after news a settlement was being negotiated. The stock may gain a further 15 percent if the company keeps payments for the spill within $10 billion of the $37 billion it has already set aside in costs, broker Brewin Dolphin Ltd. said at the time.