Gregory J. Urbanchuk MSc., AVA, CFE and Stephen J. Scherf CPA/ABV, CFE, CICA, CIRA, CrFA, CVA of Asterion, Inc., a leading provider of financial and economic consulting services focused on forensics, valuation and intellectual property, stated that individual and business claims submitted to BP for damages caused by the Deepwater Horizon oil spill, (30,000 to date) are likely understated and may ignore the long-term impact to Gulf Coast hospitality, leisure, and fishing industries.
On May 26, 2010 BP published a document entitled “Description of Claims Process”, which explains the process established by BP to intake and process the claims arising from the Deepwater Horizon oil spill. The claims process, which was established by BP under the framework of the Oil Pollution Act of 1990 (“OPA”), requires BP to pay specific categories of damages caused by the oil spill. One of the categories of damages provided for is “Net Lost Profits/Earning Capacity”, which focuses on the loss of profits or earning capacity due to the injury, destruction, or loss of real property, personal property, or natural resources.
“There are likely to be disagreements as to what revenues and expenses are included for the purpose of computing a claim for net lost profits and what support and analysis is required to substantiate such claims,” states Urbanchuk. “In our experience, many small to mid-size businesses, which are already in a distressed position due to the disaster at hand, do not have the capacity to fully address the nuances of their claim and are often at a disadvantage when negotiating with experienced claims adjusters supported by accountants and lawyers,” added Scherf.
As of June 2, 2010, the National Oceanic & Atmospheric Administration (“NOAA”) stated that all commercial and recreational fishing was prohibited in an area — which is approximately 37 percent of the Gulf of Mexico exclusive economic zone. On the same date, the Governor of Florida, Charlie Christ, stated in a letter to the U.S. Department of Commerce that Florida’s “…commercial harvesters are already having trouble selling product because of the unfounded fear that seafood from the Gulf is contaminated.”
“Unfounded contamination fears will likely continue to drive down the price of seafood sourced from the Gulf – Remedying this erosion of prices will be difficult and will likely require significant amounts of corrective advertising,”states Urbanchuk. “The quantification of price erosion damages arising from the Deepwater Horizon oil spill will require sophisticated economic and financial analysis,” added Scherf, “The total impact of such damages may not be known for years to come.”