DEEP WATER HORIZON…for agents, a sticky proposition!

It’s been less than a year since oil from BP’s Deep Water Horizon rig ravaged Gulf Coast businesses, including many in Florida. Still…according to government inspections, our beaches are clean and our scrumptious seafood is safe to eat.

Last month, after inspectors raked a few tar balls found on barely one mile of sand, all of Florida’s panhandle was certified to be as pristine as it was prior to the April, 2010 spill–a fact BP  has expended nearly $30 million to spread far and wide.

Unfortunately, some damage is proving to be stickier than tar balls!

Beachfront homes were hit the hardest according to several reports, with an average value loss of $56,000 across the Gulf Coast generally and those in Pensacola declining about $40,000.

Hotel and resort owners along Florida’s 1,197 miles of coastline suffered too, particularly those in the Panhandle where the damage was not only more significant but went more precipitously to bottom lines.

Both individuals and businesses have been reimbursed for lost revenues, most receiving sums that allow them to rebound as tourism slowly returns to normal levels.

Unfortunately, for some insurance agencies…not so much.

While those who provided coverage on coastal properties suffered  reductions in revenues commensurate with their clients, they don’t appear to be on the claim administrators list of priorities. Claims are handled by the Gulf Coast Claims Facility (GCCF) which sifts through the paperwork and claim forms allocating money and resources as necessary. (See NOTE #1 below).

The GCCF may not realize that insurance agent revenues (commissions) are based on a percentage of the premiums their clients pay to insurance companies; and, when the payroll, the revenues or the values of a coastal business decline so, too, do insurance premiums and thus the agents’ commissions–almost in lock step.  

Example: according to one report, the spill reduced income for boat operators from $50,000 to only $5,000 a month. As these operators went out of business or laid off employee’s or reduced coverage for business interruption or workers compensation or eliminated coverage for employee benefits, fidelity bonds,  watercraft physical damage or inventory, or all of the above; the insurance agents who insured them  suffered parallel reductions in commission income.  (See NOTE #2 below).

Claim delays for agents may be an indication that the GCCF believes proximity to the coast  is an indicator of legitimacy. Not so for agents.  In fact, a small agency with a niche market for motels/hotels or coastal restaurants would prospect along Florida’s beaches even if it was located in another state. And, in Florida, it’s smart business to locate inland, where costs are lower, then…sell on the coast where values and premiums are higher.

Besides,   legally speaking, claim payments cannot be contingent on geography.

While I have no evidence to indicate the problem is anything other than  overwhelming numbers of claims, the GCCF has come under  attack for biases in determining reimbursement and based on the anecdotes I’ve heard there appears no other logical reason why insurance agents are not being reimbursed in due course.

Mississippi’s attorney general has alleged that payments may have been based on “a random distance in relation to the shoreline” and warned that…

“all claims incurred as a result of the oil spill should be paid regardless of the claimant’s physical location.”

Agreed!

For insurance agents suffering economic loss due to the spill the claim deadline is in 2013 when the GCCF finally closes its doors.  That makes now the time to either file an initial claim or to appeal one that’s being mishandled and/or to seek qualified legal advice on how to get your delayed claim resolved.

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NOTE 1: the (“GCCF”) is the administrator for individuals and businesses to file claims for costs and damages incurred as a result of the oil discharges due to the Deepwater Horizon Incident on April 20, 2010. The GCCF is administered by Kenneth R. Feinberg (“the Claims Administrator”), who is responsible for all decisions relating to the administration and processing of claims submitted to the GCCF. Mr. Feinberg and the GCCF are acting for and on behalf of BP Exploration & Production Inc. in fulfilling BP’s statutory obligations as a “responsible party” under the Oil Pollution Act of 1990.

NOTE 2: businesses that have incurred damages as a result of the spill may submit a claim to the GCCF for the following reasons: removal and clean up costs, damage to real or personal property, lost earnings or profits, loss of subsistence use of natural resources, or physical injury or death. [Emphasis added].

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