More than a decade ago, Steven A. Rosenthal was on the front lines of the aftermath of the Exxon Valdez spill, calculating losses from nearly 30,000 individual insurance claims.
Blue crab coated in thick oil in Elmer’s Island, La.
Now, from his office in San Francisco, Calif., Rosenthal sees both similarities and differences in the Deepwater Horizon spill plaguing the Gulf of Mexico.
“There are a lot of similarities in terms of having a fishing community and businesses which are impacted, from hotels to restaurants to various shops,” Rosenthal told IFAwebnews.com. “But there is a much broader spectrum in terms of location with Texas, Louisiana and possibly the western parts of Florida. There is a bigger geographic area so there is the likelihood of a larger number of claims.”
On April 20, the Deepwater Horizon oil rig, owned by Transocean and leased to BP for drilling, was the site of a massive explosion, killing 11 and sending millions of gallons of oil spilling into the Gulf of Mexico. BP and Transocean are still locked in a legal battle over who is responsible for claims stemming from the incident.
Rosenthal led the team that was hired to calculate the losses from the Exxon Valdez spill, which totaled more than $1 billion after the oil tanker hit a reef in Prince William Sound March 24, 1989. An estimated 10.8 million gallons of oil spilled from the tanker.
He is now the director of insurance and support services and a partner at RGL Forensics, which provides financial forensics for various clients across the globe.
Rosenthal noted that with the larger amount of claims likely through the Deepwater Horizon oil spill, more phony claims are likely.
“In any situation where there is a disaster of significant magnitude, the likelihood of people taking advantage of the situation exists and unfortunately, it appears to be part of human nature,” he said. “For some, it is a check they feel entitled to.”
Phony claims can take two forms
Not downplaying the legitimacy of claims due to the massive spill, Rosenthal estimates that 20% of all claims to BP will be phony. A phony claim, he added, can be one where there is no basis at all for reimbursement or those that say their loss is greater than it actually is.
Based on his 40 years of experience, Rosenthal said those looking at claims from Deepwater Horizon need to first establish legitimacy in the claimant’s position. He said if a claim has an Indiana address, for example, more investigation needs to be done to see how that person was affected by the Gulf of Mexico spill. It could be tied to a fish processing chain or a phony claim, but the investigation needs to be done, he said.
Second, Rosenthal said “relevant financial information,” in the form of revenues, costs, reasonable projections of industry trends, needs to be conducted. With the Valdez spill, Rosenthal and others looked at numerous projections of the coming fishing season, a task that will be made easier given greater computerized information.
Third, he said, is investigating any mitigation. Rosenthal noted that with the Exxon Valdez, Alaskan fishermen unable to fish were hired to aid clean up efforts, a situation being mirrored in the Gulf of Mexico right now. Possible mitigation can offset the claim, he said.
No matter how the work is completed, Rosenthal said he sees a longer claims review process with the Deepwater Horizon spill than with the Exxon Valdez incident in Alaska. He worked on those claims for nearly three years.
“I suspect the negative impact will be for a while,” he said.
Expert: 20% of Deepwater Horizon insurance claims could be phony via IFAwebnews .