A fter the worst oil spill in US history, property casualty insurers are facing a growing onslaught of claims – this despite BP’s $20 billion compensation fund being administered by the Gulf Coast Claims Facility (GCCF). Property casualty insurers can expect to see numerous first-party business interruption and property damage claims as a result of the spill’s primary and secondary effects on the fishing industry, as well as hotels, restaurants, and other businesses that rely on tourism and suffered losses due to decreased travel to the Gulf Coast region. Moreover, P&C carriers are also setting reserves under liability coverages, as class action suits and other litigation continue to pile up against parties connected to the oil rig failure, as well as those involved in clean-up efforts. The litigation will raise numerous issues, including notice, mitigation and cooperation issues, as well as pollution, mechanical failure, and business risk exclusions.

Moreover, the GCCF – which is designed to handle claims from individuals and businesses that incurred damages as a result of remediation costs, damage to real or personal property, and lost earnings or profits in exchange for a relinquishment of rights – presents uncertainties likely to be sorted out in the courts, including the claims process, accord and satisfaction issues meant to prevent double recoveries, and subrogation issues. If the reports concerning the number of fraudulent claims already submitted to the GCCF are accurate, yet another significant issue likely looms for insurers.