Petroleum giant BP has lost an American court appeal over whether businesses should have to prove that they were directly harmed by the oil spill generated by the Deepwater Horizon explosion in 2010, reports the BBC.
The explosion at the oil rig, the Deepwater Horizon, in the Gulf of Mexico in 2010 created one of the largest marine disasters in history, and resulted in the deaths of 11 crew members and the spillage of 210 million gallons of oil into the ocean with devastating effects on marine life and the economy of the region.
BP set aside almost $40bn in order to settle claims made against it by individuals and businesses harmed by the effects of the oil spill, as well as claims made by the US Government itself.
Although BP agreed in 2012 to a program for the payment of compensation to victims of the spillage of oil into the Gulf of Mexico, it later sought a court order to suspend payments, saying that individuals and businesses were able to make successful claims without proving any harm was suffered.
However, a US court has refused to reconsider the earlier 2012 settlement, saying that it was agreed with the input of BP and that the criteria clearly stated the requirements for a successful claim.
BP believes that some companies are filing fictitious claims, safe in the knowledge that they need not prove actual harm to make a successful claim. It estimates that as much as $500m of claims made against it could be fraudulent.
In the latest court hearing, the 5th US Circuit Court of Appeals in New Orleans voted against BP by eight votes to five.
The result of the case means that BP must now resume making compensation payments, which had been suspended pending the outcome of the court case.
Ted Olson is a lawyer representing BP.
"We want to compensate legitimate claimants. But this here's an incentive to encourage people to commit fraud and that, that is wrong," he said.
In one extreme example of fraud, BP claims to have discovered one case in which a man claimed for compensation for a broken leg which he said he sustained when he fell whilst filling in the BP claim form.