BP won a legal reprieve in its effort to avoid payments to those whose losses were not traceable to the 2010 Gulf of Mexico oil spill, potentially sparing the oil company extra costs.
BP had agreed in 2012 to make payments to those who suffered economic losses as a result of the largest U.S. offshore oil spill.
The company, however, complained that the payout formula worked out by settlement administrator, Patrick Juneau, was too generous and compensates people and businesses that were not harmed.
In March, U.S. District Judge Carl Barbier approved Juneau's evaluation methods. BP contested this approval.
(Read more: This country has the smartest students)
On Monday, a divided 5th U.S. Circuit Court of Appeals in New Orleans said the district court erred by approving Juneau's formula.
"This court's expressing its views through two different opinions may have created interpretive difficulties on the remand, but the district court erred by not considering the arguments on causation," according to the ruling.
The appeals court halted further payments to the claimants who did not suffer economic loss or property damage because of the spill, pending final disposition of related appeals.
BP originally projected that the settlement would cost $7.8 billion, but in July boosted its estimate to $9.6 billion. As of Monday, about $3.78 billion has been paid out, according to Juneau's claims website.
The case is BP Exploration & Production Inc v. Deepwater Horizon Court-Supervised Settlement Program et al, 5th U.S. Circuit Court of Appeals, No. 13-30315.
(Watch this: the hirst hybrid Ferrari)