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BP Business Economic Loss Claim Appeal 2015-1857: Application of Policy 495 requires exercise of professional judgment


The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms.

Claimant appeals the amount of the BEL claim award to it, contending that the Settlement Program (“the SP”) erred in determining that its financials were insufficiently matched and consequently utilizing the AVM methodology to calculate the award. Claimant expressly states in its Initial Proposal that it “does not dispute that several of the [Policy 495] criteria are met by the mechanical application of the tests to P&Ls.” Claimant argues, however, that the SP was required at that point “to apply their professional judgment to determine whether, despite the criteria being met, the claim was ‘sufficiently matched ‘ . “

In Claimant’s view, had the SP applied its professional judgment to analyze the highly seasonal nature of the business–a Christmas specialty store located in Clearwater, Florida exclusively selling Christmas items–in proper context, the SP would have realized that when viewed from that perspective the claim was sufficiently matched. As sees it, once several of the seven Policy 495 criteria were triggered, the SP just automatically proceeded to apply the AVM methodology without considering the nature of the business.

Indeed, the third paragraph from the end of Section I.A. of Policy 495 (page 6) directs that even where matching is “determined to be an issue” upon application of the seven criteria, the Program accountants are to exercise their professional judgment to determine whether the claim is sufficiently matched based on an evaluation of the available information, including “the nature and complexity” of the business in question. (emphasis added by Editor) [Editor’s Note: See Why Policy 495’s seven volatility screens are not conclusive of insufficient matching]

Under the analysis offered by Claimant in its Initial Proposal, the seasonal nature of its business resulted in the triggering of the criteria, not insufficiently matched P&Ls.

Claimant appears to have overlooked the fact that the Program accountants analyzed the reasons that criteria tests 2, 5, 6 and 7 were triggered and expressly determined, in an exercise of their professional judgment, that the first two triggers might have been activated by seasonal factors but that triggers 6 and 7 were not. Thus, the record refutes the assertion by Claimant that resort to the AVM methodology was the result of a mechanical reliance on the triggering of the four criteria without any intervening exercise of professional judgment.

BP sets out in detail in its Final Proposal an analysis of why the triggering of tests 6 and 7 is not explained away by seasonal patterns and Claimant has not filed a Final Proposal of its own countering those analyses. BP’s Final Proposal in the amount of the $24,342.26 pre-RTP Compensation Amount awarded by the SP is selected in preference to that of Claimant in the amount of $171,800.96, the sum Claimant says would be due if its unadjusted P&Ls would have been used to calculate the award. Appeal denied.

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