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BP Business Economic Loss Claim Appeal 2016-1300: CA Judgment to Apply NAICS Code For Drywall and Insulation Contractor Upheld

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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 which provides industrial and commercial insulation construction services, appeals the denial of its BEL Claim for failure to meet the V-Shape Revenue Pattern causation test.
The Claims Administrator assigned NAICS Code 238310 – Drywall and Insulation Contractors. That Code is one assigned to the Construction Industry, under Attachment A to Policy 495, and, consequently, presumptively analyzed under the Construction Methodology of that Policy. Attachment A goes on to provide, “However, it is important to note that a claimant with a given NAICS code will not automatically be assigned to a given methodology by virtue of the NAICS code if, in the judgment of the Claims Administrator’s office, there are factors that indicate that revenues and expenses would be more sufficiently matched by applying an alternative methodology. As a result, some businesses within a certain three-digit NAICS Subsector may be treated under a different methodology from others within the same Subsector.” (Underlining added.)
Claimant does not challenge the assignment to it of NAICS Code 238310, but argues that the characteristics of its jobs, billing cycles, and expenses payments are such that the Construction Methodology is not appropriate for it and the AVM should have been applied instead.
In exercising its judgment in the matter, the Claims Administrator found and reasoned as follows:
The Construction Methodology was applied upon confirmation from the claimant’s attorney that materials are purchased on a job-by-job basis and no significant
amount of inventory is maintained. Additionally, Claimant stated that revenues are not normally recorded in the period in which the work is performed. DWH
Accountant utilized the Construction Methodology as variable expenses are accurately recorded on a monthly basis and thus more closely reflect when services
are performed. Contracts are completed within 30 days or less and its billings are submitted upon completion, with payments due 30-60 days from invoice. Payments are booked upon receipt. For its long-term projects, which it characterizes as approximately 6 months, it bills in completion increments of 25%, 50%, 75%and 100%. Materials are purchased on a job-by-job basis, with a relatively small amount of inventory kept on hand. Thus, revenues are received one or two months after it invoices for them.
The panelist cannot say that the Claims Administrator exceeded the discretion Policy 495, Attachment A, accords him to exercise his “judgment” about when to change to a methodology different from the one indicated by the NAICS Code assignment. Denial upheld, appeal denied.

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