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BP Business Economic Loss Claim Appeal 2016-1898: Prior Residences of Nursing Home Residents to Be Considered In Customer Mix Test (10% Decline Of Revenue Generated By Non-Local Customers)

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.

This Claimant owns and operates a skilled care nursing home in New Orleans (Zone D). Its Business Economic Loss claim was denied upon a finding by the Claims Administrator that it failed to satisfy the Settlement Agreement Exhibit 4B causation requirements. More specifically, the Administrator found that while Claimant passed the Modified V-Shaped Revenue Pattern test, it failed the Customer Mix test because it could not demonstrate the requisite 10% decline in the share of total revenue generated by non-local customers.
Claimant’s customers reside in its facility and were considered by the Administrator to be “local” in that context. Claimant sought Reconsideration, asking the Administrator to consider the previous addresses of its current tenants who it asserted were recruited from areas across Louisiana and the Gulf South, in determining whether they were “non-local.”
That request was declined with the following analysis contained in the Post-Reconsideration Denial Notice:
Claimant asked for reconsideration based upon application of Policy 345 v3 to
consider previous addresses of current tenants. After review, the facility was
determined to be a long-term rental. As such, the tenants’ current addresses (the
current facility location) should be used for purposes of the Customer Mix Test.
This appeal followed. Here is the essence of Claimant’s argument:
By its very nature, the Consumer Mix test does not allow for a nursing home (or any other assisted living or similar facility) to pass, making it fundamentally
unworkable given the intent of the Settlement Agreement to compensate those affected by the 2010 BP Oil Spill for their economic losses. The consumer mix test does not take into account the particular situation of a nursing home, i.e. that all of its “consumers” must necessarily live at the same facility, but originally came from somewhere else, therefore essentially guaranteeing that the Claimant will not pass the consumer mix test. Obviously, all of those “customers” living at the nursing facility lived elsewhere prior to becoming residents at the Claimant’s facility. The Claimant respectfully requests that this Appeal Panel order the Claims Administrator to consider the former addresses of those living in the nursing facility.
By considering the former addresses of the residents, the Claims Administrator will be taking into account that the consumers (or their loved ones) made a choice, either based on market or location, to leave their previous place of care or habitation and become a resident of the facility owned and operated by the Claimant. The families who chose the Claimant as their nursing facility were consumers coming from diverse locations across Louisiana and the Gulf Coast Area. If this Appeal Panel orders the Claims Administrator to utilize the previous addresses of the residents, or “customers,” then the intent of the Consumer Mixtest—and the Settlement Agreement—will be fulfilled.
BP, on the other hand, relies upon this statement found in footnote 15 of the Customer Mix test:
A Customer shall be considered a “non-local customer” if they reside more than 60 miles from a claimant business location. Here, it observes, Claimant’s customers reside at and thus share an address with Claimant’s business location and are simply local. While contending that Claimant ignores the plain language of the Settlement Agreement, it adds the following interesting comment in its brief:
In any event, Claimant did not provide the former addresses of its customers, and the Settlement Program fully considered all of the available record evidence in
reaching its conclusion.
After considering these opposing views, this panelist requested input from the Claims Administrator. In due course, the following Summary of Review was received;
The Claims Administrator submits the following response to the Appeal Panelist’s request for further information on the claim referenced above. Specifically, the
Appeal Panelist asked the following questions: Why should the prior tenant addresses be excluded from consideration in applying that test? What provision of the Settlement Agreement excludes tenants at a “long term rental” facility from being considered non-local customers?
Per Exhibit 4B of the Settlement Agreement, “A Customer shall be considered a ‘non-local customer’ if they reside more than 60 miles from a claimant business
location”. As such, the Settlement Program looked to where the customers resided during the relevant time period rather than where the customers resided previously.
Additionally, while not directly on point, Policy 345 v.3 Section: II-B-b states:
“Property Owners/Commercial Tenants: If a claimant with a BEL or Start-Up
BEL claim is the owner of a commercial property such as a shopping mall, the
location of that claimant’s customers shall be considered to be the location of the
leased space in the shopping mall rather than the physical location of the
headquarters for each retailer.”
In light of the foregoing, the Program Accountant determined that the nature of the claimant’s business closely relates to the example stated in Policy 345 v.3 Section: II-B-b and, as such, concluded the claimant’s customers reside at the nursing home location. There is no question about the fact that Claimant’s business differs from most retail and service enterprises such as shoe stores and marinas. The clientele they recruit and subsequently serve don’t come to live with them. Nevertheless, according to Claimant’s unrebutted assertion, its clients or “customers” were recruited from a variety of locations across the state of Louisiana and the Gulf Coast areas.
This panelist is hard pressed to draw a distinction between the two.
After de novo review, this panelist finds that the former addresses of those persons living in Claimant’s facility must be considered in applying the Customer Mix test herein. The Claimant must be given an opportunity to provide those addresses to the Claims Administrator for his further review and analysis. For the foregoing reasons, this Claimant appeal is sustained and the claim is remanded to the Claims Administrator for further processing in keeping with this opinion.

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