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BP Business Economic Loss Claim Appeal 2016-1913: Construction Methodology Instead of AVM Applied to Heating and A/C Contractor; Appeal Panelist Will Not Substitute His Judgment For That of SP

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, a heating and air conditioning company located in Baton Rouge,Louisiana, appeals the denial of its BEL claim on the basis it failed to satisfy the causation requirements of Exhibit 4B of the Settlement Agreement. Claimant asserts the Settlement Program(SP) wrongfully applied the provisions of policy 495 when it selected the Construction Methodology to process the claim rather than the AVM Methodology.
Claimant contends that it is a service company catering to residential customers and not a construction company;that it does not use a percentage of job completion as a basis for payment;that it operates on a cash basis and is paid and records revenues in the months work is performed;that based on its short revenue cycle the AVM
Methodology should have been used.
BP counters that claimant’s submissions reflect it is a HVAC subcontractor; it claims such on its federal income tax form with an entry “HVAC Service” and a NAICS code 235110; it records expenses in the same months materials are purchased and purchases materials only when a particular job requires certain materials; it has no lag time between the purchase of materials and use of materials on the job; and it has some months in which no revenues were received but expenses were recorded.BP contends this profile is consistent with that of a business in the construction industry and the guidelines of policy 495.
A review of the record confirms that the factual assertions made by the parties are essentially correct.A review of the record also discloses that because claimant used an invalid NAICS code the SP assigned a new one,238220 (Plumbing,Heating and Air-Conditioning Contractors), which under policy 495 at A-1 places claimant in the
Construction Methodology.  Paragraph 19 of the Calculation Notes reflects this entry relative to claimant’s challenge to the use of the Construction Methodology:
“We have reviewed the Reconsideration Request regarding the use of the Construction Methodology. DWH Accountant noted that although there is a lag due to the reporting of expenses based off credit cards statements,variable expenses are recorded consistently throughout the years including months in which the claimant did not record revenue. Additionally,the claimant is classified under Construction NAICS code and inventory is not maintained. Thus,no changes have been made to the previous compensation calculation with regard to methodology selection.”
Prior court and panel decisions recognize program reviewers are vested with discretion in the exercise of professional judgment in the application of the provisions of policy 495. This panelist concludes after de novo review of the record the SP had a reasonable basis to apply policy 495 and to select the Construction Methodology.It is not appropriate for this panelist to substitute its judgment for that of the SP even if this panelist believed the AVM Methodology was appropriate in the absence of a showing of abuse of discretion by the SP, of which there is none present herein. Accordingly,the decision of the Claims Administrator is affirmed and the appeal of claimant is denied.

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