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BP Business Economic Loss Claim Appeal 2016-1926: Construction Methodology Properly Applied to Motorcycle Manufacturer

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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 manufactures specialty motorcycles in Birmingham, Alabama. In Claimant’s BEL claim, the Claims Administrator (CA) issued a negative ($59,657.74) Compensation Amount and Claimant appeals.
Claimant argues that the CA should not have subjected Claimant’s financials to Policy 495. However, the record reflects that Claimant’s financials triggered 3 of the Policy 495 tests. Claimant then argues that the CA erred in applying Claimant’s financials to the Construction Methodology Framework of Policy 495. Claimant argues that the CA should have utilized the AVM Methodology Framework of Policy 495. Claimant asserts that under the AVM Methodology, Claimant would have been awarded $294,000.00 (Pre-0.25 RTP).
BP supports the application of the Construction Methodology and posits that Claimant’s financials would have produced a negative Compensation Amount even if the AVM Methodology had been utilized.
At first glance, one might wonder why the CA utilized the Construction Methodology. However, a review of the NAICS Codes listed in Attachment A of policy 495 reveals that NACIS Code 336xxx – Transportation Equipment Manufacturing is listed under the Construction Methodology Framework. Claimant’s tax returns list NAICS Code 336100 (Motor Vehicle Manufacturing). The CA assigned NAICS Code 336991 (Motorcycle, Bicycle and parts Manufacturing). The record reflects that the CA inquired into the nature of Claimant’s business, specifically asking if the Claimant was generally involved in short term engagements (i.e. less that 30 days).
The Claimant responded: “Engagements may last from less than 30 days to more than 90 days depending on the customers needs and the availability of material.”
The CA inquired into whether the Claimant’s recorded COGS expenses in the same month in which the goods were used. Claimant responded:
“Material COGS is a system generated entry based upon the value of each inventory item found on the Bill of Materials for a product. COGS are expensed in the same month in which they are used. We maintain a rolling inventory.”
The Construction Methodology is “premised on the assumption that variable expenses of a Construction Claimant are more accurately recorded on monthly P&L’s than are revenues (Policy 495, C1). Claimant admits that projects can last from 1 to 3 years and that revenue is recorded when the motorcycle is delivered. A de novo review of the records in this matter demonstrates that the CA was correct in applying the Construction Methodology of Policy 495 to this claim. BP’s Final Proposal is the proper result.

 

 

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