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BP Business Economic Loss Claim Appeal 2017-1276: Marco Island Chain Drug Store Correctly Awarded Tourism Designation Based on “Totality of Circumstances”

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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

Marco Island, Florida (Zone C) is a well-known tourist destination. BP appeals the Tourism designation assigned by the Claims Administrator to Claimant’s Marco Island store. For the following reasons, this determination is affirmed.
The Claims Administrator assigned NAICS Code 446110 – Pharmacies and Drug Stores, a code not included in Exhibit 2. The Settlement Program initially declined to classify the store as Tourism, but on reconsideration, reversed itself and determined that the store’s location and sales data reflecting that it derived less than 50% of its revenue from prescription drugs. The Settlement Program determined that this was sufficient to justify a Tourism designation. This data indicated that prescription sales for the store comprised 48% of its revenue.
Aggrieved, BP argues that Claimant is a national chain of pharmacies that does not cater to tourists. Additionally, BP argues that a mere percentage of sales vis a vis prescription drugs is a poor metric for whether the store caters to a significant number of non-local customers. BP adds that the financials do not demonstrate that sales spike in the summer months as would be expected for a Tourism business. Discounting the sales data, BP argues that a Tourism determination cannot rest solely on the location of the business.
Claimant responds that Policy 289 v.2 provides a totality of the circumstances standard for measuring whether a business can demonstrate a sufficient nexus to Tourism. Claimant points to claims for four of its New Orleans, Louisiana stores in or near the French Quarter that have been determined by the Settlement Program to qualify as Tourism businesses. Claimant adds that, contrary to BP’s argument, the focus is on the totality on the particular store’s circumstances, not status as a national chain.
In the Louisiana claims, the Settlement Program developed a two-part test for application of the totality of the circumstances standard: To determine whether each store met the definition of Tourism under Policy 289 v.2, we applied a two part test. First, we considered whether the store was located in a known Tourist destination. If so, we then examined the store’s Profit & Loss statements to determine if the store derived more than 50% of its revenue from general merchandise as opposed to prescription drugs, with the assumption that the majority of prescription drug sales were to local customers. Therefore, we assigned an Industry Designation of Tourism only to that passed both prongs of this test.
Numerous appeal panels have determined that sales data and location may be relevant factors in application of the totality of the circumstance standard. No bright line percentage of sales data has been established nor is it necessary to demonstrate the home address or distance traveled of non-local customers. This panelist is  persuaded that this store’s location in a high volume tourist area,accompanied by adequate sales data, is sufficient to tip the scales in favor of Tourism under the
totality of the circumstances. While the location is not the sole factor, it is an important one. The outcome would likely be different for a store with the same sales data but with an inland location.
The Claims Administrator was correct in assigning the Tourism designation. Accordingly, Claimant’s Final Proposal and its corresponding RTP of 2.00 is the correct choice.

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