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BP Business Economic Loss Claim Appeal 2017-1390: AVM More Appropriate Than Construction Methodology for Roofing Contractor Despite NAICS Code

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 is a roofing contractor located in Vicksburg, Mississippi . Claimant appeals the denial of its BEL claim, asserting the Claims Administrator should have selected the AVM methodology under Policy 495, not theConstruction Claim methodology. Claimant failed to meet the causation criteria of Exhibit 4B, and the claim was denied.
BP supports the use of the Construction Claim methodology, first pointing out that Claimant’s assigned NAICS code of 238160 (Roofing Contractors) is listed as one to be covered by the Construction Claim methodology. (See Policy 495, pg. A2). BP argues further that Claimant’s P&Ls display the types of matching problems the Construction Methodology was designed to address.
Essentially, the record here establishes that Claimant’s job materials are purchased and expensed in the same month. This usually occurs the day before or the same day a job is started, and the purchased materials are used on that job and not held in inventory. Corresponding revenues are recorded after Claimant invoices a customer upon a job’s completion and receives payment. Job duration is typically 30 days or less, and collections ordinarily range from within the same month to the month following the job’s completion. Claimant does not use any form of the percentage of completion accounting practices frequently associated with construction contractors.
Attachment A to policy expressly states a Claimant with a given NAICS code will not automatically be assigned to a given methodology by virtue of that code. A de novo review and analysis of this record leads to the finding that Claimant’s financials would be more appropriately matched by applying the AVM methodology. Under Policy 495, the AVM methodology is set forth as the default approach. The specialized methodologies, including the Construction Claim methodology, are available to be utilized if a claimant’s revenue stream does not reasonably reflect economic reality. Here, in the judgment of this panelist, that revenue stream does reflect economic reality, and the AVM approach should have been selected on these facts.
Accordingly, the Denial is overturned, and this matter remanded for reevaluation using the AVM methodology.

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