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BP Business Economic Loss Claim Appeal 2017-1421: Pipeline Company Payment to Rice Farmer Income, Not Insurance Proceeds

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

In this appeal of a Business Economic Loss award to a rice, soybean and crawfish farm in Basile, Louisiana (Zone D), BP assigns error to the Claims Administrator in his treatment of certain income Claimant received from a pipeline company. Noting that Claimant explained the income “had to do with a pipeline coming through the property that was being farmed,” BP submits that the revenues equate to insurance proceeds received for crop damage and should have been excluded from the calculation in keeping with CAO Policy 328 v. 2 as not typically earned as revenue in the normal course of operations.
Claimant counters with this quotation from the Administrator’s Calculation Notes:
The Claimant communicated that it used the ‘Farm Damage’ & ‘Pipeline’ revenue accounts to record the
Rice crop damages incurred as a result of a pipeline that turned previously farmed land into unfarmable acreage.
It all had to do with a pipeline coming through the property that was being farmed. The payments to
were for crops not planted, based on what he would have received for the crops had they been planted.
Both accounts relate to lost Rice crop revenues, so DWH Accountant allocated these proceeds to the Rice crop and spread the revenues over the corresponding Rice season. DWH Accountant allocated the January 2009 ‘Farm Damage’ entry of $116,000 to the 2008 Rice season because it occurred after the 2008 Rice season harvest and prior to the 2009 Rice season planting. DWH Accountant allocated the January 2010 ‘Pipeline’ entry of $46,500 to the 2009 Rice season because it occurred after the 2009 Rice season harvest and prior to the 2010 Rice season planting.
In further support of its position, Claimant cites a Discretionary Review decision issued by the supervising District Court which held that when insurance proceeds represent replacement of income that is typically earned as revenue under the normal course of operations, such proceeds are properly included as “revenue”. (E.D. La. Dkt. No.16-15284.
BP’s position is certainly a credible one: If the pipeline company payments constituted indemnification for damage to claimant’s crops, then they would properly be characterized as “insurance proceeds” and excluded from revenue under the policy in question.
Here, the Claims Administrator, after analysis and evaluation, concluded otherwise: i.e, that they “relate to lost Rice crop revenues, ” and thus constituted replacement of lost income and therefore included them as revenue. This is a close question but following de novo review, this panelist reaches the same conclusion. Accordingly, for the foregoing reasons, this BP appeal is denied and the decision of the Claims Administrator is affirmed. Claimant’s Final Proposal is therefore selected.

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