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BP Business Economic Loss Claim Appeal 2017-837: Remodeling Contractor’s “Out-of-Zone” Included Since Claimant Maintained No Facility


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


BP appeals the BEL award ($1,666,803.28 pre-RTP) to the claimant, a Tarpon Springs, Florida remodeling contractor. BP raises three issues on appeal: (1)the Settlement Program failed to adequately investigate out of Zone revenue, expenses and facilities; (2) the Program misclassified “Management Fees;” and (3) the Program misclassified “Management Fees/Office Err.” BP suggests a remand and alternatively submitted a final proposal of $0.


Claimant’s primary business involves the renovation of hotels. It does so on-site and does not utilize construction trailers. Claimant’s office location is in Tarpon Springs, Florida (Zone C) from where it manages its operations. BP argues that there is “substantial evidence” that Claimant operates outside the Gulf Coast Claim Zone and points to Claimant’s website which identifies construction projects in Puerto Rico, Aruba, Georgia, Virginia and Orlando. BP also notes that the claimant has employees in those locations and registered as a US Foreign LLC in Puerto Rico in 2007. BP asserts that revenue and earned expenses in connection with projects outside the Gulf Coast Claim Zone do not “arise” within the Gulf Coast Areas and, therefore, should be excluded. BP contends the Program should have investigated this issue further. BP also asserts that “Management Fees” and “Management Fees/Office-Err” were mischaracterized as fixed. Claimant contracts with for services in connection with its construction projects and pays 34.64% of Claimant’s net income. The Program accountants classified this expense as “Fees-fixed,” BP contends that this expense should have been treated as either variable COGS or contact labor.


“Management Fees/Office-Err” represents expenses Claimant pays to Errington to reimburse for Claimant’s portion of office expenses. These include office space, overhead, taxes, utilities, postage, phones, IT equipment and personnel, and furnishings. The Program likewise classified these expenses as fixed. BP contends they should be considered variable. Although BP maintains that this misclassification visits significant error on Claimant’s award ($534,801 post-RTP), BP nevertheless submits a final proposal of $0.


Section 38.57 of the Settlement Agreement provides:

Economic Damage shall mean loss of profits, income and/or earnings arising in the Gulf Coast Areas or Specified Gulf Waters allegedly arising out of, due to, resulting from, or relating in any way to, directly or indirectly, the Deepwater Horizon Incident; provided, however,  that Economic Damage does not include (1) loss of profits or earnings, or damages for injury relating to real property or personal property that constitutes any part of the Seafood Compensation Program, Coastal Real Property Damage, Real Property Sales Damage, Wetlands Real Property Damage, Vessel Physical Damage, or (2) VoO Charter Payment, or (3) damages for loss of Subsistence use of natural resources, which constituted Subsistence Damage.

The Settlement Agreement does not prohibit a business entity located within the Claim Zone from recovering compensation for work performed outside the Zone,

unless it maintains a “facility” outside the Zone. Policy 467 provides as follows:


  1. Definition of Facility.

The Claims Administrator defines a Facility of a Business Entity as:

(a) A separate and distinct physical structure or premises;

(b) Owned , leased or operated by the Business Entity;

(c) At which the Business Entity performs and/or managed its


  1. Determining the Location of a Business Entity
  2. Basic Rule: The location of a Business Entity is determined by the location of its Facility.
  3. Location of Customers, Employees, Contractors or Other Representatives :. The Claims Administrator does

not locate a Business Entity on the basis of the location of the customers, employees, contractors or other

representatives of the business apart from the location of the structure owned, leased or operated by the business.


The panel has conducted a de novo review of the record and unanimously finds no evidence that Claimant is a Multi-Facility Business or that it maintains “facilities” in any location other than its office location in Tarpon Springs (Zone C). The panel also unanimously concludes that the Program’s classification of Claimant’s management expenses was appropriate and that there is no record support for BP’s final proposal of $0. In this “baseball” appeal, Claimant’s final proposal is the correct result.


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