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BP Business Economic Loss Claim Appeal 2016-1190: Whether Start-Up Business In Operation at Time of Spill Based on Totality of Circumstances


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 the co-owner of a duplex located in Orange Beach, Alabama (Zone A). The Claims Administrator denied her Start-Up BEL claim, finding that she was not in business and therefore not operating in the Gulf Coast areas at the time of the spill.

In her Notice of Appeal, Claimant invokes the arguments asserted by her co-owners in their appeal: This claim is for the 50% of the duplex and rental business owned
with ***. Their claim is currently in “Discretionary Court Review.” We have uploaded their affidavit explaining the circumstances that should have allowed a judgment that the commencement date of the business was prior to  April, 2010.

On the companion claim, the Claims Administrator likewise determined that Claimant’s co-owners were not in operation at the time of the spill. On appeal, the appeal panelist agreed and upheld the denial. The analysis undertaken by my colleague is quoted below:

Claimant appeals the denial of his Start-Up BEL claim. He is the 50% co-owner of a duplex in Orange Beach, Alabama that was purchased in 2002 as a rental investment. Unfortunately, Hurricane Ivan intervened in 2004, substantially damaging the property and rendering it uninhabitable. The property remained vacant for nearly six years following Ivan, during which time the Claimant and his co-owner considered selling the continually deteriorating parcel or rebuilding. Ultimately, the City of Orange Beach notified Claimant that the property would be demolished at the owners’ expense unless it was rebuilt. Claimant entered into a contract to rebuild in January of 2010.

Exhibit 7 defines a Start-Up Business as one with less than 18 months of operating history at the time of the spill. Policy 362 requires a claimant to establish an
operating history that commenced before April 20, 2010 to be eligible for compensation. Clearly, Claimant does not meet that standard; however, the policy also contemplates that a business could be “in operation” prior to April 20, 2010 if it “incur[ed] substantial costs or expenses of a nature indicative of the actual start-up
business operations.” Such a determination is made by the Claims Administrator based upon the “totality of the circumstances.”

Claimant maintains that he incurred substantial construction costs before April 20, 2010 to qualify for compensation. It is clear from the record whether the catalyst for
doing so was desire to actually begin business operations or rather in response to the threat from the City of Orange Beach to condemn the proper and demolish it at
Claimant’s expense. The Claims Administrator found that, based on the totality of the circumstances, the Claimant failed to establish that he was in operation prior to
the spill and, after a de novo review of the record, this panelist concurs that the record supports that finding. The appeal is denied.

Policy 362 explains that determination of whether a Claimant is doing business or in operation is based on the totality of the circumstances. Relevant factors include when the business began to sell products, perform full-time services while physically present or incur substantial costs or expenses of a nature indicative of the actual start-up of business operations. Here, de novo review demonstrates that the property in question was severely damaged by Hurricane Ivan in 2004. Repair efforts commenced in early 2010 and a certificate of occupancy was dated May 26, 2010, and no revenue was generated until July of 2010. There is no evidence of operating expenses prior to May of 2010.

On this record, the Claims Administrator was amply justified in determining that the Claimant was not in operation at the time of the oil spill. No basis for overturning that decision has been demonstrated on appeal. Accordingly, the denial must be upheld.

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