PA ID# 000-91043; Metropolitan Water District of Southern California
DSR ID# 94817-94820; Eastside Reservoir Project Insurance Deductibles
Citation: FEMA-1203-DR-CA; Metropolitan Water District of Southern California; PA ID 000-91043; DSRs 94817-94820.
Cross-Reference: Insurance deductibles; damages to facilities under construction; Owner-Controlled Insurance Policy (OCIP); rain and flood disasters.
Summary: The Metropolitan Water District of Southern California (Metropolitan) contracted with two joint venture engineering firms to build its Eastside Reservoir Project. Metropolitan implemented as part of its risk management planning for the project, an OCIP to provide coverage to the contractors for workers' compensation, liability, and Builder's Risk. The February 2 to April 30, 1998 storms caused by the El Ni?o disaster did damage to the project. Metropolitan applied to FEMA for funding to reimburse the deductibles it was required to pay. The region wrote four DSRs to cover the damages but approved the DSRs for $0 because the project, which was under construction, was not the legal responsibility of Metropolitan. Metropolitan appealed the determination and the Regional Director denied the appeal despite the existence of the OCIP. A review of the contract documents shows the following. Article 19 of the General Conditions makes the contractors responsible for all risks except as otherwise provided. Article 8 of the OCIP reiterates the contractors' responsibility to repair all damages at their cost provided that Metropolitan will make available to the contractors all proceeds from the policy. Finally, Article 18d states " If Metropolitan-provided OCIP policies described in Articles 5 and 6 have deductible amounts greater than the Contractor deductible amounts, such excess will be paid by Metropolitan." Metropolitan is again appealing the region's determination stating that under the terms of the contract, it accepted legal responsibility by virtue of the fact that it provided the OCIP on the project. It is also claiming that FEMA must reimburse it for all deductibles for which the Insurance Carrier determines it is responsible. The Insurance Carrier claims five separate events caused the damages and is assessing a deductible for each while Metropolitan insists that the damages were caused by a single continuous event. The parties are in litigation on this issue. For purposes of the disaster program, the weather system that precipitated a major disaster declaration is considered a single event.
Issue: Is Metropolitan legally responsible for the project for purposes of disaster funding?
Findings: Yes. By providing insurance for the entire project, Metropolitan essentially assumed responsibility for the project while it was under construction and is responsible for all damages not covered by insurance.