Citation:          FEMA-1763-DR-IA, Aplington-Parkersburg Schools, Accelerated High School Construction Schedule, Project Worksheet (PW) 4674

Cross-

Reference:     Insurance, Improved Project

Summary:       On May 25, 2008, a tornado destroyed Aplington-Parkersburg Community High School.  Shortly after the disaster, the Aplington-Parkersburg Schools (Applicant) negotiated a compromise settlement with its insurance company for $10,879,552.  FEMA prepared PW 4674 for a replacement facility estimated at $13,066,724. FEMA determined that insurance proceeds would fully cover replacement costs, and obligated PW 4674 for $5,000 in Direct Administrative Costs (DAC).  PW 4674 Version 1 adjusted for the Applicant’s revised estimate and identified additional costs of $772,477 over and above insurance proceeds for accelerated construction costs, as well as an additional $4,812 in DAC, but FEMA maintained that insurance should cover all costs.  FEMA prepared PW 4674 Version 2 to document the Applicant’s improved project request.  The Applicant pursued an accelerated construction schedule to rebuild the facility, with improvements, in time for the 2009-2010 school year.  The Applicant contended that due to the compressed timeline, it incurred additional costs that insurance did not cover, including construction management fees, and heating and dehumidification of concrete during the winter months.  The Applicant stated that the insurance settlement was based on normal, rather than expedited, construction costs and no further insurance was available under its policy.  FEMA denied the first appeal and maintained that insurance coverage was available for all construction costs.  The second appeal review confirms that the insurance policy did not cover accelerated construction costs, the compromise settlement was both reasonable and in accordance with the policy, and the Applicant may apportion its Extra Expense coverage to both ineligible and eligible costs.

Issues:            1.  Was additional insurance, beyond the amount of the settlement reached with the insurer, available to the Applicant?

                        2.  Are the project costs for the accelerated construction schedule that are in excess of the insurance settlement eligible for reimbursement by FEMA?

Finding:          1.  No.

                        2.  No, but the Applicant may apportion its Extra Expense coverage to both ineligible and eligible costs.  Therefore, the Applicant is allowed to apply a portion of this coverage to the accelerated construction costs, which had previously been applied to temporary facilities in PW 596.

Rationale:       Robert T. Stafford Disaster Relief and Emergency Assistance Act Section 312, Duplication of Benefits; 44 CFR §206.250(c), 44 CFR §206.253; 44 CFR §206.203(d)(1), Improved projects; and Disaster Assistance Fact Sheet DAP 9580.3, Insurance Considerations for Applicants.