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Second Appeal Letter
PA ID# 005-UOFZF-00; Columbus Regional Hospital
PW ID# 56 PWs; Insurance
May 12, 2010
Governor’s Authorized Representative
Indiana Department of Homeland Security
302 West Washington Street
Indianapolis, Indiana 46204
Re: Second Appeal–Columbus Regional Hospital, PA ID 005-UOFZF-00,
Insurance, FEMA-1766-DR-IN, 56 Project Worksheets (PWs)
Dear Mr. Copeland:
This letter is in response to your letter dated January 21, 2010, which transmitted the referenced second appeal on behalf of the Columbus Regional Hospital (Applicant). The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) insurance deductions from the referenced PWs in the amount of $15,913,493.
FEMA prepared 56 PWs for the repair of damage to the hospital facilities and the repair or replacement of medical equipment that was damaged by the flood in June 2008. FEMA estimated the cost to repair disaster-related damage and reduced the PWs by $15,913,493 to reflect anticipated insurance proceeds. FEMA met with the Applicant on April 6, 2009, and explained that, based on the ratio of eligible to ineligible damages, 36 percent ($9 million) of the $25 million insurance recovery would be attributable to the Applicant’s business income loss due to the flood. The remaining 64 percent ($16 million) would be applied to FEMA eligible damages.
The Applicant submitted its first appeal on June 30, 2009, requesting that FEMA reconsider the insurance deductions taken from the PWs. The Applicant contended that the Stafford Act allows it to apply the $25 million insurance recovery exclusively to its unreimbursed business income losses. The Acting Regional Administrator denied the first appeal on November 5, 2009, stating that the anticipated insurance proceeds were apportioned based on the ratio of eligible to ineligible damage as specified in Disaster Assistance Fact Sheet DAP9580.3, Insurance Considerations for Applicants. FEMA applied the same ratio to the anticipated insurance proceeds to determine the amount that was deducted from the eligible equipment replacement cost.
On December 30, 2009, the Applicant submitted its second appeal, reiterating its claim that the insurance proceeds should be applied entirely to its business interruption losses, therefore negating any potential duplication of benefits. The Applicant did not provide any additional documentation with the second appeal.
The Stafford Act, Section 312(a) Duplication of Benefits, requires FEMA to reduce the amount of assistance provided to the Applicant by the amount of financial assistance it will receive under any other program or from insurance or from any other source. The Applicant had a $25 million insurance policy for equipment, property and business interruption. The policy did not specify any sub-limits for each category of coverage. The Applicant’s total disaster losses exceeded $160 million. It received $25 million from its insurance company. The insurance company did not allocate the insurance proceeds to the three categories of coverage. Disaster Assistance Fact Sheet DAP9580.3 states:
If the Applicant’s insurance covers eligible and ineligible damage (for example, property damage and business interruption losses respectively) without specifying limits for each type of loss, the proceeds will be apportioned based on the ratio of the Applicant’s eligible to ineligible damage.
Using the ratio of the Applicant’s eligible to ineligible damage resulted in 64 percent of the insurance recovery being applied to eligible damages and 36 percent being applied to ineligible damages (business interruption losses) or $15,913,493 and $9,086,507 respectively.
I have reviewed the information submitted with the appeal and determined that the apportionment of the insurance proceeds on the PWs was done in accordance with Disaster Assistance Fact Sheet DAP9580.3. The Acting Regional Administrator’s decision in the first appeal is consistent with Public Assistance regulations and policy. Accordingly, I am denying the second appeal.
Please inform the Applicant of my decision. This determination is the final decision on this matter pursuant to 44 CFR §206.206, Appeals.
Elizabeth A. Zimmerman
cc: Janet M. Odeshoo
Acting Regional Administrator
FEMA Region V