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Second Appeal Brief
PA ID# 000-UW4X1-00; Christus Health
PW ID# Multiple Project Worksheets ; Duplication of Benefits – Insurance
Conclusion: FEMA correctly deducted insurance proceeds Christus Health (Applicant) received under its Deductible Buy Back Policy to prevent the Applicant from receiving a duplication of benefits. Accordingly, the appeal is denied.
In September 2008, Hurricane Ike damaged several medical facilities owned by the Applicant. FEMA prepared 16 Project Worksheets (PWs) to address the damage to five of the Applicant’s facilities. Prior to its initial obligation, FEMA reduced funding for anticipated insurance proceeds. In 2014, the Texas Division of Emergency Management informed FEMA that the Applicant received its final settlement from its insurance carriers. The insurance proceeds included a commercial all risk, property and casualty policy with a $10 million deductible. In addition, the Applicant also received a Deductible Buy Back loss protection, which covered the commercial policy deductible, less a $250,000.00 deductible. FEMA examined the insurance proceeds and amended the PWs to reflect the actual insurance proceeds received. The Applicant appealed, arguing that the Deductible Buy Back was not an insurance policy, but rather a self-financing vehicle and the amount adjusted should be reinstated. FEMA Region VI Regional Administrator denied the appeal, finding that the Deductible Buy Back coverage was an insurance policy and the reductions in the PWs were appropriate to avoid a duplication of benefits. On second appeal, the Applicant argues that any eligible losses incurred by the Applicant and indirectly financed by it through its risk management mechanism, provided by the Applicant’s wholly owned captive, is eligible.
Authorities and Second Appeals
- Stafford Act § 312.
- 44 C.F.R. § 206.250.
- PA Guide, at 41, 119.
- Roman Catholic Diocese of Brooklyn, FEMA-4020-DR-NY.
- Stafford Act § 312 prohibits an applicant from receiving public assistance where it has received financial assistance under its insurance or any other source.
- The Applicant’s Deductible Buy Back protection was an insurance policy held by the Applicant’s wholly owned subsidiary, its captive insurance company. As such, it would constitute a duplication of benefits.
- Pursuant to FEMA policy, if the Applicant receives insurance proceeds for both eligible and insured ineligible damages, such as property and business income losses, without specifying limits for each type of loss, FEMA will apportion eligible costs between the two based on the ratio of insured eligible to insured ineligible damages, similarly, deductibles are apportioned in the same manner.
- The Applicant received proceeds for both eligible property damage and ineligible business interruption loss and FEMA appropriately apportioned the proceeds.
- Pursuant to 44 C.F.R. § 206.250(c), FEMA is required to deduct actual and anticipated insurance recoveries from otherwise eligible costs.
The costs for water cleanup on PW 12171 were covered by the Applicant’s insurance policy and the corresponding insurance deduction was correct.