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Legal Responsibility – Private Entity

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

DisasterFEMA-1909
ApplicantCity of Clarksville
Appeal TypeSecond
PA ID#125-15160-00
PW ID#3655
Date Signed2015-12-18T00:00:00

Conclusion:  The north extension of the City of Clarksville’s (Applicant) Riverwalk Park (Facility) was under construction at the time of the disaster and the Applicant did not accept the work as complete prior to the disaster declaration date.  On second appeal, the Applicant has failed to demonstrate that it, not the Contractor, was legally responsible for the Facility at the time of the disaster. 

Summary Paragraph

Beginning on April 30, 2010, severe storms, tornadoes, heavy rains, high winds, flooding, and flash flooding affected the City of Clarksville.  FEMA prepared Project Worksheet (PW) 3655 to address damage to the north extension of the Applicant’s Facility.  However, FEMA subsequently determined that the project was ineligible because it was located in an U.S. Army Corps of Engineers (USACE) flowage easement, the Applicant was not legally responsible for the Facility at the time of the disaster because it was under construction, and planting trees and shrubs is not eligible work under the PA Program.  In its first appeal, the Applicant appealed FEMA’s determination that the project was not eligible because the Facility was within an USACE flowage easement but the USACE easement did not include a hold harmless provision.  The Region IV Regional Administrator (RA) addressed all three reasons for denying eligibility, even though the Applicant only raised the USACE easement determination in its first appeal.  The RA concluded that the Facility was misidentified as located within an USACE flowage easement.  However, the RA determined that documentation indicated that the construction project was not yet complete at the time of the disaster’s declaration date.  Finally, the RA concluded that $14,559.84 in funding to replace grass, trees, and shrubs was ineligible based on FEMA policy.  The Applicant’s second appeal claims that the first time FEMA raised the issue of legal responsibility was in the first appeal determination.  As such, the Applicant was not afforded its full appeal rights regarding the new basis for denying eligibility and those rights are preserved.  In addition, the Applicant states the construction contract clearly states, “[u]nless otherwise provided, the Owner shall purchase and maintain, … property insurance written on a builder’s risk “all-risk” or equivalent policy form in the amount of the initial Contract Sum ….”  Finally, the Applicant argues that it was legally responsible for repair work to the Facility at all times because it is the owner. 

Authorities and Second Appeals

  • Stafford Act §§ 406 and 423. 
  • 44 C.F.R. §§ 206.206 and 206.223(a).
  • PA Guide, at 23, 28, 30-31.
  • PA Digest, at 53.
  • Metropolitan Water District of Southern California, FEMA-1203-DR-CA, at 2.
  • Florida Inland Navigation District, FEMA-1785-DR-FL, at 3.

Headnotes

  • Pursuant to Stafford Act § 423 and 44 C.F.R. § 206.206, an eligible Applicant may appeal any decision regarding eligibility for, from, or amount of public assistance within 60 days of notification of such decision.
    • The Applicant was afforded its full appeal rights regarding FEMA’s determination that it was not legally responsible for the Facility.
  • According to 44 C.F.R. § 206.223(a), an eligible item of work must be the legal responsibility of the Applicant.
  • According to the PA Guide and PA Digest, facilities under construction at the time of the disaster are generally not eligible for Public Assistance because they are the responsibility of the contractor until the owner has accepted the work as complete. 
  • The Applicant did not provide sufficient documentation to establish that it was legally responsible for the Facility at the time of the disaster. 

Appeal Letter

David Purkey
Director
Tennessee Emergency Management Agency
3041 Sidco Drive, P.O. Box 41502
Nashville, Tennessee 37204-1502

Re: Second Appeal – City of Clarksville, PA ID 125-15160-00, FEMA-1909-DR-TN, Project Worksheet (PW) 3655 – Legal Responsibility – Private Entity

Dear Mr. Purkey:

This is in response to a letter from your office dated January 26, 2015, which transmitted the referenced second appeal on behalf of the City of Clarksville (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $27,440.16 for disaster-related work completed on the north extension of Riverwalk Park (Facility). 

As explained in the enclosed analysis, pursuant to the Stafford Act § 406(e)(4) and 44 C.F.R. § 206.223, I have determined that the Applicant was not legally responsible for the Facility at the time of the disaster.  Therefore, I am denying the appeal.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division                                                                       

Enclosure

cc: Gracia Szczech
     Regional Administrator
     FEMA Region IV

Appeal Analysis

Background

Beginning on April 30, 2010, severe storms, tornadoes, heavy rains, high winds, flooding, and flash flooding affected the City of Clarksville (Applicant).  As a result, the President declared a major disaster (FEMA-1909-DR) on May 4, 2010.  FEMA initially prepared Project Worksheet (PW) 3655 to document damage to the Applicant’s Riverwalk Park (Facility).  During PW development, FEMA met with city officials multiple times regarding the project’s PA eligibility.[1]  During these meetings, FEMA notified the Applicant that the project was probably not eligible for funding because it was under construction at the time of the disaster and the contractor had not yet issued a Certificate of Substantial Completion.  In addition, FEMA requested additional documentation from the Applicant to support its claim that it was legally responsible for the Facility at the time of the disaster.  Ultimately, FEMA determined the project was ineligible because the project was under construction and control of the general contractor, was not open to the general public and had not been turned over to the Applicant at the time of the declared event; therefore FEMA found that the Facility was not the legal responsibility of the Applicant to protect and maintain.  Moreover, FEMA determined that the Facility was within an United States Army Corps of Engineers (USACE) flowage easement and work done to replace trees and shrubs was not eligible pursuant to DAP Policy 9524.5, Trees, Shrubs, and Other Plantings Associated with Facilities.[2] 

First Appeal

In an October 18, 2011 first appeal letter, the Applicant appealed FEMA’s determination that the project was ineligible because the Facility was within an USACE flowage easement.  The Applicant argued that the USACE easement did not include a hold harmless provision.  In addition, the Applicant asserted that Stafford Act claims are unrelated to any contractual provisions regarding liability or flood rights.

In a letter dated October 30, 2014, the Region IV Regional Administrator (RA) addressed the matter on appeal, USACE easement, as well as two other reasons for denying eligibility (i.e. legal responsibility and trees and shrubs).  While the RA concluded that the Facility was misidentified as located within an USACE flowage easement, he determined that a change order to the construction contract specifying June 16, 2010 as the substantial completion date indicated that the construction project was not complete at the time of the disaster’s declaration date (May 4, 2010).  In addition, the RA noted that a provision in the Applicant’s construction contract required the contractor to maintain builder’s risk insurance covering the entire duration of the project.  As such, the RA determined that, pursuant to 44 C.F.R. § 206.223(a)(3), the Applicant was not legally responsible for the Facility at the time of the disaster.  Finally, the RA concluded that $14,559.84 in funding to replace grass, trees, and shrubs was ineligible based on FEMA policy. 

Second Appeal

In a second appeal, dated January 23, 2015, the Applicant claims that the first time FEMA raised the issue of legal responsibility was in the October 30, 2014 first appeal determination, and consequently, the Applicant was not afforded its full appeal rights regarding the new basis for denying eligibility.  In addition, the Applicant contends that the construction contract clearly states, “[u]nless otherwise provided, the Owner shall purchase and maintain … property insurance written on a builder’s risk “all-risk” or equivalent policy form in the amount of the initial Contract Sum ….”[3]  The Applicant argues that this clause clearly demonstrates that it had legal responsibility of the Facility at the time of the disaster, regardless of what other provisions in the contract state.  The Applicant acknowledges it did not obtain property insurance for the Facility.  Finally, the Applicant argues that it was legally responsible for repair work to the Facility at all times because it is the owner.  The Applicant does not contest the RA’s denial of $14,559.84 in funding to replace grass, trees, and shrubs.

On July 27, 2015, FEMA sent a Request for Information (RFI) to the Applicant requesting any and all contractual documentation, including the primary signed, dated contract between the City of Clarksville and the Contractor, that provide a detailed scope of work that reflects work representative of that which was solicited by the Applicant and bid on by and offered to the Contractor and any documents that purported to waive/transfer/assign builder’s risk insurance or coverage.  The Applicant responded on August 27, 2015 by providing the Contractor’s Certification for Payment and a signed and dated addendum to the AIA Document.[4]  In its response, the Applicant acknowledges that it was unable to locate a scope or summary of work document.[5] 

Discussion

Appeal Rights

The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) § 423[6] and Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.206[7] allow an eligible applicant to appeal any decision regarding eligibility for, from, or amount of public assistance within 60 days of notification of such decision.  In this appeal, the Applicant claims that FEMA did not notify it that its project was ineligible for PA funding pursuant to 44 C.F.R. § 206.223(a)(3) until the first appeal decision.  Therefore, it had not received its full appeal rights regarding this determination.  However, during the initial eligibility assessment of the project, FEMA informed the Applicant repeatedly that, without additional documentation demonstrating legal responsibility, the project would likely be denied funding.[8]  Prior to the first appeal, FEMA sent the official notification regarding the project’s eligibility to the Grantee, Tennessee Emergency Management Agency (TEMA), through its grants management system, stating, “(1) Facility under contract pre-disaster; still contractor’s responsibility. (2) Per Disaster [A]ssistance Policy 9524.5, ‘Trees, shrubs, and other plantings are not eligible for replacement under Section 406 of the Stafford Act….’”[9]  It is the Grantee’s responsibility to inform applicants about the status of their applications, including notification of FEMA’s approval or denial of PWs.[10]

Even if, setting aside the facts of multiple meetings between FEMA and the Applicant and the official notice provided through TEMA that stated legal responsibility is an issue, there is no harm because the Applicant was afforded multiple opportunities to submit additional documentation in support of its claim with its second appeal and in response to the July 2015 RFI.  The Assistant Administrator for Recovery considers appeals of the Regional Administrator’s decision on any first appeal.[11]  Because the RA determined the Applicant was not legally responsible for the Facility on first appeal, the issue of legal responsibility is ripe for a determination on second appeal pursuant to 44 C.F.R. § 206.206(b)(2).

Legal Responsibility

The Stafford Act authorizes FEMA to provide Federal assistance to a local government for the repair, restoration, or replacement of a facility damaged by a declared disaster.[12]  Pursuant to 44 C.F.R. § 206.223(a)(3), an eligible item of work must be the legal responsibility of the Applicant.  Generally, legal responsibility to repair a facility resides with the owner of the facility, unless the owner has transferred that responsibility to another party by lease or other legal instrument.  Facilities under construction at the time of the disaster are generally not eligible for Public Assistance (PA) because they are the responsibility of the contractor[13] until the owner has accepted the work as complete.[14]  However, repairs may be eligible if the contract places responsibility on the Applicant during the construction period or the Applicant accepted the work as complete prior to the disaster.[15] 

The fact that the Facility was under construction at the time of the disaster is not at issue in this appeal.  Rather, the Applicant argues that, at all times, it was legally responsible for the Facility per the terms of the contract.  When facilities are under construction at the time of a disaster, FEMA may provide PA funding if the Applicant accepted the work as complete prior to the disaster or the contract stipulates that the Applicant was legally responsible for the Facility during the duration of the contract.  As explained below, the Applicant failed to provide documentation to demonstrate that either of these exceptions apply. 

The President declared the disaster on May 4, 2010.  Upon review of the documentation, FEMA determined that the date of substantial completion was June 16, 2010, as evidenced by Change Order #5, dated July 27, 2010.  Previous change orders stipulated that the delays in completion of the project were due to circumstances that predated and were unrelated to the disaster.[16]  As the documentation demonstrates, the contractor was still liable for the Facility at the time of the disaster, and the Applicant had not accepted the work as complete at the time of the disaster.  As such, the Applicant has not established that it, not the contractor, was legally responsible for the Facility.

With its second appeal, the Applicant submitted an unsigned, undated template[17] with provisions placing the legal onus on the Owner for the duration of the project.[18]  However, in response to FEMA’s RFI, the Applicant provided a signed and dated contract that incorporates by reference and modifies the provisions of the unsigned document.[19]  The Applicant also submitted a Certificate of Liability Insurance, an electronic mail attachment that lists the types of insurance obtained by the contractor[20] and bid documents that include insurance and bonding requirements for city contractors.[21]  These documents clearly state that the contractor is responsible for obtaining Builders Risk insurance, not the Applicant.[22]  The requirements further stipulate that the coverage must include earth movement, flood including surface water backup, water damage, and debris removal, among other perils.[23]  The signed, modified contract and bid documents place the responsibility to obtain Builders Risk insurance on the contractor.  As such, the contractual terms and supporting documentation did not place responsibility for damage on the Applicant during the construction period, and the project is not eligible for PA funding under Stafford Act § 406(e)(4). 

Conclusion

At the time of the disaster, the Facility at issue was under construction.  The Applicant had not yet received a Certificate of Substantial Completion from the contractor.  In addition, the documents proffered by the Applicant to demonstrate legal responsibility for the Facility throughout the duration of the North Riverwalk Extension project do not demonstrate that it was legally responsible for the Facility at the time of a disaster.  As such, the project is not eligible for PA funding.

 

 


 

[1] See Memorandum prepared by FEMA Public Assistance Project Specialist, Project Notes, at 1-2 (Sep. 17, 2010) [hereinafter Project Notes]. 

[2] Disaster Assistance Policy DAP9524.5, Trees, Shrubs, and Other Plantings Associated with Facilities (Jul. 18, 2007).

[3] AIA Document A201- 1997, at § 11.4.1 (undated) [hereinafter AIA Document A201-1997].

[4] Email from Grants Analyst/ Title VI Coordinator, City of Clarksville to Attorney Advisor, FEMA (Aug. 27, 2015, 15:07 EST) [hereinafter RFI Response].

[5] Id.

[6] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 423, 42 U.S.C. § 5122 (2007).

[7] 44 C.F.R. § 206.206(c)(1) (2009).

[8] Project Notes, at 1-2 (documenting several meetings between FEMA and the Applicant held between July and September 2010).

[9] Email from Public Assistance Group Supervisor, FEMA to Public Assistance Officer, TEMA (June 22, 2011, 16:15 EST) [hereinafter Project Notification].

[10] 44 C.F.R. § 206.200(b)(2)(i).

[11] 44 C.F.R. § 206.206(b)(2). 

[12] Stafford Act § 406.

[13] See 44 C.F.R. § 206.201(a) (defining “Applicant” as “a State agency, local government, or eligible private nonprofit organization … submitting an application to the Grantee for assistance under the State’s grant”).  Under this definition, a contractor is not an eligible applicant for Stafford Act funding.  

[14] Stafford Act § 406(e)(4) (stating, “[i]n any case in which the facility being repaired … was under construction on the date of the major disaster, the cost of repairing … the facility shall include, … only those costs that, under the contract for construction, are the owner’s responsibility and not the contractor’s responsibility.”); Public Assistance Guide, FEMA 322, at 28 [hereinafter PA Guide] and Public Assistance Policy Digest, FEMA 321, at 53 [hereinafter PA Digest].

[15] PA Guide, at 28; see also FEMA Second Appeal Analysis, Florida Inland Navigation District, FEMA-1785-DR-FL, at 3 (Sep. 11, 2012) (determining that the contract required the contractor to purchase “all-risk” property insurance to cover the site for the duration of the contract, and as such, did not place responsibility on the Applicant).

[16] See Change Order #2 between Clay Powers, LLC and City of Clarksville (Mar. 4, 2010) (requesting a time extension of 55 days and change of Substantial Completion date to April 25, 2010 with no adjustments to the contract price); see also Change Order #3 between Clay Powers, LLC and City of Clarksville (June 25, 2010) (requesting a time extension of 52 days due to weather delays and change of Substantial Completion date to June 16, 2010 with no adjustments to the contract price). 

[17] See AIA Document A201- 1997.  The template also does not list the parties to the contract nor detail/describe the scope of work for the North Extension Riverwalk Park Project. 

[18] See AIA Document A201- 1997 §§ 11.4.1 and 11.4.1.2.  

[19] See Agreement for Construction Services between the City of Clarksville and Clay Powers, LLC, Riverwalk North Extension to the Red River, at 1-2 (Oct. 21, 2009) (stating that AIA Document A201-1997 was adopted by reference and “[t]he [present] Contract represents the entire and integrated agreement between the parties… and supersedes prior negotiations, representations, and agreements, either oral or written.”) [hereinafter Contract Agreement].

[20] Email from Accounting Support Specialist, City of Clarksville to Purchasing Supervisor, City of Clarksville (Oct. 29, 2009, 08:11 EST) (providing that the Contractor obtained General, Auto, and Workman’s Compensation Liability Insurance on Sep. 1, 2009; however, the column for Builders Risk insurance is blank).

[21] See Contract Agreement Addendum, at 1 (Oct. 12, 2009) (forming part of the Contract Documents and modifying the original bidding documents, dated September 23, 2009.  The Addendum modified the bid documents with respect to certain specifications and unit prices, but not to bidding requirements.); see also City of Clarksville & Clay Powers, LLC, City of Clarksville Insurance and Bond Requirements for City Contractors, Vendors, and Consultants § A.4 (Sep. 23, 2009) [hereinafter Insurance and Bond Requirements].

[22] Id. (stating “[t]he Contractor shall provide and maintain at Contractor’s own expense, until Contract completion … All Risk Builders Risk Insurance.”).

[23] Id.

Last updated May 28, 2020