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Duplication of Benefits

Appeal Brief Appeal Letter

Appeal Brief

DisasterFEMA-1603-DR
ApplicantHousing Authority of New Orleans
Appeal TypeSecond
PA ID#071-U8M7N-00
PW ID#Multiple Project Worksheets
Date Signed2008-02-19T05:00:00
Citation:FEMA-1603-DR-LA, Housing of New Orleans
Summary: The Applicant submitted cost reimbursement for emergency work performed at various facilities for which it responsible. FEMA prepared 39 PWs for these facilities to address the emergency protective measures of mold remediation and pest control. The FEMA insurance specialist determined that the level of federal assistance should be reduced by the amount of anticipated insurance recovery the Applicant would receive from the insurance underwriter. The PWs were obligated for zero dollars due to the anticipated insurance proceeds.

The Applicant submitted its first appeal on February 23, 2007, requesting that FEMA reverse the anticipated insurance proceeds deduction. After reviewing the information provided in the Applicant’s first appeal, FEMA determined that the interpretation of section 312(a) Duplication of Benefits of the Stafford Act (42 U.S.C. 5155) applies to both emergency work and permanent work. FEMA denied the Applicant’s first appeal in a letter dated April 19, 2007.

In its second appeal, August 14, 2007, the Applicant again appealed the anticipated insurance proceeds reduction and requested that versions to the 39 PWs be written to restore the amount deducted as anticipated insurance proceeds. No additional documentation was provided. The appeal centers on two arguments:

1. The Applicant asserts that section 312 is applicable only to permanent work. The Applicant has not credited insurance against the emergency work; therefore, there has been no duplication and reductions should not be made.
2. The Applicant claims that FEMA’s reductions for anticipated insurance proceeds were arbitrary because the insurance was counted against eligible emergency work rather than permanent work.
3.
Issues: 1. Does section 312 of the Stafford Act only apply to permanent work?
2. Was the allocation basis for the insurance proceeds arbitrary?

Findings: 1. No. It applies to both emergency and permanent work.
2. No. An insurance review of the coverage was performed by FEMA’s insurance specialist to determine coverage with respect to the scope of work of each PW.

Rationale: Section 312 of the Stafford Act.

Appeal Letter

February 19, 2008

Colonel Thomas Kirkpatrick (Ret.)
State Coordinating Officer
Governor’s Office of Homeland Security and
Emergency Preparedness (GOHSEP)
7667 Independence Boulevard
Baton Rouge, LA 70806

Re: Second Appeal–Housing Authority of New Orleans, PA ID 071-U8M7N-00,
Duplication of Benefits, FEMA-1603-DR-LA, Multiple Project Worksheets (PWs)

Dear Colonel Kirkpatrick:

This is in response to your letter dated August 9, 2007, which transmitted the referenced second appeal on behalf of the Housing Authority of New Orleans (Applicant). The Applicant is appealing the Federal Emergency Management Agency’s (FEMA) deduction of insurance proceeds from the cost of eligible emergency protective measures rather than from permanent repairs.

The Applicant requested FEMA assistance for emergency work performed at its eligible facilities. FEMA prepared 39 PWs to address the emergency protective measures at each facility. The FEMA Public Assistance funding for eligible work was reduced by the amount of anticipated insurance proceeds.

The Applicant appealed the reduction in the first appeal dated February 23, 2007, regarding restoration of the amount deducted. The Applicant contends that FEMA misinterpreted section 312 of the Stafford Act and was arbitrary in applying the anticipated insurance proceeds.

The Regional Administrator denied the first appeal stating:

The types of work performed in the PWs in appeal are items covered in the Applicant’s insurance policy. Accordingly, the PW costs must be reduced by the amount that the Applicant would receive from insurance. Failure to take the reductions would be contrary to the intent that insurance is the primary source of funding for Applicants and funding from Federal agencies is supplemental. Applicable insurance reductions are required by FEMA regulations.

The Regional Administrator further stated, “Interpretation of this section [312] makes it clear that the insurance requirements included in the Stafford Act apply to both emergency work and permanent work.”

On August 14, 2007, the Applicant submitted a second appeal, again contending that section 312 of the Stafford Act applies to permanent work, not emergency work. The Applicant also stated, “Nonetheless, HANO is not disputing the amount of the deductions but rather the fact that the Category A and B Project Worksheets were reduced at all as there has been no duplication of benefits received by HANO.” The Applicant submitted no additional documentation with the second appeal.

The Applicant has a general insurance policy on each location. The policy provides coverage for debris removal subject to insurance limits as specified in the policy. In addition, each location has Debris Removal Additional Coverage in the amount of $5,000. The 39 PWs being appealed cover work that includes tear-out and interior demolition activities. By insurance company definition, debris removal covers the cost of tear-out and removal. Therefore, the Applicant can receive the costs from its insurance carrier. Section 312 of the Stafford Act requires that FEMA reduce the amount of assistance provided to an Applicant by the amount of financial assistance it will receive “under any other program or from insurance or any other source.” FEMA’s Response and Recovery Directorate Policy 9525.3, Duplication of Benefits – Non-Government Funds, states that the reduction of anticipated insurance proceeds is required.

Based on the review of all information submitted with the appeal, I have determined that the Regional Administrator’s decision on this matter is consistent with program statute and regulations. Therefore, I am denying the second appeal.

Please inform the Applicant of my decision. My determination constitutes the final decision on this matter as set forth in 44 CFR §206.206.

Sincerely,

/s/

Carlos J. Castillo
Assistant Administrator
Disaster Assistance Directorate

cc: William Peterson
Regional Administrator
FEMA Region VI