Support Documentation

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster	FEMA-4250
Applicant	Metropolitan St. Louis Sewer District
Appeal Type	Second
PA ID#	510-UO2ZP-00
PW ID#	PW 206
Date Signed	2018-02-09T00:00:00

Conclusion:  The Metropolitan St. Louis Sewer District (Applicant) has not established its request for reimbursement is tied to eligible work.  As such, the remaining issues are moot.  Consequently, the second appeal is denied. 

 

Summary Paragraph

From December 23, 2015 through January 9, 2016, torrential rainfall totaling over 15 inches caused widespread flooding throughout St. Louis County and the City of St. Louis, Missouri.  FEMA wrote Project Worksheet (PW) 206, as an emergency protective measures roject, stating that excess flows from the Applicant’s gravity sewers resulted in 1967 properties being flooded from the sanitary sewers.  However, FEMA obligated zero dollars for PW 206, after concluding the Applicant’s costs were ineligble as a duplication of benefits, and issued an eligibility determination memorandum to nofity the Applicant accordingly.  The Applicant submitted a first appeal, requesting $5,207,756.61 for reimbursement of wastewater backup claims it paid for damages to private properties.  FEMA Region VII’s Regional Administrator denied the appeal, determining: (1) the facilities were not eligible as the Applicant did not own the facilities where repairs were completed nor was it legally responsible to complete the work; (2) the work was not eligible as either emergency or permanent work; (3) the Applicant did not demonstrate all claimed damage was the result of the disaster; (4) the Applicant failed to provide documentation demonstrating any actual work was completed; and (5) the costs were not eligible because the Applicant’s wastewater backup insurance and reimbursement fund constituted a duplication of benefits.  The Applicant submitted a second appeal, contending that FEMA should consider the work completed, based on the Applicant’s settlement of the claims.  The Applicant also argues that a local ordinance provides for the claimants to do the emergency work, thereby eliminating the condition that ordinarily requires applicants to be the entity who performs or contracts for the performance of emergency work on private property.  Moreover, the Applicant emphasizes that it previously gave FEMA opportunities to review documentation concerning disaster-related damages by informing it the documents were available for review in the office of its third party administrator.  Finally, the Applicant argues that its wastewater backup insurance and reimbursement fund is not self-insurance, and therefore, does not duplicate benefits otherwise provided through Public Assistance (PA).    

 

Authorities and Second Appeals

• Stafford Act §§ 312, 403(a)(3).

• 2 C.F.R. § 200.406(a).

• 44 C.F.R. §§ 206.206(a), 206.223(a), 206.225(a)(3).

• PAPPG, at 19-21, 39.

• Chambers Cty., FEMA-1791-DR-TX, at 7.

• City of Sweetwater, FEMA-1345-DR-FL, at 3.

Headnotes

• 44 C.F.R. 206.206(a) requires appeals to contain documented justification that supports the applicant’s position.

• FEMA policy requires that costs must be directly tied to the performance of eligible work in order to be allowable.

• The Applicant has not produced documentation demonstrating any work was completed to any of the properties associated with the sewer backup damage claims.  As such, the Applicant has not demonstrated the requested reimbursement, comprised of claim settlements, is tied to the performance of any eligible work.  Therefore, the project and associated costs, are ineligible for PA funding.

Appeal Letter

Appeal Analysis

Background

From December 23, 2015 through January 9, 2016, torrential rainfall totaling over 15 inches caused widespread flooding throughout St. Louis County and the City of St. Louis, Missouri.   The President declared a major disaster on January 21, 2016, making available Public Assistance (PA) funding for both areas.  FEMA wrote Project Worksheet (PW) 206, an emergency protective measures project, stating that excess flows from the Metropolitan St. Louis Sewer District’s (Applicant) gravity sewers resulted in 1,967 properties being flooded from sanitary sewers.  During the project’s formulation, the Applicant provided various documents to FEMA to support its request for PA funding for its reimbursement of claims for sewer backup damage. 

 

The Applicant provided a spreadsheet (Sewer Claims Spreadsheet), listing the claims filed by individuals who asserted flooding from sanitary sewers damaged their property. [1]  While the spreadsheet did not specify the exact nature of the damages, the claims totaled $5,207,756.61.  Next, the Applicant supplied to FEMA copies of three local ordinances relevant to its request for reimbursement of claims paid to the invididuals listed on the Sewer Claims Spreadsheet.  Ordinance 10561 establishes a wastewater backup insurance and reimbursement fund to meet the costs of insurance and self-insurance, and to pay damages to people who sustain damage as a result of a wastewater backup.[2]  Ordinance 13805 limits the overcharged sewer line backup insurance coverage to a maximum of $3,000.00 per claim[3] and Ordinance 14104 purchases an insurance policy for a blocked main and overcharged sewer line backup policy that requires a $6,000,000.00 deductible.[4]  Finally, the Applicant provided its general management policy, which stated, “[i]n an effort to assist customers with damages and the cleanup, the [Applicant] may consider compensation for any damages…for water backups caused…by an overcharged sewer system….”[5]

 

On August 1, 2016, FEMA obligated zero dollars for the emergency protective measures project; FEMA’s insurance reviewer noted that funding for the $6,000,000.00 deductible, collected through Ordinance 10561, constituted self-insurance and as a result, provided a duplication of benefits for the requested $5,207,756.61 in PA funding.[6]  Consistent with its denial in PW 206, FEMA wrote an eligibility determination memorandum dated July 22, 2016, which determined the project was ineligible for PA funding due to a duplication of benefits.  FEMA forwarded the memorandum to the Applicant via an August 16, 2016 letter.

 

First Appeal

The Applicant appealed FEMA’s denial in a letter dated October 3, 2016, requesting $5,207,756.61 for reimbursement of wastewater backup claims.  In an October 11, 2016 letter, the State of Missouri Emergency Management Agency (Recipient) forwarded the Applicant’s appeal and recommended it for FEMA’s consideration.  

 

On December 12, 2016, FEMA sent a Basic Request for Information (RFI) to the Applicant and Recipient, attaching a second eligibility determination memorandum dated December 9, 2016, in which FEMA listed four additional bases for finding the project ineligible.  First, FEMA concluded the facilities repaired were not eligible for PA as they were neither public nor private non-profit facilities.  Second, it determined the Applicant did not have legal authority to make repairs to the damaged facilities, the costs claimed were the result of third party liability claims and not first party property damage claims, and the Applicant did not perform or contract out any of the repair work.  Third, FEMA found that although the project was written as an emergency protective measures project, it did not meet the definition of emergency work, either as temporary emergency repairs or emergency protective measures, and was also not eligible as permanent work.  Lastly, FEMA stated the Applicant had not provided documentation identifying the actual damages, details of work performed, or the actual cost of the work performed. 

 

In the Basic RFI, FEMA afforded the Applicant an opportunity to submit a response regarding the original eligibility determination reached in the July 22, 2016 memorandum and the additional eligibility issues identified in the December 9, 2016 determination memorandum, and provide any additional information supportive of its appeal.  FEMA also requested that the Applicant provide specific documentation such as copies of each claim’s proof of loss, signed releases for each claim, and confirmation that claims were paid.  In addition, FEMA asked the Applicant to provide information explaining how actual repair costs were verified and why the Sewer Claims Spreadsheet included claims for losses that occurred several weeks after the incident period in February 2016.

 

The Applicant responded in a letter dated February 2, 2017.  First, it stated the proof of loss documentation, photographs of damages for each claim, and other information relative to the claims (actual damages, details of work performed, and actual costs associated with the work) were available for review at the office of the third party claims administrator.  As the information for all claims would be voluminous, it invited FEMA to pull a random sample of documentation from the office in order to conduct an inspection.  As an example of the documentation available for FEMA’s review, the Applicant provided records for one homeowner’s claim.[7]  

 

Second, the Applicant stated some damages were associated with an accident date beyond the incident period because the underground sewer system continued to malfunction post-disaster.  Third, the Applicant noted it had paid a total amount of $4,585,656.89 in claims to date, but expected paying additional claims.  Therefore, the total amount requested from FEMA, which the Applicant anticipated it would eventually incur from paying all claims, was $5,101,001.53.  Fourth, the Applicant contended Ordinance 10561 required it to be responsible for the cost of the emergency protective measures, regardless of whether the work was completed by the Applicant or the claimants.  Finally, it argued the cleanup and repair work were eligible emergency protective measures because timely cleanup of sewage backups in residential facilities is a public health/safety issue.  

 

On April 28, 2017, FEMA transmitted a Final RFI, asking for documentation that demonstrated (1) the costs claimed were not a duplication of benefits,[8] (2) the facilities were eligible,[9] (3) the Applicant was legally responsible for the work,[10] (4) the damage was the result of the disaster,[11] and (5) eligible emergency protective measures were performed.[12]  The Applicant responded by letter dated May 26, 2017.  It confirmed it did not own the facilities that were the basis of the claim.  However, it emphasized that emergency protective measures completed on private property are eligible for PA, and timely cleanup of sewage backups in residential facilities as well as timely prevention of property damage resulting from a backup are issues of public health and safety.  Additionally, the Applicant asserted that its ordinance provided the legal jurisdiction and legal authority for paying claims for damage that resulted from the sewer backups caused by the disaster. 

 

Next, the Applicant noted it relied on rain gauges placed throughout the service area, which recorded rainfall amounts in conjunction with specific days to verify damages were disaster-related.  Then, it addressed the question of whether work was actually performed.  It stated that because the claimants essentially brought actions against the Applicant, the Applicant was responsible for the actual cash value of the damaged items, regardless of whether items were ever repaired or replaced.  Lastly, the Applicant revised the requested reimbursement, repeating the prior estimated project amount of $5,207,756.61.[13]

 

FEMA Region VII’s Regional Administrator denied the appeal on August 29, 2017, determining: (1) the facilities were not eligible as the Applicant did not own the facilities where repairs were completed nor was it legally responsible to complete the work; (2) the work was not eligible as either emergency or permanent work; (3) the Applicant did not demonstrate the damage was the result of the disaster in all cases; (4) the Applicant failed to provide documentation demonstrating any actual work was completed; and (5) the costs were not eligible because the Applicant’s wastewater backup insurance and reimbursement fund constituted a duplication of benefits.

 

Second Appeal

The Applicant appeals FEMA’s denial in an October 30, 2017 letter, seeking funding of approximately $5.1 million, or alternatively, the amount that will be requested at final inspection after all eligible claims have been paid.  The Applicant argues its ordinance[14] provides for the claimants to do the emergency work for which the Applicant has liability and responsibility, thereby eliminating the PA condition that ordinarily requires applicants to be the entity who performs emergency work on private property.  Next, the Applicant emphasizes FEMA declined multiple opportunities to review documentation available in the office of its third party administrator that would sufficiently demonstrate the damages claimed were the result of the disaster.  Then, it contends that FEMA should consider the work completed, based on the Applicant’s settlements of the claims.[15]  Finally, the Applicant argues that its wastewater backup insurance and reimbursement fund is not self-insurance, and therefore, does not duplicate benefits otherwise provided through PA.  By way of a November 15, 2017 letter, the Recipient recommends FEMA approve the appeal.

 

Discussion

Under Section 403(a)(3) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), work or services performed on private lands that are essential to protecting and preserving immediate threats to property or public health and safety, may be eligible for PA.[16]  To be eligible for financial assistance, an item of work must be required as a result of the disaster[17] and be the legal responsibility of an eligible applicant.[18]  To determine legal responsibility for emergency work, FEMA evaluates whether the applicant requesting PA either has (1) jurisdiction over the area, or (2) the legal authority to conduct the work related to the request.[19]  Finally, as FEMA is prohibited from providing PA funding that duplicates insurance proceeds,[20] it is required to deduct actual and anticipated recoveries from otherwise eligible costs.[21]

 

In order to be allowable, costs must be, among other requirements, directly tied to the performance of eligible work.[22]  An appeal must contain documented justification supporting the applicant’s position.[23]  The burden to substantiate appeals with “documented justification” falls exclusively to the applicant[24] and hinges upon the applicant’s ability to produce not only its own records, but to clearly explain how those records support the appeal.[25]

 

Here, the Applicant has not provided documentation that any work was actually completed in relation to the claims paid; even the claim documents that the Applicant submitted as an example do not include records of the work performed.[26]  Therefore, because the Applicant has not demonstrated its requested costs are tied to the performance of any work whatsoever, whether eligible or ineligible, the issues concerning general work eligibility requirements and duplication of benefits, are moot.  Accordingly, the project and associated costs are ineligible for PA funding.

 

Conclusion

The Applicant has not demonstrated the completion of eligible work in connection with its claimed costs.  As such, the requested reimbursement for sewer backup claims is ineligible for PA funding. 

 

[1] Spreadsheet from Metro. St. Louis Sewer Dist., MSD 12/23/15 – 2/4/16 (June 6, 2016) (listing the sewer backup damage claims, and including the corresponding claim numbers, claimants’ names, accident dates, coverage descriptions (i.e. blocked main, os – over charge, sbu – sewer backup), narrative descriptions of the accident (i.e. blocked main, water backup, and sewer separation failure), claims’ status, addresses, and totals paid).

[2] Metro. St. Louis Sewer Dist., Mo., Ordinance 10561 (June 10, 1999).

[3] Metro. St. Louis Sewer Dist., Mo., Ordinance 13805 (Feb. 13, 2014).

[4] Metro. St. Louis Sewer Dist., Mo., Ordinance 14104 (June 16, 2015).

[5] General Mgmt. Policy, Water Backup Claims, at 1 (July 19, 2005).

[6] See FEMA’s Emergency Mgmt. Mission Integrated Environment, Project Worksheet 206, Metro. St. Louis Sewer Dist., Entire Application, at 11-12 (last visited Nov. 17, 2017) (a database that comprises FEMA’s web-based grants management system); see generally The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) of 1988, Pub. L. No. 93-288, § 312, 42 U.S.C. 5155 (2015) (prohibiting FEMA from awarding financial assistance to any business concern or other entity, with respect to any loss for which it has received financial assistance under any other program, or from insurance, or from any other source.); Title 2 Code of Federal Regulations (2 C.F.R.) § 200.406(a) (2015) (requiring FEMA to reduce allowable costs if an applicant receives funding from another source for the same work that FEMA funded).

[7] The documentation included: (1) a copy of a check in the amount of $2,900.00, paid by Corporate Claims Management, Inc., O/B/O MSD Water Backup Fund, to the homeowner, for a full and final settlement of any and all claims; (2) multiple letters and documents referencing a date of loss of December 26, 2015; (3) a photograph of an empty concrete floor that contained the sewer drainage hole and a photograph of a separate room with various boxes and items stacked upon themselves; and (4) a proof of loss from the homeowner’s insurance policy that included an estimate for the replacement value and actual cash value of the damages sustained from the sewer back-up.  The estimate included, but was not limited to, costs associated with replacement of 1.5 inches of drywall, removal and replacement of 223.21 square feet of carpet, water extraction, and replacement of a water heater.

[8] Letter from Dir., Recovery Div. FEMA Region VII, to Dir., State of Missouri Emergency Mgmt. Agency (SEMA) and Fin. Dir., Metro. St. Louis Sewer Dist., at 2-3 (Apr. 28, 2017) (requesting that the Applicant explain how it determined that none of the homeowners other than the 59 previously identified, could have filed claims through their homeowners insurance policy).

[9] Id. at 1 (requesting documentation demonstrating the Applicant either had ownership of the facilities or was legally responsible for maintaining the facilities).

[10] Id. at 1-2 (asking for an explanation regarding the discrepancy between (1) the Applicant’s argument it was legally responsible for the work, and (2) the language in the release of claims, executed between the property owner and the Applicant, which stated the Applicant admitted no legal liability regarding the damages.  Furthermore, FEMA requested documentation that (1) there was a threat to public health/safety that was also widespread, (2) the Applicant had the legal authority to perform the work, and (3) the Applicant had rights of entry and agreements to indemnify and hold harmless the Federal government).

[11] Id. at 2 (requesting clarification on how inspections were conducted to ensure damages claimed were the result of the disaster).

[12] Id. (because the Applicant previously indicated it was responsible to pay the actual cash value of the damaged items, regardless of whether items were repaired, FEMA requested the Applicant clarify whether it does not in fact ensure work was actually performed by the claimants.  Moreover, FEMA requested the Applicant provide legal authority that allows FEMA to fund work that was not completed). 

[13] Letter from Fin. Dir., Metro. St. Louis Sewer Dist., to Lead Appeals Analyst, FEMA Region VII, at 1 (May 26, 2017) (the Applicant does not clarify the reason for amending the previous $5,101,001.53 requested in its response to the Basic RFI, to the original amount requested in the PW).

[14] Letter from Fin. Dir., Metro. St. Louis Sewer Dist., to Dir., SEMA, at 2 (Oct. 30, 2017) (not specifying the exact ordinance it references).

[15] Id. at 3 (citing 2 C.F.R. § 200.318(k), a federal regulation that discusses general procurement standards, to support its argument that “FEMA should not substitute [its] judgment when [the Applicant’s] judgment was based upon good administrative practice and sound business judgment for the procured settlement of the claims for the emergency work under [the Applicant’s] ordinance.”).

[16] Stafford Act § 403(a)(3); see also 44 C.F.R. § 206.225(a)(3) (For emergency protective measures to be eligible, they must either eliminate or lessen immediate threats to life, public health or safety, or eliminate or lessen immediate threats of significant additional damage to improved public or private property through cost-effective measures.).

[17] 44 C.F.R. § 206.223(a)(1); see also Public Assistance Program and Policy Guide, FP 104-009-2, at 19 (Jan. 1, 2016) [hereinafter PAPPG] (for emergency work, “[t]he Applicant is responsible for showing that work is required due to an immediate threat resulting from the declared incident.”).

[18] Id. § 206.223(a)(3); see also PAPPG, at 20 (“To be eligible, work must be the legal responsibility of the Applicant requesting assistance.”).

[19] PAPPG, at 20; see also id. at 21 (discussing the legal responsibility for conducting “activities” in the context of both the jurisdiction and legal authority prongs).

[20] Stafford Act § 312; 2 C.F.R. § 200.406(a); PAPPG, at 39.

[21] PAPPG, at 39.

[22] Id. at 21.

[23] 44 C.F.R. § 206.206(a).

[24] FEMA Second Appeal Analysis, Chambers Cty., FEMA-1791-DR-TX, at 7 (May 26, 2017).

[25] FEMA Second Appeal Analysis, City of Sweetwater, FEMA-1345-DR-FL, at 3 (Aug. 15, 2017).

[26] In its second appeal letter, the Applicant requests that FEMA find work was completed because it had mechanisms in place that confirmed repair work was performed before it paid any claims, and cites to 2 C.F.R. § 200.318(k) for support.  However, the federal regulation cited is not applicable to this appeal; the federal regulation pertains to procurement, not eligibility.  As such, it does not negate the Applicant’s responsibility to provide supporting documentation to support its claim.