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7th Circuit rejects hospital's claims for $20M more in federal aid

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Columbus Regional Hospital, which was flooded following heavy rains in southern Indiana in 2008, is not entitled to an additional $20 million in disaster relief funds from the Federal Emergency Management Agency in addition to the $70 million it already received, the 7th Circuit concluded Wednesday.

In Columbus Regional Hospital v. Federal Emergency Management Agency, 12-2007, the federal appellate court tackled two issues: whether the District Court was the proper venue for the lawsuit and the merits of the suit.

The lawsuit was filed in the Southern District of Indiana, but under the Tucker Act, suits seeking more than $10,000 in monetary damages are to move before the Court of Federal Claims. The judges concluded that the District Court was the right venue because it’s the only court that can serve as a forum for all of the hospital’s legal theories, which include claims under the Stafford Act and the Federal Tort Claims Act.

The 7th Circuit rejected FEMA’s claim that everything it does is a “discretionary function” so there can never be an obligation to pay more than the agency decides is due. Switching focus to the lawsuit, the hospital contended that FEMA must cover the replacement cost of equipment and supplies destroyed by the flood, and that includes new equipment. The court found FEMA’s approach – to value property lost as cost (basis) less depreciation – to make sense in that it gives all victims the value of what they lost, and no more.

“Disaster benefits are a subsidy, and no one is entitled to a greater subsidy than the statute mandates,” Chief Judge Easterbrook wrote. “If a fast-food restaurant gets the depreciated value of a fryer or milkshake mixer, a hospital gets the depreciated value of a magnetic resonance imager.”

The second issue involves the proceeds the hospital received from insurance. FEMA concluded property damage represented roughly two-thirds of the hospital’s losses within the policy’s scope, so it attributed around $16 million of the $25 million in insurance proceeds to the property damage and deducted that amount from the federal funds. The hospital claims that no deductions should be made because it used the $25 million to cover expenses such as salaries and the cost of moving patients.

“ … as far as we can see nothing in the Stafford Act or any regulation prevents the agency from imputing all insurance proceeds to covered claims. FEMA did the Hospital a favor when it allocated a third of the proceeds to losses outside the scope of the Stafford Act, and thus deducted only $16 million rather than $25 million from the Hospital’s claim,” Easterbrook wrote.

“The Hospital tells us that it now has pursued its administrative remedies and filed a second suit under the FTCA. We expect it to be met with a defense of claim preclusion (res judicata) as well as the observation that the suit is substantively feeble, but we leave that to the court where the FTCA litigation is pending.”
 

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  1. I just wanted to point out that Congressman Jim Sensenbrenner, Senator Feinstein, former Senate majority leader Bill Frist, and former attorney general John Ashcroft are responsible for this rubbish. We need to keep a eye on these corrupt, arrogant, and incompetent fools.

  2. Well I guess our politicians have decided to give these idiot federal prosecutors unlimited power. Now if I guy bounces a fifty-dollar check, the U.S. attorney can intentionally wait for twenty-five years or so and have the check swabbed for DNA and file charges. These power hungry federal prosecutors now have unlimited power to mess with people. we can thank Wisconsin's Jim Sensenbrenner and Diane Feinstein, John Achcroft and Bill Frist for this one. Way to go, idiots.

  3. I wonder if the USSR had electronic voting machines that changed the ballot after it was cast? Oh well, at least we have a free media serving as vicious watchdog and exposing all of the rot in the system! (Insert rimshot)

  4. Jose, you are assuming those in power do not wish to be totalitarian. My experience has convinced me otherwise. Constitutionalists are nearly as rare as hens teeth among the powerbrokers "managing" us for The Glorious State. Oh, and your point is dead on, el correcta mundo. Keep the Founders’ (1791 & 1851) vision alive, my friend, even if most all others, and especially the ruling junta, chase only power and money (i.e. mammon)

  5. Hypocrisy in high places, absolute immunity handed out like Halloween treats (it is the stuff of which tyranny is made) and the belief that government agents are above the constitutions and cannot be held responsible for mere citizen is killing, perhaps has killed, The Republic. And yet those same power drunk statists just reel on down the hallway toward bureaucratic fascism.

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