When a third party 155 causes damage (e.g., an oil spill) or increases the cost of repair or cleanup and an Applicant requests FEMA funding for the costs, FEMA requires the Applicant to make reasonable efforts to pursue claims to recover costs it is entitled to receive from the third party.

If the costs recovered are not adequate despite the Applicant’s good faith effort, FEMA reduces eligible costs based on the recovered amount. If the Applicant receives funds from the third party for eligible and ineligible work or losses, FEMA determines the offset amount based on:

• The proceeds received for eligible losses as specified by the settlement documentation; or

• The ratio of total eligible losses to total ineligible losses.

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