In today’s economic environment, everyone is looking for value. In my experience, I have found that the earlier the forensic accountant is involved in the claim process, the more value he/she typically provides. The value derived from the forensic accountant is his/her technical knowledge of accounting and familiarity with the claims process, which may result in a more efficient resolution to the Business Income claim.
The purpose of Business Income coverage is to indemnify the insured for its net income or loss plus continuing operating expenses during a period of interruption (period of restoration), resulting from a covered loss. In addition, the insured may be covered for additional expenses (Extra Expense), which they incurred due to the incident.
To quantify a Business Income loss, an analysis of pre- and post- loss revenue, costs and operating expenses is required. A competent forensic accountant will provide an adjuster, policyholder, or legal counsel with his/her knowledge and experience in matters including, but not limited to: technical aspects of accounting, familiarity with policy terms and conditions, general business knowledge, and accounting and document control procedures to ensure inclusion of all relevant data into the claim calculation.
The above-mentioned services will result in an expeditious compilation of a Business Income claim that properly indemnifies the policyholder for its Business Income loss in accordance with its coverage(s). Some specific examples of how the forensic accountant can assist:
- Requesting the relevant books and records needed to support a Business Income claim.
- Using his/her general knowledge of coverage to properly analyze, identify and segregate revenues, costs and expenses to coincide with coverage to facilitate the preparation of the claim. The forensic accountant does not provide coverage interpretation, as this is the responsibility of an adjuster and or legal counsel.
- Fostering communication between the “two sides” on technical accounting matters that may be beyond the understanding of the adjuster and or legal counsel.
- Preparing a Business Income analysis that indemnifies the policyholder for its covered loss in a timely manner.
A forensic accountant serves as a resource of technical knowledge in accounting-related matters that an adjuster or legal counsel may not feel comfortable with. The early inclusion of a forensic accountant will go a long way in assuring that the policyholder is being properly indemnified for its covered loss under the terms of the policy coverage.