Business Interruption and Business Income Loss Calculations

A&C’s loss accountants have deep experience in analyzing lost business income or business interruption as both affirmative and rebuttal experts for a wide variety of industries.

A business’s ability to earn profits may be compromised by another party’s actions or by an event which is not in its control. When a business suffers a property loss such as a fire, storm damage, theft or vandalism, it may be forced to close for some time or move to a new location, temporarily or permanently. Even when a business has no income, it must still pay regular bills, such as rent or mortgage payments, utilities, taxes, insurance, loan payments, suppliers, etc.. The company also may have to incur additional expenses related to the loss, such as employee overtime, moving expenses, storage expenses, and rent payments on a temporary location. Most business interruption coverage is written on an actual loss sustained basis; thus, measuring the associated loss of earnings requires the comparison of actual earnings during the period of the loss to the expected earnings had no loss occurred, also called the “but-for earnings.” Disputes between insured and insurer can arise when the parties disagree on the size of the covered business interruption loss. Many such disputes center on the assessment of the but-for earnings and how that relates to any income forecasts the firm might have had.

A&C experts have significant experience and expertise in the accounting and economic analyses and can provide independent, fact-based assessments useful in resolving business interruption disputes. The business interruption accountants at A&C are adept at analyzing historical accounting records, company work papers, and insurer work papers to provide a full understanding of the insurer’s investigation. The firm has in-depth industry knowledge and sophisticated quantitative skills to develop analyses that can disentangle the effects of multiple forces on expected earnings and can quantify loss mitigation as well as other related issues. A&C’s report is based on a forecast model which rests on credible, fact-based assessments that can withstand legal questioning.

A&C’s qualified professionals calculate the change in business income by comparing the level of profits before and after the relevant actions while factoring in changes in the industry as well as pre-existing projections that would have led to a change in profits even in the absence of any outside influence. A&C’s calculations assist businesses & insurance companies in reaching a supportable lost profit analysis.


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