Business Interruption Claims Resulting from the

Japan Earthquake and Tsunami

Adjusters International has the depth and experience to handle insurance claims arising from the effects of the earthquake and tsunami in Japan. We offer over 50 years’ experience handling complex property, business interruption, contingent business interruption and supply shortage loss calculations. Our staff of public adjusters, forensic accountants, construction cost estimators, and inventory personnel provide the resources you need to address the interruption of business or the real property damage as a result of the recent disaster. Additionally, although we do not practice law, many of our adjusters have law degrees.

Adjusters International Can Help

The following detailed explanation specific to business interruption insurance claims is taken from “Choosing The Right Professional For The Job”, by Paul Migdal, Esq:

“It must be acknowledged that Business Interruption insurance is one of the insurance coverages requiring an in-depth and detailed use and analysis of financial statements. It is nearly impossible to quantify a business interruption loss without reference to the financial statements and records of an entity.

However, while the accounting aspects of a business interruption insurance calculation are important, they represent only one facet of the entire process. Such claims, among other things, almost invariably involve issues of coverage, definitions of policy terms, interpretation of policy provisions, application of legal principles to relevant concepts and terms and a practical understanding of insurance industry requirements and its ways… and those of its appointed adjusters, accountants and consultants… of doing business.

Accounting firms (with some limitations) are usually well equipped to handle the accounting aspects, but ill-equipped to deal with the remaining legal, insurance and adjusting issues.

Adjusters International has available to it and its clients all of the requisite resources: adjusting, accounting & legal.
Accountants and accounting firms must labor under rules, regulations and restrictions, which are not relevant to the handling of business interruption claims.

a. Tax returns are prepared and interpreted with the Internal Revenue Code and Regulations and State and Local Tax Codes and Regulations in mind.

For example: On a tax return, depreciation is an item deducted as an expense in determining net income. Adjusters International believes that depreciation (being a non-cash expenditure in the immediate sense) should not be considered in calculating net income.

b. Financial statements are usually prepared and interpreted with General Accepted Accounting Principles (“GAAP”), Securities Exchange Commission (SEC) rules and other governing agencies’ pronouncements in mind.

For example: Under a Gross Earnings form, “gross earnings” is defined in the policy. It is crucial to recognize that a business’ “gross earnings,” as so defined, does not necessarily mean gross profit as used in financial statements. In many situations, especially with manufacturing concerns, deductions made in calculating the statement’s gross profit are not permitted in the calculation of the defined “gross earnings.” Conversely, the reverse may also apply. Common examples of expenses deducted from one, but not the other, are direct labor costs and supplies… including packaging and ancillary materials.

c. Interim Financial statements are usually prepared for management’s purposes.

For example: One client has its statements prepared with certain expenses being classified under an Operating Expense category as opposed to being properly included under Costs of Goods, thereby directly affecting the true replacement cost… for insurance purposes… of the damaged/destroyed personal property.

An accountant working on an insurance claim must carry to the task his/her education, background and experience; much of which has been developed under the factors above delineated which could negatively affect the business interruption claim.

Adjusters International has years of experience preparing and settling claims from an advocacy position, using more relevant and less limiting methods to do all that is necessary to maximize a client’s insurance loss and claim.

Most accounting firms work for “both sides” insureds and insurers alike. Adjusters International works exclusively for policyholders. As such, you are assured that the work we perform on your behalf is never influenced by the insurance company’s interests. Contact us today for a free consultation. We will assess your situation and provide a roadmap for recovery.

Adjusting Today Articles on Business Interruption