Branching Into No-Fault Lost Earnings Claims
Background
FAZ was engaged to evaluate the lost earnings portion of an individual’s no-fault claim under New York State law. The Insured, an owner-operator of a tree removal and landscaping business, was involved in an automobile accident in early 2025. As a result of the injuries sustained, the Insured was unable to work for an extended period, prompting the need for an analysis of lost earnings.
Initial Documentation and Requests
At the onset, FAZ received the Insured’s 2023 personal income tax return and 2024 sales reports. Given that the accident occurred in 2025, this documentation alone was insufficient to provide a reliable analysis. Accordingly, we requested additional records to verify the Insured’s 2024 reported income.
To verify the 2024 sales reports, FAZ requested the Insured’s 2024 personal income tax return. When evaluating self-prepared documents such as sales reports, invoices, or profit and loss statements, our standard practice is to corroborate them with independent documentation, such as tax returns, bank statements, or copies of customer payments. In response, the Insured provided their 2024 tax return along with copies of checks received from customers during 2024. These materials enabled us to confirm the accuracy of the reported sales activity.
Consideration of Discontinued Expenses
A critical component of no-fault lost earnings analysis is the treatment of what we refer to as “discontinued expenses.” These are expenses the Insured would reasonably not incur while unable to work. For example, vehicle-related costs such as fuel, repairs, and maintenance are presumed unnecessary if the Insured is not operating their business due to injury.
FAZ evaluates these expenses as a percentage of reported gross earnings. The total percentage of discontinued expenses is then deducted from the estimated loss, thereby reflecting the net financial impact on the Insured.
In this case, discontinued expenses included:
- Car and truck costs
- Fuel
- Supplies
- Deductible meals
Together, these expenses accounted for approximately 75% of the Insured’s reported gross earnings. As a result, the estimated loss was reduced by this percentage.
Key Findings and Outcome
Although the deduction of such a significant percentage may appear unfavorable to the Insured, it is FAZ’s position that these reductions are justified. The Insured is presumed to benefit from the elimination of these expenses during their period of inactivity. This principle often confuses the Insured; however, from a financial perspective, if such expenses are reported for tax purposes, they must also be considered when calculating a fair measure of lost earnings.
Ultimately, FAZ provided the insurance carrier with a substantiated estimate of the Insured’s loss, inclusive of a 75% deduction for discontinued expenses.
Conclusion
This case illustrates FAZ’s consistent methodology in evaluating no-fault claims. By relying on verified documentation and accounting for discontinued expenses, FAZ ensures that loss estimates are both accurate and equitable. We continue to apply this process across all no-fault evaluations, maintaining consistency, transparency, and defensibility in our findings.