Navigating a Complex Business Interruption Loss
In this case, our client represented an Insured who owned a custom handmade furniture business based in New England. Following a devastating fire that destroyed their primary storefront and workshop, the business was forced to operate out of a temporary pop-up location with significantly less capacity. The client filed a business interruption claim, but due to the nature of their operations and their manual record keeping, it was challenging to evaluate the loss in a traditional manner.
To begin, FAZ worked closely with the Insured to understand the operational structure of the business. The company did not use a modern or automated accounting system and instead maintained handwritten logs for customer orders, payment plans, and furniture build schedules. Because furniture was often built to order with varying production timelines, and deposits were collected in stages, the company’s cash-basis profit and loss statements did not clearly reflect the actual impact of the fire on revenue and profitability.
FAZ conducted a detailed analysis of the business’s incoming orders, production timelines, and customer deposit patterns. This required extensive collaboration with the client to obtain daily order records and reconcile them with payment histories and manual schedules. At the same time, FAZ evaluated the extra expenses incurred to operate the pop-up store and determined whether these expenses helped mitigate the overall business income loss.
Throughout the process, FAZ engaged in multiple rounds of discussions with the opposing forensic accountant to address the complexities of the claim and provide clarity on the methodologies used. Despite the lack of standardized data and the need for extensive manual reconciliation, FAZ was able to quantify the loss and present a thorough, supportable claim.
In this case, FAZ’s forensic analysis and close collaboration with the client helped overcome substantial documentation challenges and led to a finalized business interruption claim that was submitted to the Insurance company for resolution.