PBTK Case Study #3: Determine Economic Losses as Neutral Expert

PBTK was retained as a neutral fact finder to make a final determination of tenant economic losses pursuant to an Engagement Protocol drafted by counsel pursuant to a settlement arrangement. This business interruption claim for lost profits resulted from water intrusion and the subsequent repair process at a men’s clothier tenant (“Clothier”)
located in Las Vegas.

Relevant issues included:  Loss period, Gross profit margins, Methodology for estimating lost sales and Impact of related-party supplier relationship.

PROCEDURES

PBTK performed procedures to determine the time-span of the business interruption, quantify losses and determine the extra costs incurred as a result.

Planning:

Review loss estimates prepared by the litigating parties; perform site visit; review photographs of the water damage; conduct interviews with the general manager and corporate-level accounting personnel; Evaluate monthly retail traffic counts and monthly
relative sales indexes for other tenants of the shopping venue.

Forensic Investigation and Analysis:

Background research on the Clothier, including its origin and mode of operation; analyze and evaluate financial statements and tax returns of Clothier; develop predictive indicators for quantifying lost sales using composite sales indices from other retailers; determine loss period for the Clothier; consider possible avoided costs; quantify any extra costs incurred as a result.

Quantify the Loss:

An economic loss was determined, including business interruption loss and extra cost components.

OUTCOME

Issued a Preliminary Report from which the parties were able to reach a settlement.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s