Some business owners are choosing to trust BP to “do the right thing” later on and are not immediately hiring a forensic accountant to calculate preliminary estimates of a business interruption loss related to the Gulf coast oil spill. A business owner or corporate officer could be rationalizing that: a) BP will pay these losses because they said they would; b) If BP doesn’t pay, we can get reimbursed through the federal fund; or c) Our attorney will have us hire someone to quantify our damages before a trial, in the event we sue BP for our business interruption. The mistake in this logic is omitting the urgency of the business interruption claims process.
All of the forecasters are predicting an active 2010 hurricane season. While the ultimate effect of a hurricane on the spill situation is unknown, one thing is certain. A business that has not effectively supported its damages from the oil spill, prior to a hurricane, will have serious issues in presenting loss estimates after a hurricane.
Business owners or officers may wonder, “Why? What’s the difference?” Here’s what they need to realize: once a hurricane hits, businesses may be further damaged, and it may be very difficult to segregate damages from the economics of the oil spill and damages from the hurricane. Businesses will be in the unenviable position of trying to be reimbursed by either BP or the insurance company, as both BP and the insurance company point their fingers at one another, fight over who should have to pay what proportion of the losses, and the entire process grinds to a halt, negatively affecting the cash flow of the very business they should be helping.
Alternatively, if a business immediately hires a forensic accountant who specializes in business interruption calculations, the business can provide BP with strong and defensible business interruption models before the hurricane hits. In other words, a business will be “on record,” having properly quantified and documented their damages related to the oil spill. Then, incremental damages that occur in the event of a hurricane will be easier to segregate and will have more merit than business interruption damages that are arbitrarily allocated after the fact.
Now is the time to calculate a business interruption loss due to the oil spill and document these losses, before the waters get muddied as well as oiled.
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