Assessment of Economic Loss
The forensic accountant’s role in these cases is usually to assist with the quantification of past and future economic loss arising from a motor vehicle accident or other incident, insured or otherwise.
The starting point for a prospective plaintiff is to understand whether there has been an economic loss which can be attributed to the relevant cause of action. This will involve gaining an understanding of the business or income producing activity and making an assessment of income levels pre and post the incident which gave rise to the cause of action. Sometimes this will involve understanding the requirements of any insurance policy which governs the capacity and quantum of amounts to be claimed.
Sometimes, the legal team may prefer to understand the potential quantum of a possible claim prior to expending client funds on establishing whether there is a cause of action. Sometimes this will involve understanding the requirements of any insurance policy which governs the capacity and quantum of amounts to be claimed.
The preparation of a report which quantifies the economic loss can be prepared in a format designed to assist the plaintiff’s legal team.
Engaged by the legal team for the defendant, normally an insurer, the role of the forensic expert is to assess the plaintiff’s claim under economic loss headings. Mostly this will be by reviewing the report of an accountant but claims can sometimes be by a claim made by a non accountant.
In these cases, the forensic accountant has regard to the methodology of the loss calculation, the underlying facts and assumptions in order to assist the legal team assess the appropriateness of the claim. In some instances the starting point will be to understand the requirements of any insurance policy under which a claim has been made to ensure the claim is in accordance with its provisions.
In many cases the challenge for the forensic accountant is to separate those issues which impacted on pre or post incident income which are attributable to the incident and those which are not related to it. Doing this requires a deeper understanding of the facts of the matter than can be obtained from merely looking at historical records.
Click here to read Daniel Rands’ Capability Document for Forensic Accounting and Assessment of Economic Loss Matters.