Business Interruption: A Unique Assessment of Commercial Damages

Business interruption is a form of commercial damages that may include both breach of contract and torts.  While it is not common for financial experts to be hired in business interruption situations, some claims require their expertise.  Unlike a traditional lost profit analysis, business interruption calculations are unique.  Any expert asked to make such an analysis should consider lost profits (projected revenue for the loss period less saved expenses), non-saved expenses that are ongoing during the interruption, and extra or expedited expenses the business has to incur to reopen.  This article addresses the work in estimating a business interruption claim and provides a case study on how two experts handled such an analysis.

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Evidence of Actual Monetary Loss is Required When Calculating the Exemplary Damages Cap

In a recent Texas Court of Appeals case, the jury awarded plaintiff $15,000,000 in exemplary damages; the Court reduced this amount citing section 41.008(b)(1) of the Texas Civil Practice & Remedies Code, which caps exemplary damages at two times the amount of "economic damages," plus up to $750,000 in non-economic damages.  The question on appeal was whether the jury's finding of "pecuniary loss" was the same as "economic damages" for purposes of Chapter 41.  The Court emphasized the word "actual" in the statutory definition of "economic damages".  The decision features a dissent from Justice Brown who opined that pecuniary losses are not always subject to precise mathematical calculation.  A jury, she said, is entitled to look beyond the evidence of calculable financial contributions and use their own knowledge and experience to estimate the lost value of things like household services.

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One of AIG’s Largest Shareholders Put the Terms of AIG’s Bailout on Trial

AIG collapsed in the wake of Lehman’s bankruptcy filing and required a government bailout in order to avoid the same fate as Lehman. The plaintiff (AIG’s shareholders) contended that they were harmed by the relatively harsh bailout terms that were imposed on AIG but no other bailout recipients. The defendant (U.S. government) countered that AIG’s bailout terms were: (1) legal, and (2) benefitted the plaintiff because a bailout under relatively harsh terms was better than no bailout at all. This article explains why the court held that: (a) the terms of AIG’s bailout were illegal, yet (b) AIG’s shareholders were not harmed by the illegal terms.

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Is Strategic Planning Still Relevant?

What is strategic planning? How does a valuation professional adding value to the client recognize strategic planning? Quantify strategic planning? Michael Porter observes that the whole subject of strategy has become too confusing. It seems that everything is strategic; otherwise, it is not really that important. We have become overwhelmed with strategic plans, strategic vision, strategic thinking, strategic insight, strategic management, strategic information, strategic marketing, strategic branding, and strategic positioning. In this article, David Axson shares his views on what is truly strategic and how to incorporate strategy into the valuation analysis.

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