Business Interruption Expert Witness

Overview

About Business Interruption Expert Witnesses

A business interruption expert decides how much income a covered event actually cost an insured business and for how long. The number depends on three moving parts: what the business would have earned without the loss, which expenses would have continued, and how long the interruption lasted under the policy. This page covers insured loss measurement. Whether the policy responds at all belongs to a coverage expert, how the claim was handled to a claims expert, and lost profits in a contract or tort suit to a lost profits expert, where the measure comes from different law.

The Measure Comes From the Policy

Each policy sets its own formula, so the work starts with the words. In Consolidated Companies v. Lexington (5th Cir. 2010), the policy measured actual loss sustained during the period of restoration: net profit prevented from being earned, plus charges and expenses, excluding ordinary payroll, only to the extent they must necessarily continue and would have been incurred had no loss occurred ¹. That language, or a close variant, decides what counts. Newer forms may use different definitions, and ordinary payroll may be treated separately.

The same opinion shows the fight over offsets. The dispute there was whether about $12 million in continuing charges and expenses should be offset by income earned while the business partly operated ¹. The expert has to run the formula as written, then show what changes if the court reads a term the other way.

What the Business Would Have Earned

The analysis is a but-for projection. The expert builds what sales would have been from historical results, seasonality, trend, budgets and comparable periods, then tests it against what actually happened. The Reference Manual on Scientific Evidence warns that short histories limit how firmly a projection can be stated: with only three or four years of data, a study may fall short of statistical significance even where the effect is real ².

Area-wide catastrophes make this harder. After a hurricane, a business that reopens first may earn more than it ever did. Consolidated Companies involved a policy provision requiring due consideration of experience before the loss and the probable experience thereafter had no loss occurred ¹. Following Catlin Syndicate v. Imperial Palace, the court rejected a reading that calculated loss as if the storm struck but did not damage the insured's own facility ¹. It also recorded the jury instruction that the loss need not be proved with mathematical precision but cannot rest on conjecture or speculation ¹. These cases apply specific language and state law, and a different form or forum may come out differently.

Time: The Period of Restoration

The clock is often worth as much as the rate. Terry Black's Barbecue v. State Automobile (5th Cir. 2022) describes a period of restoration as the time needed to repair, rebuild or replace the lost or damaged property, or to resume operations at another location ³. An expert compares the actual schedule with what a reasonable repair would have taken, which often requires input from a construction scheduler on permits, supply and contractor availability. Delay caused by the insured or by a dispute may not count.

Coverage disputes shaped the COVID era. Terry Black's held that closure orders did not trigger coverage because there was no physical deprivation of property ³, and the Sixth Circuit in Brown Jug v. Cincinnati Insurance, applying Michigan law, read direct physical loss as tangible harm or damage to property ⁴. Those decisions are coverage rulings, so they sit outside the accounting. They matter because they show why an expert's numbers can be moot if the trigger fails.

Not every policy has this coverage. The Standard Flood Insurance Policy excludes loss of revenue or profits and loss from interruption of business or production ⁵, so a flood loss can leave an income claim uninsured under that form.

Who Is Qualified

Look for a forensic accountant who has measured insured income losses, ideally for both insurers and policyholders. A CPA with the AICPA's Certified in Financial Forensics credential is one common profile; the credential requires AICPA membership, a valid and unrevoked CPA license or qualified equivalent, and passing the CFF examination ⁶. Experience with the industry matters too, because a hotel, a refinery and a seasonal retailer lose income in different ways. The expert should show the model, its assumptions and the alternative readings of the policy, and should leave the meaning of the policy to the court.

Qualifications

Qualifications to Look For

• ✓CPA or equivalent accounting training with direct experience measuring insured income losses
• ✓Certified in Financial Forensics from the AICPA where held
• ✓Experience on both insurer and policyholder sides
• ✓Experience with the affected industry's revenue and cost structure
• ✓Ability to model the loss under alternative readings of the policy
• ✓Working knowledge of how the policy form at issue defines the measure and period
• ✓Prior deposition, trial or appraisal testimony on business income loss

FAQ

Frequently Asked Questions