November/December 2005

As U.S. Gulf Coast businesses reel from the devastation caused by the most active hurricane season on record, it’s a good time to take a close look at how forensic accounting firms such as Matson, Driscoll & Damico can assist in the adjustment process.  

Because natural disasters are often times sudden and unpredictable, MD&D’s Catastrophe or CAT team is always on alert.  However, during hurricane season, the firm pays particular attention to monitoring the weather so that they will be in a position to respond at a moment’s notice.  It is in the days and hours leading up to a natural disaster that MD&D’s CAT team becomes active, securing rooms and office space close to the predicted landfall and contacting clients’ in order to best respond to their needs.

“When the storm hits, we make every effort to remain in constant contact with our clients and other CAT team members,” said Kent Bogdan, a partner in MD&D’s Dallas office and CAT team member.  “Both our national and local CAT teams work together in responding to our client’s needs” 

In addition, the CAT team holds weekly conference calls to ensure that our clients’ needs are met and to address any critical issues on a timely basis.

Once an assignment is received, MD&D enters the planning phase, which includes establishing contacts both with the adjustor and the insured, defining roles and responsibilities, securing important insurance, business and financial documents and setting realistic expectations with both adjustors and the insured.

When assessing the damage after a hurricane or other natural disaster, MD&D f is usually provided with the preliminary scope of damages and estimated repair period.  These two elements of damage are the key to estimating the business interruption loss in addition to setting up the controls for the physical damage assessment with the assistance of other experts. 

“It’s also critical that we obtain historical financial and operating records,” said Bogdan.  “By reviewing past years’ performance, we are able to estimate the experience of the business had no loss occurred.” 

In addition, MD&D must consider additional or extra expenses incurred by the insured to return to operations as quickly as possible and quantify the amounts that are over and above normal operating costs.  MD&D is then able to provide the insurer with a reasonable estimate of what the damages could be based on available information in a timely, effective manor.   

At the end of the day, MD&D’s calculation is merely an accounting recommendation to the adjuster and is subject to coverage and adjustment considerations. .  “In the world of forensic accounting, it is critical that we understand the business of the people who are suffering,” added Bogdan.  “We must understand where the production and/or distribution bottlenecks are and how to overcome them.  The more knowledgeable we are on what makes this business tick is how we can best help all parties involved.”