Forensic accounting expert witness advises on declined insurance coverage after hurricane


Forensic accounting expert witnessA forensic accounting expert witness advises on a case involving a hurricane that devastated a university hospital in South Dakota. It had multi-peril insurance coverage, for which it paid more than $200,000. After the hurricane, the insurance carrier refused to provide coverage for the hurricane damage on the grounds it was caused by floodwaters or storm surge. The university contended that wind damaged the roofs of several buildings, allowing water intrusion and damage to machinery, equipment, furniture, fixtures, and office contents. The roof of one facility suffered catastrophic damage.

The university sued for breach of contract, insurance code violations and bad faith insurance practices. It alleges that the unrepaired buildings resulted in lost students and, consequently, lost income.

Question(s) For Expert Witness

  • 1. What are the university’s estimated losses?
  • 2. On what is that estimate based?

Expert Witness Response

Based upon historical and projected financial data, the university has suffered a permanent decline in undergraduate enrollment beginning with the first fiscal year following the hurricane and continuing through the present. I have been asked to assume that typical undergraduate students spend between four and six years completing their undergraduate studies at a university.

The decrease in undergraduate enrollment has had a negative impact on the university’s gross earnings stream consisting of tuition, fees, housing and other revenues, and is expected to continue through May 2015. The business interruption and consequential losses range between approximately $14.5 million and $34.4 million, representing the reduction in gross earnings, less any noncontinuing expenses (or avoided costs) over a four-year and six-year period, respectively.

The expert CPA is director of an independent consulting firm and has more than 20 years of experience, including with an international economic and financial advisory consulting firm and a national forensic accounting and dispute consulting practice. The expert has numerous accreditations and has provided forensic accounting and consulting services to clients in a wide variety of industries.

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