Situation

When a mid-sized car dealership in central New York experienced a fire on the property that damaged the building and three of its service bays, it was forced to partially shut down for an extended period of time.

The dealership filed claims against its insurance company for property and equipment damage but also for income loss due to the business disruption.

The insurance company, however, disagreed with the income loss claim and refused to settle.

Solution

To help validate the income loss, the dealership engaged the litigation support team at Springline Advisory, which brought its extensive in-house expertise in taxation, accounting, and financial advisory practice areas, as well as deep industry knowledge, to prove the dealer’s claim.

While Springline typically works on behalf of insurance companies, this case allowed the team to instead represent the insured and face off against an opposing forensic accountant, who claimed that because the dealer’s business continued to some degree, it couldn’t claim business disruption or income loss from the fire.

“The insurance company conceded the property loss, but because the dealership still had operational service bays, they asserted the income loss claim wasn’t valid,” said Jim Marasco, managing partner. “They claimed the two remaining service bays served them just fine, so we had to show them that wasn’t the case.”

The Springline team agreed to represent the dealership in what’s known as an appraisal process (similar to arbitration) and to defend the claim in front of a neutral third-party arbitrator. The team was able to choose the arbitrator, a former public accountant who’s now a CFO for a large group of car dealers, and the insurance company agreed to the choice.

“Most of the process is done through the exchange of information and mostly reading reports,” Marasco said. “It’s not like a trial, and no witnesses were called. We each simply presented our arguments to him.”

Results

About one month later, the arbitrator issued his report and agreed with the Springline team, awarding $1.2 million in damages to the car dealership — the exact amount requested.

“This dealership had really been sucking wind for a while until they could get everything back in order,” Marasco said. “We’re grateful the arbitrator heard and considered our arguments and ruled in our favor. It was the right call.”