COVID-19 Aftermath: Shutdowns and Business Interruption
The negative impact COVID-19 has had on the worldwide economy has been enormous. Although there are exceptions, most companies have been negatively impacted. In the U.S., the Governors of each state have exercised their authority in deciding the extent of business shutdowns. In many cases, the shutdowns have been based on whether a business is considered essential versus non-essential. However, in either case, self-quarantines have negatively impacted both essential and non-essential companies. Furthermore, businesses that are considered essential are still at risk if or when their employees contract the virus and negatively impact operations.
Companies whose business has been interrupted, shut down temporarily, or even worse, shut down permanently are looking for relief. The topic of business interruption insurance coverage has even been mentioned at several of the President’s daily news conferences. The insurance industry is bracing itself for the possibility of being required via legislatively to cover these types of losses. A recent article in Insurancebusinessmag.com warns that the insurance industry could face insolvency if legislation forces commercial insurers to cover business interruptions caused by the coronavirus lockdown. Regardless of anyone’s opinion, the fact is that many businesses are experiencing significant economic hardship as a result of business interruption and shutdowns as a result of the coronavirus.
Economic damages to a business representing either an interruption of business operations or a shutdown can ultimately represent lost value and/or lost profits. Lost value is a measure of the impairment in the value of the business, measured by virtue of its impaired cash flow that would have been earned by the Company, “but-for” the damaging event, present-valued, assuming the loss is permanent. Lost profits is a measure of the impairment of cash flow that would have been earned by the Company, “but-for” the damaging event, present valued, assuming a loss for a determinable period.
Regardless of whether representing an insurance company or the business that has experienced economic damage in the form of an interruption of business operations or a shutdown, the team at Vallit has the ability and experience to develop an objective supportable analysis of either lost value or lost profits resulting from the COVID-19 pandemic.
The contents above are purely educational in nature. The information contained within the website of Vallit Advisors, LLC should not be assumed to be representative of the views and opinions held by Vallit Advisors, LLC. Information found on this website is not intended to be legal advice, it is not intended to create or solicit instructions of any kind and should not be treated as such. By accessing this web site, you are agreeing to be bound by the web site Terms and Conditions of Use.
Providing a Clear View of The Financial Picture
Vallit is focused solely on dispute consulting, business valuation and forensic accounting. Our senior team members have testified over 200 times in Federal, State and International courts. Our dispute expertise ranges from family law to complex commercial and intellectual property matters in a wide variety of industries. In non-disputes, our valuation reports are relied on by estate and trust attorneys, auditors, and business decision makers for tax, financial reporting and transaction purposes.