e3 Business Accountants, Christchurch, New Zealand

E3 HQ is Alive and Well We are back in business at 10 Oxford Terrace. How does the E3 Team thank the massive support offered by all our clients who kept in touch and offered everything from toilet paper to their own houses to operate our business from? Quite extraordinary. How do we thank every newsletter subscriber who responded with contacts and ideas about where we might find accommodation?  Over time, I will attempt to personally thank every one of you. It has been deeply gratifying. Thanks from the whole E3 Team. Phone (03) 379 2343, 0274 337280 or email jamie@e3accountants.co.nz

Business Interruption Insurance Claims
Beware - the battle lines are already drawn
Many of our clients will be relying on their Business Interruption insurance policies to make a claim for loss of business income, extra costs or worse because they are no longer in business.

As a result of claims coming from the September quake, we have experienced reluctance by Loss Adjusters and Assessors to agree with the actual future financial loss experienced by the business owner. There seems to be little argument over paying out for damaged tangible property, but when it comes to the non-tangible loss arising from the earthquake, Loss Adjusters are taking a very hard line.

For instance, a services company was told that a claim would not be accepted because the business had not incurred a loss and that business had merely been delayed and would come back in due course. A truly extraordinary statement considering the Loss Adjuster did not even check to see if the services company’s clients were still in business!.

Another example is of a retail store that was able to remain open for business but because it was partially inside one section of the cordoned off area of the CBD, and buildings around it were being demolished, there was a significant drop off in business. Initially, the Loss Adjusters referred to the reduction in business was a result of “de-population” and therefore the amount that could be claimed was going to be limited. 

These are just two examples of Loss Adjusters’ initial responses to legitimate claims resulting from the earthquakes and their aftershocks.

How do you counter this hard line?
This is our advice – some dos and don’ts

1.       Don’t prepare the financial part of your claim yourself

2.       Don’t hand over your current or last year's financial results to either your friendly broker or the loss adjuster. The loss adjusters do not work for you – they work for the insurance companies. Their interests are not your interests.

3.       Don’t try and make sense of your policy’s definition of “profit”. It is not what you expect it to be as it is outside the normal statement of financial performance and profit and loss reports as you’ve come to expect.

4.       Financial statements are prepared for tax purposes and through legitimate means, keep profits to a minimum to help reduce tax.  These figures do not necessarily represent the true profit and the potential loss that you need to claim.

5.       The good news – most Business Interruption insurance policies have a fee set aside for the cost of advisors to help prepare your claim.

6.       Do bring your claim to us before releasing any financial information to your broker or your Loss Adjuster.

7.       We have set up an Earthquake Claims Team to personally oversee every claim to ensure that your claim is presented to fairly represent your true losses.

This is not an area to try to go it alone. The insurance companies have their own interests to look after and when there are billions of dollars at stake, their interest in minimising the value of hundreds of thousands of claims is, understandably, enormous.

I am happy to sit with anyone and go over the issues involved and help you decide what needs to be done to maximise the legitimate value of your claim. If your claim does not proceed, there will be no fee.

Accounting Treatment of Earthquake Wage Subsidy
The earthquake subsidy to employers to assist with paying wages should be coded to a sundry income code.  Given the size of the subsidies in many cases, we suggest it is coded to a separate income code.  The subsidy is subject to income tax but is not subject to GST.