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Editor’s Note: This article has been contributed by Bruce D. Smith, CPA, CFF, CFE, is a consultant and expert witness. Smith provides forensic and investigative accounting services to the insurance industry and has also assisted non-insurance clients in business disputes, including misappropriation of assets.

To fairly value a business income (BI) loss claim, a claims handler must have an understanding of how a policyholder captures economic transactions on its financial statements and other relevant operating reports and records. Sometimes the valuation is a relatively simple task, as the claims professional is familiar with similar businesses and their recordkeeping, the loss period is short, and revenue and expenses have been stable over a number of years. In other cases, however, it is the polar opposite, resulting in an extremely challenging task.

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