Consequential Loss Case Study


The issue

A company which bought and sold computer components suffered the theft of a £1m shipment of its stock.

Claim for consequential loss

The company made a claim for consequential loss of stock and profit from its insurers but the insurance company refused to consider this, and limited the claim to the £1m stock loss.

What we did

Forensic Accounting Services was instructed to assist the company in formulating a Consequential Loss claim against the insurers. From a detailed review of the company’s accounts and discussions with the directors, we found that the company made profits by selling large numbers of items at very small margins and that stock was turned over in a matter of hours. The loss of £1m of stock had had a dramatic effect on the company’s cash flow and had affected its ability to buy replacement stock over the subsequent few days. We therefore produced a report which provided detailed explanations of the company’s operations and how it created profit. This included calculations to show the financial effects that the stock theft had created.

The outcome

The company submitted our Consequential Loss report in support of its claim which was accepted in its entirety and the insurance company paid out £2.3m in settlement.

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