There has been a disgraceful amount of pandering by potentially incompetent lawyers to sign up BP Spill Victims. Many of these lawyers are experienced only in personal injury cases, and many are not licensed in the affected states and are using the internet to lure clients. One attorney from California, who is not licensed in Florida, gave a seminar this week in Destin, Florida, about his services. Many of these attorneys have no intention of providing sound disaster recovery advice that accountants and other experienced attorneys can provide. The "elephant in the room" is that they do not have the experience or resources to give competent legal advice but are banking on contingent percentage contracts that obligate clients to sums far in excess of what is reasonable. These attorneys do not have the competence or experience to discuss business interruption concepts because they have never practiced in this area of the law. Many attorneys are advertising and signing up clients without then doing anything that is reasonably required under the circumstances.
My friends and attorneys at Levin, Papantonio, Thomas, Mitchell, Echsner, Rafferty & Proctor, P.A. are doing it right. I had the pleasure of working with them as co-counsel on a great number of Hurricane Ivan matters, and they were kind enough to attempt to refer some major business income claims to me following Hurricane Katrina. My understanding is that they have decided to not charge clients for work to recover money that BP will voluntarily pay as a partial damage claim, and they will charge attorney fees only on claims that are denied or have disputed amounts. That is fair. There are some businesses that will need help right away to prepare and present these claims, and the fees for those services should be far lower than the one third of any recovery that some attorneys have been quoting.
Bob Glasser sent me the following article, that I minimally edited, which will help some insurance and BP claimants in their future first and third party claims.
How to Capture Hotel Lost Profits Today Due to the Gulf Oil Spill
in Order to be Reimbursed by the Responsible Party
With uncertainty and concern surrounding the impact of the Gulf oil spill to the coastline from Florida to Texas, many companies are asking what needs to be done to quantify and document lost income for future claims. Many businesses are considering filing insurance claims. Others may be looking at the potentially responsible parties for direct reimbursement. Regardless of the source of indemnification, proper documentation of claimed losses is critical.
Quantifying and documenting lost revenue has been a complicated undertaking for the hospitality industry. On one hand, documenting cancellations in connection with booked rooms is relatively straightforward. On the other hand, identifying lost demand prior to a booking can be quite subjective.
Capturing cancellations with appropriate and supportable documentation to withstand future audit can happen only if specific protocols and procedures are put in place now. The process needs to be properly documented and communicated to the relevant employees. Documentation objectives include memorializing discussions and correspondence among hotel sales personnel or reservation agents with guests, potential guests, corporate booking agents and wholesalers, for the purpose of identifying the reason for a cancellation. Loss documentation prepared today should be reviewed by a seasoned financial professional to increase the likelihood it will withstand challenge by an adverse party. Date, time, conversation or action reported contemporaneously, and person making the entry should be made as it is done and collected at least daily.
The protocol for associating lost income from cancelled bookings to the oil spill may include refinements to existing sales software or the use of a database/spreadsheet to include the group name, group contact, intended date of stay, number of rooms, F&B revenue, room revenue, ancillary revenue, date of cancellation and reason for cancellation as well re-booking date if any and where the group moved, if known. Additional recommended procedures to be implemented include but are not limited to the following:
- Reservation call centers should be provided specific instructions on how to document lost demand when guests ask about oil spill conditions.
- Properties should identify any group discounts they offer to either appease a group with complaints due to the oil spill or to maintain a group reservation that was considering cancelling due to the oil spill. These discounts would be considered a mitigation strategy to curtail future lost revenues.
- Any extra expenses incurred for marketing promotion or additional advertising over the normal operations to negate a loss of occupancy due to the oil spill should be documented.
- Subsequent drops in occupancy rates from historical levels attributable to the oil spill should be recorded. Therefore, pre-oil spill occupancy, ADR and RevPar reports must be archived and maintained for future documentary support of decline in revenue.
The ability to submit and ultimately settle a claim for lost revenue with either an insurance carrier, BP, or another entity will be predicated on the culmination of many hours of dedicated recordkeeping and consistent application of data accumulation protocol. The critical lesson learned is that when an organization is able to execute the above steps, the likelihood of proving a loss and recovery is substantially increased.
Those making a third party claim or insurance claim should consider obligations of mitigation and consult with competent legal counsel and trusted business professionals.
About the Author
Bob Glasser is a managing director at BDO Consulting, a division of BDO Seidman, LLP, in the New York office. Mr. Glasser is a certified public accountant, a certified fraud examiner and a certified insolvency and reorganization accountant, with more than thirty years of diverse financial management and accounting experience at public and private companies.
Mr. Glasser, who is also known as “B.I. Bob,” leads the firm’s New York Insurance Claim Services practice, assisting insured businesses—including hotels, manufacturers, distributors and service organizations throughout the world—to prepare and substantiate business interruption and property damage claims resulting from physical damage due to hurricanes, floods and other perils. Mr. Glasser has also been involved in forensic investigations of employee theft in the hospitality and retail industries.
EDO hold a variety of certifications, including CPA, CFE, MAI, ASA and MRICS and can be accessed at www.bdo.com
Robert Glasser, Managing Director