Personal Injury Claims and Forensic Accountants

When is a Forensic Accountant required?

A Forensic Accountant is usually required to assist with a claim arising from personal injury where a loss is suffered by those who are self-employed or owner managers of businesses or employees with complicated remuneration packages, or where the loss is suffered by a business rather than an individual.

Similarly, forensic accountants are often required where an accident may have resulted in death or in the inability post-accident to continue in the same occupation.

Our work would include an assessment of pre and post-accident trends. Typically this would include research of the claimant’s business or employer and the markets and industries in which it operates and the prospects for the business.

What is included in the claimant's claim?

An assessment of an claimant’s lost earnings should consider the following:

• probable earnings stream had it not been for the accident
• actual earnings following the event
• residual earnings capacity that could have been attained with mitigation
• offset for any savings in personal consumption expenditures that are no longer being incurred, and
• increased education, retraining, or other costs incurred to accomplish mitigation

What information and documentation is required by the Forensic Accountant?

For claimants deriving compensation in the form of employee wages and employer paid benefits, the following information specific to the individual may be useful in determining the earnings had the accident not occurred:

• Educational attainment and anticipated future education
• Employment history, including promotions and wage increases
• Anticipated date of retirement
• Copies of Income Tax returns along with supporting attachments and schedules
• Copies of payslips and forms P60 (Year end summaries)
• Personnel file, including written agreements for incentive-based pay
• Employee benefit guides
• Pension documents

What does the Forensic Accountant use to forecast earnings?

Types of documents that are useful in forecasting earnings for a business owner had the accident not occurred include:

• Articles of association and shareholders agreements
• Annual financial accounts
• Copies of corporation tax returns with supporting attachments and schedules
• Sales and customer orders on a monthly or periodic basis
• Monthly/Quarterly management accounts
• Payroll records
• Documents specific to the type of business or industry

Mitigation of loss

Injured claimants must undertake a reasonable effort to mitigate their losses, and the following key questions can help establish the magnitude of the impairment, if any, along with his or her efforts:

• Do the injuries preclude the individual from working on a part-time or full-time basis in the same job as prior to the accident?
• With treatment for the injuries, is the individual able to continue working in the same or a similar job either on a part-time or full-time basis?
• Does the individual possess any education knowledge and/or skills that may transfer to another vocation?
• Has the individual undertaken any efforts since the accident to find substitute employment?
• Will the injuries force the individual to retire from work at an earlier date than originally planned?
• Is it anticipated that the injuries will have a negative impact on their individual’s life expectancy?

Costs no longer being incurred

Earnings for an injured individual should be adjusted downwards for costs related to his or her employment that are no longer being incurred. For example:

• commuting costs such as petrol, parking etc
• professional memberships and/or training, unless reimbursed by the employer
• income taxes with certain caveats

Losses claimants often overlook

• Loss of household services such as cooking, cleaning and transporting children
• Loss of future social security or pension benefits
• Loss of holiday pay
• Loss of future health insurance and life insurance benefits
• Loss of deferred compensation from a lost job
• Loss of long- or short-term disability insurance
• Loss of benefits from promotions that were expected or likely
• Loss of personal possessions damaged in an accident
• Loss of estate accumulation, including contributions to retirement plans
• Cost of mileage to and from medical treatment

We can prepare detailed reports dealing with the issues mentioned above. For more information, please contact Davidsons Forensic Accountants on 0113 483 1127.