Your client was damaged – and you’ve come to Gleason & Associates to prepare a damage claim.

The company that you represent purchased a piece of equipment that failed to function properly. As a result, your client incurred costs that it wouldn’t have otherwise. Because the machine took eight rather than four hours to do the job, the company’s labor and fuel expenses increased.

But was there anything else that might have caused the increase in the company’s labor and fuel costs? Was weather a factor? Were the operators poorly trained or ineffective? Did the grade of material that the company put through the machine contribute to the lackluster performance? Were there also lost profits? Did the four extra hours it took to do the one job hamper the company’s ability to complete other orders?

Answers to these and other questions are needed in order to accurately assess the economic impact of the improperly functioning machinery. “Knowing that your client was damaged isn’t enough information to calculate the effect of the harmful event,” notes Tom Pratt, director of Gleason & Associates.

Gleason & Associates typically applies three standards in developing or evaluating a damages claim. First, the claim must be adequately documented. Second, a claim must be mathematically accurate. Finally, claims need to be appropriate to the circumstances. According to Pratt, it’s this third area, the appropriateness of the claim to the circumstances, that ties to causation.

“While we don’t offer legal opinions, legal precedent says that damages must be proximately caused by the wrongful conduct of a defendant. In order to determine the appropriate economic impact of the alleged wrongful conduct, we also need to know who and what caused the damage,” Pratt explains. “When we understand the circumstances surrounding a negative event, we can work together with counsel and our client to assess and link the financial effects to the actions or inactions of the parties involved.”

Domino Effect
Gleason & Associates can also often play a role in determining causation and the extent to which damages may have been caused by the action or inactions of one of the parties.

If a failed turbine shut down a client’s power plant, Gleason & Associates didn’t need to understand the technical failure of the turbine to link the event to the economic impact of the additional repair and maintenance costs incurred and the profits not realized when the plant was down. But understanding the cause enabled us to link the event to additional damages that the client was able to document and claim.

In an engagement involving alleged financial reporting issues, it was equally important for Gleason & Associates to not only determine whether or not the client’s financial reporting was accurate, but also evaluate the domino effect of inaccurate reporting on management’s decision making. In this example, there were additional damages caused by decisions that were made as a result of the questionable financial reports. One bad decision led to the next one.

“Our expertise and experience allowed us to understand the cause and economic effect, and play a role in linking the two,” says Pratt.

Excerpted from Briefly Speaking, a complimentary newsletter published by Gleason & Associates. Subscribe