A Quantitative Approach to Commercial Damages: Applying Statistics to the Measurement of Lost Profits, + Website

CHAPTER 2

Case Study 2—Trend and Seasonality Analysis

May 31, 2010, was a dark and stormy night. The 18-wheeler turned off the interstate and roared down the sloping off-ramp, heading for the town of Brunswick on Route 1. At the base of the off-ramp, at the point where it curves into and merges with Route 1, sits the XYZ Motel, eagerly awaiting guests for Memorial Day weekend and the start of the tourist season. Just before midnight, it got the biggest guest it ever had, as the tractor-trailer combo failed to negotiate the curve and plowed right into the building that housed the motel office and the manager's quarters, effectively demolishing it. Fortunately, there was no loss of life and no personal injuries, nor were any rental units damaged, as the office is a stand-alone building. But the claimant insisted that there was lost income as a result of the manager losing her on-site living space and the office having to be replaced with an unsightly temporary trailer.

Claim Submitted

The complete text of the claim submitted by the XYZ Motel follows:

In December 2001, negotiations with the franchiser were finalized. This resulted in approximately $60,000 in capital outlay to acquire the franchise, the equipment updates and changes required by the franchiser to meet their standards for operation.…

Generally, it takes four to five years to realize the results of a large capital outlay like this. All indications were that 2010 was going to be one of their best years. Subsequent to ...