Page 352 - CA Final PARAM Digital Book.

The company has been asked to shell out damages of ₹ 5 crore due to supply of faulty products to one of
its vendors. The vendor had sold floor coverings to a 5-star hotel which has alleged that harmful
chemicals used in dyeing of floor coverings have resulted in skin ailments to some of its guests.

Being in capacity of forensic accountant Professional appointed by insurance company, what special
issues you would keep in mind while dealing with claims involving PLI policy covering such matters?
Answer (i) In claims involving product liability insurance policies, many documents are required from third
parties. The third party may be unwilling to provide relevant documents to forensic accountant
concerning the very organization responsible for causing damages.

(ii) Independence of forensic accountant become paramount in such types of assignments because
it involves engagement with parties who are not directly claiming from insurance company.
Forensic accountant needs to resist any pressure or interference in establishing the scope of
the assignments or the manner in which the work is conducted and reported.

(iii) The company might be willing to negotiate it to salvage its reputation. It can lead to additional
complexities.

(iv) Quantification of legal liability under the policy can prove to be a challenging task and it has to
be determined in accordance with policy terms & conditions.

(v) Careful analysis of date of loss when first claim occurred in accordance with “claim series”
clause and whether the same falls under the policy

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