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Petitioner argues that owing to the cancellation of its
workers’ compensation insurance, it was justified in accumulating
$50,000 in each of TYE 8/31/90 through TYE 8/31/92. Respondent
properly allowed no amounts as a reserve for this purpose. There
is no question that petitioner would have been justified in
reserving funds for self-insurance. Petitioner’s argument fails
because there is no evidence to substantiate the existence of a
plan to accumulate $50,000 or any other amount specifically to
meet this need. The testimony of petitioner’s president leaves
little doubt that there was no such plan.6
Business Interruption
Petitioner alleges on brief that it had always planned for a
business interruption like the one it experienced from November
1991 through February 1992, and that it recognized the need to
reserve funds. Therefore “prudent business practice requires
retaining an amount of earning equal to three (3) months
operating expenses because of the nature of the business.” The
6 After counsel elicited from Hagerman the general
observation that “the size of lawsuits these days--everybody asks
for at least a half a million to several million for no matter
what they do,” the following colloquy occurred:
Q: Did--but did you consider yourself a minimum amount
that Eyefull should have on hand in the event that any
employee was injured?
A: No, not really, knowing that you’d need at least a half
a million. I would just guess a half a million.
Q: Did you as president of Eyefull set aside some funds
for that contingency?
A: Not particularly for the Workers’ Comp. There was
always funds set aside for the rainy days. I suppose
that would be a rainy day problem.
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