THE DIFFERENCE BETWEEN LOST PROFIT AND LOSS OF USE DAMAGES

ProfitSharingLost profits are a type of damages that are sometimes thrown around in a litigation.  However, these damages are very difficult to establish and prove and they really require expert testimony.  If the theory to recover lost profits is speculative, or the way the lost profits is measured is speculative, they will not be recoverable.  (Typically, lost profits require a history of profits to measure against and/or establishing the profitability of another business using a substantially similar business model for comparative purposes).  Lost profit damages have a difficult burden of proof in order to avoid the argument that they are speculative in nature.

 

Loss of use is another type of damages that is often confused with lost profit damages. Loss of use damages is generally the rental value of property / fair market value due to the loss of use of that property. See B&B Tree Service, Inc. v. Tampa Crane & Body, Inc., 38 Fla. L. Weekly, D970a (Fla. 2d DCA 2013) citing MD. Cas. Co. v. Fla. Produce Distribs., Inc., 498 So.2d 1383 (Fla. 5th DCA 1986) and Meakin v. Dreier, 209 So.2d 252 (Fla. 2d DCA 1968).  Hypothetically speaking, this type of damage can come into play if an owner is trying to recoup the rental value of units / fair market value of units that are out of service due to a defect, i.e., water intrusion problem.

 

There is a better argument for an owner under Florida caselaw to testify as to loss of use damages than lost profits, although with both types of damages, a qualified expert is preferential. “An owner is qualified to testify to the value of his property based on a presumed familiarity with the characteristics of the property, knowledge or acquaintance with its uses and purposes, and experience dealing with it….An owner must be shown to have knowledge regarding the property and its value sufficient to qualify him.” B&B Tree Service quoting Craig v. Craig, 982 So.2d, 724, 729 (Fla. 1st DCA 1993) (internal quotations omitted). The key is the owner’s familiarity with the property and value to support his opinion testimony regarding loss of use damages.

 

Understanding the differences between lost profit damages and loss of use damages, as well as the ways to prove such damages, is important if these are damages a party is looking to recover. Not understanding the burdens of proof for these types of damages can be fatal to recovery or can lead a party to an unrealistic method of thinking during the course of a case and prevent the party from entertaining reasonable settlement offers.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.