Loss in Injury and Death Matters

In litigation, the analysis of damages ' what was lost as the result of the tort or breach ' often takes a back seat to the analysis of various facets of liability. This can be particularly true in medical malpractice matters, where liability issues tend to be complex. Much time and effort is invested in determining fault, while damages analysis is too often left until the last minute.

However, careful attention to all the elements of economic loss, and careful discovery on damages, is essential in ensuring a fair recovery that compensates the plaintiff for what was actually lost. A thorough analysis will help to uncover elements of damages that might be overlooked and can also highlight elements in a claim that might overstate loss. By engaging in damages discovery early and by considering each element of loss to each plaintiff, each side can be fairly certain that the damages case will be accurate and compelling when presented in settlement negotiations and at trial.

The Hypothetical Incident

As a road map to illustrate some of the key issues in damages discovery, we'll study a hypothetical matter involving five claimants, each presenting a unique loss profile.

On vacation, the Smith family ' Roger Smith, his wife, Beth, their son Ryan, Roger's father Tom and Roger's mother Renee ' were riding in an SUV that collided with a tractor trailer. Roger died instantly. Ryan suffered a spinal-cord injury, rendering him permanently disabled. Beth was mildly injured. Tom died two weeks after the accident of injuries sustained in the crash. Renee was uninjured.

Elements of Damages

The basic elements of damages in injury and death matters are: 1) lost earnings; 2) lost fringe benefits; 3) medical costs; and 4) lost household services. In most jurisdictions, damages for wrongful-death claims are reduced by the amount the decedent would have spent on personal living expenses, exclusive of what he or she would have spent on family members.

How best to determine the loss to each ember of the Smith family in light of these basic elements of loss? First, each of the Smiths' individual pre-incident economic situations must be considered.

Roger Smith was 39 years old at the time of the accident. A certified public accountant, Roger was a partner in an accounting firm, earning $150,000 per year. Beth Smith, age 37, is a homemaker. Ryan Smith, age 14, is an eighth-grade student. He currently earns straight A's and recently won a science-fair prize. His IQ is 138. Tom Smith, age 69 at the time of the accident, was a retired electrical worker and member of the International Brotherhood of Electrical Workers, enjoying an IBEW annual pension of $35,000 and $20,000 per year in Social Security. Renee Smith, 63, is a homemaker and has never been employed.

The next step in discovery is to examine what element of damages each of the Smiths suffered and what information is needed via discovery to determine the extent of loss.

Earnings Loss

This element of damages is based on earning capacity, which has been defined as “The capability of a worker to sell his labor or services in any market reasonably accessible to him, taking into consideration his general physical functional impairment resulting from his accident, any previous disability, his occupation, age at the time of injury, nature of injury and his wages prior to and after the injury.“ Sims v. Industrial Commission, 10 Ariz.App. 574.

Many factors relate to the differences in pre-incident and post-incident earning capacity, including the claimant's age, education, occupation, the state of the job market and any preexisting limitations on earning capacity due to health, aptitude or other issues. Let us look at this element of damages to the Smith family claimants.

Roger Smith

Roger Smith's estate can claim survival damages (his cause of action as an individual survives him and is brought by his estate, the fictional claimant). However, he is survived by a wife and a child, who will make a wrongful-death claim for that which they have lost as a result of Roger's death. The estate can recover Roger's lost earnings minus maintenance ' the amount Roger would have spent on personal living expenses ' and the wrongful-death damages recovered by his family.

Key issues in determining Roger's lost earnings consist of how much he was making and what he could have expected to earn over the course of his lifetime, absent the accident. Specific discovery is needed to show the likely amount of earnings. Questions to ask are: Would Roger's compensation likely have risen, declined or stayed the same over the course of his probable work life, taking into account his particular skills and his work history? Did Roger have any health issues that might have affected future earnings? What was the likelihood that Roger's firm would have continued to be successful? How long would Roger have worked? Was he likely to have retired at age 60, or is it more likely that he would have worked until age 65, or older?

The expert economist can provide industry data on accounting firms, showing broad industry trends by region, sizes of firm and practice areas. Economists can also provide data on likely retirement age, based on statistical studies. More specific indicators of future earnings can be elicited via depositions of firm members and by looking at firm financial records and Roger's personal tax records.

Beth Smith

Beth was not employed at the time of the accident. However, if it can be shown that she had planned on entering the workforce, it may be reasonable to assume she suffered some loss of earning capacity. Suppose, for example, that she was attending college classes and had expressed a desire to enter the workforce. If it can be shown that her injuries will prevent her from doing this, or will limit her employment opportunities, she may have a valid claim for lost earning capacity. Testimony by a vocational specialist can help establish the extent of this loss.

Ryan Smith

When a child who has no employment or earnings track record is injured, indications of probable future earnings absent the incident include the parents' educational levels and occupations, and the child's school performance. Here, Ryan was demonstrably intelligent, as indicated by his straight A's, science-fair prize and above-average IQ. He is also clearly limited in employment opportunities by virtue of his permanent disability stemming from his spinal-cord injury. How much has he lost in future earnings? Evidence from a vocational expert might show that, despite Ryan's disability, his residual earning capacity might be fairly high given his intelligence and future potential. Statistical evidence might be useful in showing the earnings of workers with a similar disability and similar academic and intelligence profiles.

Tom Smith

Tom Smith received an IBEW pension and Social Security payments, which are not earnings per se, but which may be the basis of loss claim by a surviving spouse. Typically, on the death of a spouse, the payments the couple had been receiving would be reduced, but the reduction would typically not represent loss to the surviving spouse since maintenance for the decedent is no longer necessary. Reduction of pension benefits may be an item of loss if the pension payments are reduced or eliminated. Some plans allow plan members to opt for a “joint and survivor“ arrangement, whereby payments continue to the surviving spouse on the death of the spouse receiving the pension. Pension plan details are available through the employer or the union. Also, Tom's Social Security benefits should be examined. A loss might exist, depending on the total household benefits received.

Chad L. Staller, J.D., M.B.A., M.A.C., a member of this newsletter's Board of Editors, is president and senior economist at the Center for Forensic Economic Studies, a Philadelphia-based firm providing economic and statistical analysis and testimony. He can be reached at 215-5460-5600 or [email protected]. More information on the Center can be found at http://www.cfes.com/.

In litigation, the analysis of damages ' what was lost as the result of the tort or breach ' often takes a back seat to the analysis of various facets of liability. This can be particularly true in medical malpractice matters, where liability issues tend to be complex. Much time and effort is invested in determining fault, while damages analysis is too often left until the last minute.

However, careful attention to all the elements of economic loss, and careful discovery on damages, is essential in ensuring a fair recovery that compensates the plaintiff for what was actually lost. A thorough analysis will help to uncover elements of damages that might be overlooked and can also highlight elements in a claim that might overstate loss. By engaging in damages discovery early and by considering each element of loss to each plaintiff, each side can be fairly certain that the damages case will be accurate and compelling when presented in settlement negotiations and at trial.

The Hypothetical Incident

As a road map to illustrate some of the key issues in damages discovery, we'll study a hypothetical matter involving five claimants, each presenting a unique loss profile.

On vacation, the Smith family ' Roger Smith, his wife, Beth, their son Ryan, Roger's father Tom and Roger's mother Renee ' were riding in an SUV that collided with a tractor trailer. Roger died instantly. Ryan suffered a spinal-cord injury, rendering him permanently disabled. Beth was mildly injured. Tom died two weeks after the accident of injuries sustained in the crash. Renee was uninjured.

Elements of Damages

The basic elements of damages in injury and death matters are: 1) lost earnings; 2) lost fringe benefits; 3) medical costs; and 4) lost household services. In most jurisdictions, damages for wrongful-death claims are reduced by the amount the decedent would have spent on personal living expenses, exclusive of what he or she would have spent on family members.

How best to determine the loss to each ember of the Smith family in light of these basic elements of loss? First, each of the Smiths' individual pre-incident economic situations must be considered.

Roger Smith was 39 years old at the time of the accident. A certified public accountant, Roger was a partner in an accounting firm, earning $150,000 per year. Beth Smith, age 37, is a homemaker. Ryan Smith, age 14, is an eighth-grade student. He currently earns straight A's and recently won a science-fair prize. His IQ is 138. Tom Smith, age 69 at the time of the accident, was a retired electrical worker and member of the International Brotherhood of Electrical Workers, enjoying an IBEW annual pension of $35,000 and $20,000 per year in Social Security. Renee Smith, 63, is a homemaker and has never been employed.

The next step in discovery is to examine what element of damages each of the Smiths suffered and what information is needed via discovery to determine the extent of loss.

Earnings Loss

This element of damages is based on earning capacity, which has been defined as “ The capability of a worker to sell his labor or services in any market reasonably accessible to him, taking into consideration his general physical functional impairment resulting from his accident, any previous disability, his occupation, age at the time of injury, nature of injury and his wages prior to and after the injury. “ Sims v. Industrial Commission , 10 Ariz.App. 574.

Many factors relate to the differences in pre-incident and post-incident earning capacity, including the claimant's age, education, occupation, the state of the job market and any preexisting limitations on earning capacity due to health, aptitude or other issues. Let us look at this element of damages to the Smith family claimants.

Roger Smith

Roger Smith's estate can claim survival damages (his cause of action as an individual survives him and is brought by his estate, the fictional claimant). However, he is survived by a wife and a child, who will make a wrongful-death claim for that which they have lost as a result of Roger's death. The estate can recover Roger's lost earnings minus maintenance ' the amount Roger would have spent on personal living expenses ' and the wrongful-death damages recovered by his family.

Key issues in determining Roger's lost earnings consist of how much he was making and what he could have expected to earn over the course of his lifetime, absent the accident. Specific discovery is needed to show the likely amount of earnings. Questions to ask are: Would Roger's compensation likely have risen, declined or stayed the same over the course of his probable work life, taking into account his particular skills and his work history? Did Roger have any health issues that might have affected future earnings? What was the likelihood that Roger's firm would have continued to be successful? How long would Roger have worked? Was he likely to have retired at age 60, or is it more likely that he would have worked until age 65, or older?

The expert economist can provide industry data on accounting firms, showing broad industry trends by region, sizes of firm and practice areas. Economists can also provide data on likely retirement age, based on statistical studies. More specific indicators of future earnings can be elicited via depositions of firm members and by looking at firm financial records and Roger's personal tax records.

Beth Smith

Beth was not employed at the time of the accident. However, if it can be shown that she had planned on entering the workforce, it may be reasonable to assume she suffered some loss of earning capacity. Suppose, for example, that she was attending college classes and had expressed a desire to enter the workforce. If it can be shown that her injuries will prevent her from doing this, or will limit her employment opportunities, she may have a valid claim for lost earning capacity. Testimony by a vocational specialist can help establish the extent of this loss.

Ryan Smith

When a child who has no employment or earnings track record is injured, indications of probable future earnings absent the incident include the parents' educational levels and occupations, and the child's school performance. Here, Ryan was demonstrably intelligent, as indicated by his straight A's, science-fair prize and above-average IQ. He is also clearly limited in employment opportunities by virtue of his permanent disability stemming from his spinal-cord injury. How much has he lost in future earnings? Evidence from a vocational expert might show that, despite Ryan's disability, his residual earning capacity might be fairly high given his intelligence and future potential. Statistical evidence might be useful in showing the earnings of workers with a similar disability and similar academic and intelligence profiles.

Tom Smith

Tom Smith received an IBEW pension and Social Security payments, which are not earnings per se, but which may be the basis of loss claim by a surviving spouse. Typically, on the death of a spouse, the payments the couple had been receiving would be reduced, but the reduction would typically not represent loss to the surviving spouse since maintenance for the decedent is no longer necessary. Reduction of pension benefits may be an item of loss if the pension payments are reduced or eliminated. Some plans allow plan members to opt for a “joint and survivor“ arrangement, whereby payments continue to the surviving spouse on the death of the spouse receiving the pension. Pension plan details are available through the employer or the union. Also, Tom's Social Security benefits should be examined. A loss might exist, depending on the total household benefits received.

Chad L. Staller, J.D., M.B.A., M.A.C., a member of this newsletter's Board of Editors, is president and senior economist at the Center for Forensic Economic Studies, a Philadelphia-based firm providing economic and statistical analysis and testimony. He can be reached at 215-5460-5600 or [email protected]. More information on the Center can be found at http://www.cfes.com/.