AGE EARNINGS PROFILES
Tables compiled from Census and other data showing the current average earnings of workers at different ages.
CONSUMPTION
See PERSONAL MAINTENANCE DAMAGES
DAMAGES
Money claimed as compensation for loss or injury.
See ECONOMIC DAMAGES
DISCOUNT RATE
The rate used to reduce damages to present value. This rate should be based on the yield from a safe investment. The rate of return on high-grade municipal bonds is often used as a discount rate because the bonds are not only safe but tax free. Some economists favor the rate of return on U.S. treasuries as a discount rate. A higher discount rate results in a lower present value. Lower discount rates yield higher present values.
The U.S. Supreme Court in Jones & Laughlin v. Pfeifer, 426 U.S. 523 held that "real return" should be considered in the discounting process. Real return is the difference between inflation and the yield on a safe investment.
Certain jurisdictions, such as Michigan, specify discount rates by statute. Other jurisdictions provide little or no guidance, leaving the discounting process as a matter of argument.
(See PRESENT VALUE; TOTAL OFFSET)
EARNING CAPACITY
Expected income, taking into consideration:
Age
Education
Personal attributes
Health
Labor-market conditions
Actual earnings
Black's Law Dictionary, 5th Edition, defines earning capacity as
"The capability of 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, 560 P.2D 1003, 1006. Term does not necessarily mean the actual earnings...at the time the injuries were sustained, but refers to that which, by virtue of the training, the experience, and the business acumen possessed, an individual is capable of earning."
EARNINGS GROWTH
Earnings grow over time due to inflation and increases in both personal productivity and advances in national productivity.
(See PRODUCTIVITY, PRESENT VALUE)
ECONOMIC DAMAGES
Damages that are tangible and measurable, such as lost income, medical expenses and loss of household services (as opposed to claims for emotional distress, pain and suffering). Economic damages are the difference between the plaintiffs' economic status before and after the tort.
FRINGE BENEFITS
Employee benefits over and above straight salary, such as 401K contributions, sick pay and medical insurance. Fringe-benefit losses are properly measured by the actual loss to the claimant, not by their cost to the employer.
Some fringe-benefit items should not be claimed in cases where the plaintiff is totally disabled -- sick pay and disability-insurance are not needed by a totally disabled plaintiff, since an award for lost income makes them unnecessary.
HEDONIC DAMAGES
A hedonic damages claim seeks compensation for the loss of the pleasure of being alive. Some economists, using various studies on risk and wages and cost-benefit analyses of various safety measures, claim to be able to calculate the dollar value of life. The theories and methods they use are unreliable and not generally accepted. Courts are increasingly aware of the serious problems inherent in hedonic-damages expert testimony. Ayers v. Robinson, 887 F.Supp. 1049 (N.D. Ill. 1995); "An Academic Study and a District Court Dispute the Hedonic Damages Theory," Staller, Jerome M. and Scott F. Gibson, For the Defense 1997 39 (8
HOUSEHOLD SERVICES
The value of services provided by a plaintiff or decedent for the benefit of other family members. Sources for the amount of household services rendered and their value include government and academic studies and the cost of services from commercial providers.
LIFE CARE PLAN
A chart showing what medical costs the plaintiff can expect over his or her lifetime. The plans are compiled by medical-care specialists. The economist uses the life-care plan as the basis for the calculation damages for future medical costs. Future medical costs can include:
Therapy
Supplies
Housing
Transportation
Daily care
Institutional care
Special education
LIFE EXPECTANCY
The average number of years of life remaining for a person or a particular class of persons. "Life tables," compiled by the government and insurance companies, show the probability of surviving to a age and remaining years of life expectancy at different ages.
MAINTENANCE
See PERSONAL MAINTENANCE
PERSONAL MAINTENANCE
What a decedent would have spent on his or her own personal living expenses, exclusive of expenses of other family members. Maintenance is deducted from lost-future-earnings damages in wrongful-death claims. Also referred to as "consumption."
PRESENT VALUE
The amount of money that, if invested today, will earn what will be required in the future. Awards for future damages, such as lost future income or future medical expenses, are reduced to present value under the assumption that the plaintiff can invest the lump-sum award to meet future needs.
(See DISCOUNT RATE; TOTAL OFFSET)
PRODUCTIVITY
Earnings tend to grow due to inflation, personal productivity (the value of experience and maturity) and increases in national productivity (e.g., technological advances such as fax machines and the Internet increase productivity.)
SURVIVAL CLAIM
Loss to a decedent (the decedent's cause of action survives after decedent's death), as opposed to loss suffered by decedent's family members as a result of decedent's death. Loss to family members is covered under a wrongful-death claim. In many jurisdictions, survival claims include only damages suffered from the time of the tort until death, usually for the pain and suffering that the decedent experienced before dying. In some jurisdictions, survival claims can include the decedent's lost future earnings, but in such cases the survival-claim recovery cannot duplicate recovery to family members under a wrongful-death claim.
See WRONGFUL DEATH CLAIM
TOTAL OFFSET
A method of reducing damages to present value. The total offset method is based on the theory that, over time, inflationary growth in wages is equal to, and thus offsets, the interest rate, leaving only productivity in the equation. This makes the calculation of present value extremely simple -- the present value of future wages is current earnings times the number of years the earnings will be received, increased by the rate of productivity. There is no explicit 'reduction' calculation. The method is favorable to plaintiffs. Pennsylvania is the only state that uses the total-offset method, as specified in Kaczkowski v. Bolubasz, 421 A.2d 1027.
See DISCOUNT RATE; PRESENT VALUE
VOCATIONAL SPECIALIST
An expert who specializes in the assessment of a plaintiff's employment possibilities, given the plaintiff's work history, educational background, physical limitations and the current labor market. Economists often use vocational reports as the basis for calculating lost-earnings damages.
WORKLIFE
How much time a person can expect to spend in the workforce, taking into consideration expected retirement age and expected absences form the workforce for illness, child rearing or other reasons.
WRONGFUL DEATH CLAIM
A claim for damages to the decedent's family. This is different from a survival claim, which addresses damages to the decedent's estate.
See SURVIVAL CLAIM