Economic losses are calculated to the “present value” to quantify a steady stream of lost past and lost future income into a single, lump-sum figure for settlement or award purposes. The present value of the economic losses is also considered “the replacement value” related to the event (injury, loss of life).
In order to present his/her case, the plaintiff must show that a wrongful event has occurred and that he/she has suffered measurable damages, as a result. Establishing economic damages would include the following 5 essential elements:
•Loss of Earning Capacity - Base/earning capacity (what was earned or could have been earned) over the work life expectancy, beginning from the date of injury or death. Earnings are based on education, training, experience, with consideration given to age, health, intelligence, and record of employment. Taxes are usually not deducted. In cases involving injury or death of a child, projected earnings are based on a study of the family’s educational background and socio-economic status.
•Loss of Fringe Benefits - Benefits that were part of the job or occupational income streams, expressed in the calculation as a percentage of gross lost earning capacity. It can be as much as 20% - 40%. Examples of fringe benefits include employer paid FICA, unemployment, workers compensation, health insurance, retirement plans, employer paid vacations, on-site child care, and meals.
•Loss of Household Services - Services that can no longer be performed due to injury or death. These can be assessed for any household member, not just for the loss of a homemaker. Services include unpaid tasks that maintain and enhance the lives of those in the household, such as cooking, cleaning, lawn care, child care, maintenance, repairs, gardening, shopping, etc.
•Medical & Rehabilitation Bills - Expenses already incurred and estimated future bills from a Life Care Plan, which are indexed using the Medical Price Index rather than the general Consumer Price Index.
•Discount all Losses to Present Value - Calculation of past losses prior to trial date, compounded with interest and the present value of future losses due to the event.
Frequently wages and other employee benefits are adjusted for future expected growth. Conversely, amounts that would have been received in the future should be adjusted to their present value. These two processes can have a major impact on the net amount of damages in an economic damages case.
Nawrocki Smith LLP
290 Broad Hollow Road, Suite 115E
Melville, New York 11747
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