Wrongful Death Damages and Personal Consumption Offsets

 

Economists Ink: A Brief Analysis of Policy and Litigation


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Laura Malowane is a Vice President at Economists Incorporated and has over 15 years of experience in analyzing and testifying on economic damages related to wrongful termination, injury and death.

In wrongful death litigation, economic experts are often asked to put a dollar value on the economic losses to the family left behind. While such economic damages usually encompass the lost employment earnings the deceased would have contributed to the family, they can also include the loss of household and childcare services that the deceased provided. These losses represent, in economic terms, the contribution of the deceased individual to the family. To fully evaluate the net economic loss to the family from a wrongful death, however, an adjustment to these contributions must be made for the amount of household income that the deceased would have consumed. The net of these amounts represents economic damages in wrongful death litigation.

For individuals in the labor force at the time of death, valuing the loss of earnings involves an estimate of lost wages for the remaining time of the deceased individual’s expected participation in the workforce, i.e. his or her “work life.” Government-derived work life tables can help determine how long an individual was likely to have worked, but specific facts about the deceased may also affect the estimated work life. For example, a person in failing health or with a history of dropping in and out of the workforce may have a shorter future work life than the government tables indicate is the average for the population.

Forecasting lost future wages necessitates examining not only the individual’s earnings at the time of death, but also the security of the income stream and the expected growth in earnings over time. In regards to earnings growth, a logical starting point is to examine the individual’s past earnings and how they have changed during his or her working life. Other factors, such as what stage of his or her career the individual was in, can also be important. Economic studies have shown that, in general, a person’s earning capacity increases most dramatically in the early parts of his or her career, then levels off in later years. A person’s education and field of employment may also play a role in the calculations. For example, a tenured college professor likely has a more stable future income stream than a professional athlete.

If the deceased did not work outside the home, economic damages may involve a calculation of the value that the individual would have contributed to the home and to the family left behind. Examples of household services include cleaning the home, yard work, and household maintenance. If children are in the home, then the individual may have contributed to their childcare in many ways, such as meal preparation, laundry, driving, and tutoring. Valuing these household and childcare services is not always easy, but a good indicator is how much the deceased individual would have earned performing these same types of services outside the home. Thus, the person’s education and geographic area are factors to consider. Finally, valuing household services not only involves estimating contributions in hours and dollar value to the family at the time of the individual’s death, but also examining how these contributions can be expected to have changed over time. For example, a 30 year-old caregiver of three young children is likely to contribute more services to the household than a 68-year old with no children at home and failing health.

To fully determine net economic damages, one must deduct the amount of family income that the deceased would have consumed. The deceased’s personal consumption would have included food, medical expenses, and clothes, among other items. Some elements of familial consumption would not decline with the death of a member, and no adjustment should be made for those elements. Examples of consumption expenses that would not decline might include many housing expenditures, such as property taxes and heat, and car payments if the family has only one car.

Several factors affect the estimate of what the deceased would have consumed in the future but for his or her death. In general, an individual’s personal consumption is partly based on the number of individuals within the family as well as the total income of the family. As the number of people in the household declines (that is, as children move out of the house), the percentage of income used for personal consumption by remaining household members generally increases.

Some economists and other litigation experts have argued that future personal consumption of a deceased individual should only be an offset in damages calculations if the decedent earned money working outside the home. Such an argument has no economic rationale. The foundation for wrongful death damage calculations is to make the remaining family whole in an economic sense. Since the deceased would have consumed part of the family’s income whether or not he or she worked outside the home, there is no reason to treat the two situations any differently.

An assessment of damages in wrongful death litigation must consider all aspects of the economic losses to the family left behind. The deceased’s economic contribution to the family may have taken the form of employment earnings, household services or childcare services. Once the dollar value contributed to the household by the deceased individual has been calculated, a deduction must be made for the amount of family income that would have been consumed by the deceased individual. The net figure represents the economic damages to the family in wrongful death litigation.