Wage Loss in Personal Injury Cases

TASA ID:

On Tuesday, April 2, 2013, at 2 p.m. ET, The TASA Group, Inc., in conjunction with financial, statistical, and rehabilitation economist Nora Ostrofe, presented a free, one-hour, interactive webinar, Wage Loss in Personal Injury Cases, for all legal professionals.

Personal injury wage loss is one of the most common economic damage claims in civil litigation. Yet there is often a wide gulf between the amount of damages calculated by the plaintiff’s expert and those calculated by the defense expert. Who is right? What accounts for such disparities? And who can understand all the computations in the experts’ reports?

During this program, forensic economist Nora Ostrofe, MBA, CEA, AVA, explained the fundamentals of how economists calculate damage claims, as well as perspectives that experts can take that influence value. She will explain how to identify overly-inflated or overly-depleted damage claims.

She also gave useful practice pointers, in such areas as: minimizing economic expert fees; obtaining economic data through discovery (even for workers with a sporadic history of work); and deposing and cross examining economic experts.

Takeaways from the webinar included the following: how to read and understand an economist’s report; how to build a credible case for economic damages; and how to work with your economic expert.



About the Expert

Nora Ostrofe has served as a forensic economist for the past thirteen years. She has a bachelor’s degree in Economics from UCLA, an MBA from St. Mary’s College, and a Certificate in Accounting from U.C. Berkeley.

Transcription: 

Matt: Good afternoon. Welcome to today's webinar, "Wage Loss in Personal Injury Cases". Personal injury wage loss is one of the most common economic damage claims in civil litigation. Yet, there is often a wide gulf between the amount of damages calculated by the plaintiff's expert and those calculated by the defense expert. Who is right? What accounts for such disparities? And who can understand all the computations in the experts' reports? Forensic economist Nora Ostrofe will explain the fundamentals of how economists calculate damage claims and perspectives that experts can take that influence value. She will explain how to identify overly inflated or overly depleted damage claims. She will also give useful practice pointers in such areas as minimizing economic expert fees, obtaining economic data through discovery, even for workers with a sporadic history of work, and disposing, deposing, and cross-examining economic experts.

Takeaways from today's program include how to read and understand an economist report, how to build a credible case for economic damages and finally, how to work with your economic expert. The presenter for today's program is Nora Ostrofe. Nora has served as a forensic economist for the past 13 years. She has a bachelor's degree in economics from UCLA, an MBA from St. Mary's College, and a certificate in accounting from University of California at Berkeley. We'll take two Question & Answer breaks during today's program. If you have a question, please use the chat or Q&A features located on the right-hand side of your screen. We'll do our best to answer the questions that are submitted. However, if we can't get to your question, we will submit them to Nora and she will do her best to respond to you within two to three weeks.

We encourage all attendees to submit questions throughout today's presentation. Tomorrow morning, I'll send out an email with the links to the archive recording of this program and in that email, I'll include a copy of the PowerPoint presentations used during today's webinar. We do ask that you take time to fill out the survey that will appear on your screen after today's program is over. I now invite you to sit back, relax and enjoy. I'm gonna turn the presentation over to our distinguished guest, Nora Ostrofe. Nora, the program's now all yours.

Nora: Okay. Thank you. Can we get to the page after the title page? Okay. Basically, for the economist putting together an assessment of lost earnings is fairly simple. We're just gonna be looking at a couple of factors. One would be the period of loss and that's the period over which the plaintiff's injury affected their earnings. And I've seen cases where it can be as little as two weeks or it could be a lifetime. So, and that's usually not the economist's call. Usually, someone, a medical expert, a vocational expert is going to determine the loss period.

Then what the economist needs to do is determine what the plaintiff's earning capacity is and that is what is their ability to earn wages out in the competitive job market. And for...that would be what they could do at the time of the incident but also post-incident because some plaintiffs will have, as I mentioned before, loss periods that would extend over an entire lifetime and we have to determine what they would be earning at each stage of their life.

The third element is gonna be determining whether or not the plaintiff post-injury is even able to work and if they can, what they can earn with their injury. And then we reduce everything to present value which is something that eludes a great...calculation that eludes a great many people so I'll try to simplify that. I'm gonna talk a little bit about data you want to look for in discovery to determine earnings and then I'll give you an example of a legal case that I worked on. Next. Okay.

Determining the loss period. Usually, the economist will rely on the evidence of other experts because they have to...a medical expert, a vocational expert needs to talk about how long the plaintiff can be expected to be off work and, you know, how they can get back into the labor force and back into earning a wage. The defense will usually hire an independent medical expert. Very often the plaintiffs will rely on the treating doctor, the doctor that's actually treating the expert. Sometimes their opinions will differ. Sometimes a vocational rehabilitation expert will be hired if it's someone who can perhaps return to their former job that needs to sort of go through a work hardening program to work up to the point where they're physically capable of handling the work again.

Also, sometimes for people who have a fairly severe disability, they can be determined to be totally disabled by the Social Security Administration and very often, the defense will accept that. However, I've seen in some cases the defense will contest social security determination. And also, if the plaintiff is receiving social security disability, it's not necessarily for life. Sometimes social security will reevaluate the plaintiff after a couple of years and so there might be...even though someone's receiving social security disability, that might not mean that they're going to receive it forever or there's some point where they could reenter the workforce and earn wages.

If the plaintiff is in fact totally disabled, usually what we'll do is we'll take the plaintiff out to something called work-life expectancy. Now and a lot of people think about when people retire, they tend to leap to the social security retirement age which was typically 65, and for people of my generation, Boomers and beyond, it's been raised to 67 and it may be extended beyond that. So that's what a lot of people think of. But when economists are talking about work-life expectancy, we're talking about the period of time that the plaintiff would have been expected to be in the workforce actively earning a wage. And so, what we do is we take off time that they would be expected to be between jobs, unemployed, disabled, sick, bearing a child, that sort of thing.

So, work-life expectancy is almost always shorter than the number of years before the plaintiff is expected to retire. Nevertheless, you will see a lot of analyses that take people out to age 65 or 67 and the first question you wanna ask is have you reduced the time until retirement for the period of time that the plaintiff is expected to be out of the workforce. If they haven't, then the damages are probably overstated. Right.

Years through...and again, years to...oh, can we go back, please? I wasn't finished. Okay. Years to retirement or final separation. Another thing you should know about social security is even though people have a full retirement age, which is the age at which they receive 100% of their social security benefit, most people begin taking social security at age 62. So even if you're facing a social security retirement age of 65 or 67, you can always argue that it could be less since most people take social security at age 62. You can also use the plaintiff's intended date of retirement but usually, the plaintiff is not an objective source and that's when you get people saying, "I would've worked to age 70. I would've worked to age 75." That doesn't mean that that should be discredited. Some people have very good reasons for working till age 70. They may not have enough retirement. Maybe they planned to do a second career. Maybe they planned to work part-time. But if they do say something different in an age that's different than their work-life expectancy or social security retirement age, make sure that you have all the reasons why the plaintiff would have worked longer than one might expect. Next.

Okay. Earning capacity versus lost earnings. There's two ways of looking at what the plaintiff could've made. One is to just look at what they made historically and assume that that's what they would've made over the period of loss. However, there's another concept called earning capacity and that is what the plaintiff could potentially make even if they never made that amount in the past or they weren't making that amount at the time of the injury. Usually, earning capacity is a little harder argument to make because it's speculative and it's an assumption. It's not based on what they actually have made in the past. So usually, you will find the defense looking at what the plaintiff actually made and at times, you will find the plaintiff saying, "Yes," but they could've earned more and this is why. And that's a point of contention.

Determining earning capacity at the date of the incident is usually looking at what they were earning if they had earnings. If they didn't have earnings, then you might...then we have to look to other things. What were they capable of earning? Maybe earnings based on their education or so forth and I'll talk about that in a little bit later.

Future loss lost earning capacity again may make a difference depending on how long the time horizon of the loss is. We're looking at someone who's fairly young and looking at what they're expected to make over an entire career. Let's say they're 25 when they're injured. We're gonna be making quite a number of assumptions about what their potential career path would look like.

Mitigation earning capacity is what we're going to deduct from the lost earnings. This is what they can make now that they've been injured. If the plaintiff has returned to work at their former job, it's easy. It's just what they would've made over the period they were out of work versus what they've made once they've returned to work and it's a very simple analysis. If they're not working...if they haven't returned to work yet and they're not going to go back to their previous job, then we have to find them an alternate career and measure what their earnings are expected to be then. And also, if the plaintiff is fairly young, what their raises and promotions and career path would be in their alternate job. Next. Okay.

As I said before, the plaintiff can lose earning capacity even if they're not employed. For instance, if it's an 18-year-old who's just entering the workforce who's someone who's in college once they were injured or if it's a housewife who had planned to return to work, those people, we're gonna have to look at what their earning potential is and determine what it's worth. Okay. And again, earning capacity can be measured by actual earnings. So, with someone who has, you know, 10 years in the labor force, a defined career path, and that sort of thing, then it's pretty much going to be what they have earned in the past at the job they had before their injury and what they could've been expected to earn at that job in the future. Next. Okay.

Determining their earning capacity. If the person is a salaried worker, it's very simple. You can look at their W-2 the year previously, you can look at their paystubs up until the point of injury, projected out for the remainder of the year and projected forward. Some people, people who are self-employed or people who might be hourly workers might have a more uneven earning history and then we'll look at...take the five years prior to the injury and perhaps take an average of every year and get to the sort of average rate that they earned year by year and project that forward. Okay.

Benefits are something, fringe benefits are something that can be overlooked. People tend to...even economists tend to concentrate on wages and not try to correctly measure the benefits. But as people with health insurance know, health insurance benefits can be...if they're employer-paid, can be worth up to $10,000 a year. Retirement plans, 401Ks, pensions, bonuses, stock options, all those can add quite a bit to the lost earnings when you include them in the analysis. So, they shouldn't be overlooked. Very often, even the plaintiff doesn't really know the dollar value of their fringe benefits. So, if you have a plaintiff who does have employer-paid fringe benefits, you want to have them identify a human resources professional at their job who you can call to find out exactly what the company contributed on their behalf. Sometimes it's listed on the paystubs. Sometimes only the portion that the employee paid is listed on the paystubs. So, it's sometimes not always readily apparent if you have the plaintiff's earnings records which is why it's a good idea to get someone in HR on your side.

If they have left their job, there's a COBRA letter which will tell them the premiums that they have to pay in order to continue coverage. That will often be a clue as to what it's actually worth. But you wanna make sure that you get the dollar value that the employer paid into their medical, dental, and vision benefits, their health insurance, whether or not they had a 401K or a pension plan, and what the employer contribution was. Very often, for a 401K, it would be 3% or more a year. If it was a pension plan, what percentage of their earnings the employer paid into that. Social security. Employers pay 6.2% of earnings. Not to be overlooked. That's worth something.

Also, some people, for instance, in the security industry, their annual bonus might be a very large portion of their pay. And if they are out due to injury, you can't determine what their bonus is so you may wanna subpoena what the bonuses of their coworkers were to find out what that is. Stock options may also be granted and worth something as well.

You'll want to have a history of the hours that they worked prior to the incident. So that's something else you wanna get from personnel. You wanna get their complete payroll records, their complete personnel records, their...if you can get it, you know, their paystubs and so forth. Next.

Okay, you wanna know, for people who have a fairly long-time horizon of loss again whether or not they would've received a raise or a promotion or if it was possible. You wanna look at their past history of raises, past history of promotion. You may wanna depose their supervisor or their manager at work. Sometimes plaintiffs would have been laid off in the next couple of months and that's something if you're on the defense, you may wanna know was the plaintiff really going to continue this job if we're gonna project out earnings for another 20 years.

I once had a case where a gentleman, right before the day of the injury had an offer letter for a job that was worth about $45,000 a year and it was a level of earnings he had never achieved before but he did have the offer letter. So, we based his lost earnings on that only to find out that this was right before the recession. Two years later, his position would've been eliminated. That doesn't mean that that wasn't his earning capacity since he was offered a job at that amount but it was also harder to argue that he was going to continue to earn that rate of pay.

However, even if somebody was gonna be laid off, if you could show that there was a demand for these kinds of workers and they could've just sort of laterally moved into the same sort of position, that may not be an impediment to getting that level of earning. Also, you wanna find out if there was a likelihood of a change in benefits. During the recession, a lot of people saw their 401K contributions go away for a couple of years or they had to pay more for their medical insurance and so forth. So that's again why you want to be in contact with human resources to see how those benefits would've changed over the lost period. Even if somebody lost some benefits in the recession, that doesn't mean as companies come out, they start to begin paying that again. And so again, it's important to talk to somebody knowledgeable if their benefits were cut, say, in 2010 or 2011, you might wanna ask, "Do you expect these benefits to come back in 2013, 2014?" Next.

Okay. Special issues as I said before, people who really don't have an established earning history, for instance, a child, a young adult who hasn't really chosen a career or might be majoring in something that doesn't...like English or history that doesn't immediately lead to a defined job, or a housewife or also workers with an undocumented earning history. Something that we do is we can...the U.S. census puts together very, very detailed reports of average earnings by gender, race, educational level. They'll start out with below high school, high school, a degree, bachelor's degree, advanced degree and they'll break it out every five years what the average earnings for people who meet those sort of, meet those criteria earn. So, we do have data based on education that we can use if we don't know what somebody was going to do. There's also surveys of thousands of occupational titles that are performed by the Bureau of Labor Statistics and you can find them by geographic areas, major...like San Francisco, Boston, Chicago, by state, and so forth.

So, if we know what the occupation was, we can find out what the average wage was. Finally, you can always rely on testimony and people have gotten awards based on what people testified somebody made even if they were a cash-only worker, weren't paying taxes and so forth. But you have to be careful about people who sort of fall below the, you know, documentation level because the IRS will go after them and tax them on...you know, based on what they should have paid for the earnings that they collected outside of the taxes. Okay, next.

Okay. Mitigation earning capacity. Again, once you've established the lost earning rate, the question is now, now that the plaintiff has been injured, what can they earn with their injury. As I said before, if they can go back to their previous job, then it's just the period that they weren't working. If they can't do their former job, now you're going to have to look to what they can do. Very often, a medical expert will come in with some work limitations. You know, maybe they can't lift 50 pounds anymore and they were a construction laborer so now they have to find something else. Very often it's difficult to mitigate somebody who had a very heavily physical job and doesn't have a lot of education, can't do very much. You know, maybe they can be a security guard. Maybe if they were in construction, they could be a construction estimator but they'd have to be able to do math. So sometimes that's difficult and sometimes all that someone...if someone wasn't at a very low educational level or very low ability to sort of do administrative work, you know, maybe minimum wage is the best they can do.

Very often, in those situations, a vocational expert will be hired. They will do functional physical testing of what they can do and also test them in terms of their academic aptitude, ability to return to school, ability to...they may test them about the kinds of work they would like to go into and then put together a return-to-work plan and a new career. At that point, the vocational expert will probably determine what they can earn in the competitive job market and that's what the economists will use for mitigation earning. You also want to ask if you have someone like a vocational expert determining what the mitigation wages are, you wanna ask them what benefits they could expect to earn.

Usually, since this person hasn't been hired into a job, we'll use is sort of a broad survey of what benefits are paid. And there's a U.S. government study, it's put out by the Bureau of Labor Statistics called Employer Costs for Employee Compensation and it determines what government and nongovernment workers earn on average for fringe benefits in a variety of different industries. And we'll use that sort of generic estimate for what kinds of fringe benefits they would be expected to get.

If they have gone out and actually obtained a job, we can use what their actual earnings are. Maybe the plaintiff isn't earning as much as the vocational expert says they can and, in that case, you know, you could argue that they're really not mitigating as much as they could and this is what they could earn if they did a proper job search and so forth. If you have a plaintiff that's sort of claiming disability but the experts don't agree or you have a plaintiff that, you know, is going out, you wanna make sure in any of these cases where if the plaintiff can return to work that they're really doing a bona fide job search and they're just not sort of sitting around waiting for an award. You want to really show that the plaintiff is trying hard to mitigate. And you want to, you know, keep...have the plaintiff keep records, every job they apply for, every interview they go for, every job they interviewed for and were rejected and so forth to show that, you know, this person is trying to mitigate. Next.

Okay. Discounting the present value. Sometimes there will be future medical expenses. Because the plaintiff was injured, they're going to have to see a chiropractor every year or they're going to have pain injection shots or they're going to have future surgery. Maybe they had an injury to their hip, twenty years out, they're gonna have another surgery. So, we also have...if there's future medical expenses that are a part of the loss, we're going to have to discount them to present value.

To explain what present value is, there's a time value a month. If we had $100, we could put it in the bank today and we could earn maybe 1% on it and have $101 at the end of this year. So, what we do is because future dollars we could invest...the plaintiff could take their award, invest it today and earn something on that, what we do is we discount it back to present value so that future damages are always worth a little less than they would be at the time that they were paid out. The higher the discount rate, the lower the damages. Okay. Right now, we're in sort of an anomalous period where discount rates are so low that we're looking at, you know, net discount rates that are usually in the 1% to 2% range. But if you're looking for someone...if you're looking at a loss that's going out 20 or 30 years, 2% to 3% might not be unreasonable because we expect that the economy recovers and inflation begins to rise and so forth. We might expect the return on treasury bills or secure investments might be expected to rise. So that's the next thing that the economist does is discount wages, future wages to present value. Okay. And so those numbers are gonna come down a little bit. Next.

Okay. Okay. Medical costs sometimes will result in a negative discount rate because some areas of medical costs, for instance, physician services and so forth can be escalating 4% a year. So, when we're talking about medical costs, there are a couple of ways to look at them. One of them is the typical fee-for-service rate which is just what hospitals would charge outright for the service. Okay. But in today's sort of environment, usually what doctors and hospitals are accepting is they're either accepting reimbursement rates from insurance plans that are far lower than fee-for-service rates or they're accepting Medicare payments or medical payments that are far lower than fee-for-service rates.

So very often, the defense will want to make an argument for future medical expenses that are based on what is typically paid and that is not the fee-for-service rate but what an insurance company has arranged with the hospital or a physician to accept or what Medicare and medical would pay. Plaintiffs very often will want to introduce the amount of the fee-for-service rate under the argument that this is really what it costs or this is really what is charged. Okay.

Sometimes care costs may be reported by a vocational expert or a lifecare planer in conjunction with treating physicians or medical experts. They'll go to the doctor, they'll say what sort of care does the plaintiff need going out into the future and they will then write a report and what the economist will do is project out are those costs expected to increase over time and then discount them back to present value. Okay. If the person has to undergo, you know, a fairly lengthy medical procedure at some point in the future that might involve a surgery and then weeks or perhaps even months of recovery, they can also claim the wage loss with the time spent undergoing and recovering from future medical procedures. And that is something that the economist will do. Next.

Okay. Opposing experts. Very often the defense in a personal injury case, if they think that either the plaintiff is lying or malingering or there really isn't an injury, they may elect not to present an opposing expert under the theory that if they present an economist, that suggests that there are damages. The jury will consider some number instead of zero and some juries will take zero and whatever the plaintiff puts on and split the difference. And so, all they're gonna do is raise the amount of damages they'll be expected to pay in case the jury is confused or thinks maybe there's truth on both sides.

Some of the largest awards I've seen as an economist when I've been retained by the plaintiff are awards in which the defense elected not to put on an opposing expert. So, I would say if you're looking at a defense case wherein the plaintiff has hired an economist who is going to testify to a large amount of money, you may be...you may want to, at the inception of the case, hire an economist as a consultant, you know. Declare them if you have to and bring them in if you think that as the case proceeds in trial, it may be a good idea to at least have an opposing view because if you don't have someone in reserve, then all the jury has is the plaintiff's numbers and that can very often be very painful. Okay.

I think my experience is that most juries really want to be fair. And they're looking for a way to be fair. And when they're taking things like taking the plaintiff's numbers and defense numbers and, you know, adding them together and dividing in half to get to the midpoint, they didn't really believe either side. So, I think that when...the theory that, you know, we're just gonna lowball this or we're going to, you know, make this as high as possible isn't really responding to what the jury is looking for. So, I think it is better to go in there and show what's most reasonable and probable and why. I think you have a better chance of getting your numbers than rather throwing the highest or lowest number on the wall and seeing what will stick. Next.

Okay, discovery. This is usually what attorneys want to know most and it's also...if you do a very thorough discovery, it's the best way to reduce your expert bills. Where I have had the largest bills on a case, it's usually a case where someone calls me two or three weeks before trial. They say, "You know, I don't have any of these records. Talk to the plaintiff. Get them from them." And I spend hours on the phone going back and forth with the plaintiff who doesn't really know what he or she is looking for looking through their old tax returns and so forth. It chews up a lot of my time. It chews up a lot of the plaintiff's time and it results in a very large bill.

The best way for you to proceed and the way that's the least stretch for everyone is at the inception of the case, contact your economist and give them...send them a copy of the complaint. Perhaps the plaintiff's response is to form interrogatories, something that will give them sort of the basic outlines of the case, of the plaintiff's educational level, what they were making at the time of the injury, what their date of birth is, and so forth. And ask the economist to put together a list of the data that they're gonna need to do a report, okay. Then you've got a couple of months to have the plaintiff go look for it. You can subpoena data that the plaintiff can't get. You have the opportunity to talk to people in human resources and get all the data you need for a report.

Then if you wanna go forward and pay for a report to take into settlement negotiations, you have all your data and all the economist has to do really is put it into a spreadsheet and do an analysis that takes much less time. Or if you wanna wait until a couple of weeks before trial and you haven't settled the case, now you need a number for the economist. Everything is there, okay. That is the best way to proceed. If you decide at the penultimate moment that now you need a wage loss analysis and you don't have all your data together, it's going to be extremely expensive and time-consuming. You may not get...the economist may not end up with all the data they would've liked. Okay.

One of the most complete pieces of data on a plaintiff's cost earnings is a social security itemized statement of earnings. The plaintiff can go down to a social security office and request this if they have...or their relatives can if they have information and that's going to give history going back to whenever they first entered the workforce of every employer they worked for who paid into social security for them. You can also request...sometimes if you...that's going to be sort of an informal history. You can also mail in a request to social security and what they will do is they will give you a certified copy of their social security record which has been certified with social security information. And those forms are online. You can find them.

You also want their form 1040 tax returns to see what they reported on their taxes as wages and earnings. If the plaintiff is self-employed, they usually have something called...and they're a sole proprietor, they have something called their Schedule C where they list their revenues and expenses from the business that they're in and then their net income which is something that the economist is gonna rely on. These are privileged. Very often, if somebody wants to hide the earning history of the plaintiff, they will deny the 1040 tax returns. But if you feel that this is something that's gonna help your case, those are good to get. If the plaintiff doesn't have them, again they can write in a request, send a check for some money to the IRS and request going back years all their tax returns and that will give you their reported earnings anyways to the IRS every year.

Subpoenaed personnel and payroll records from your former and current employers. Usually, you wanna go back five years preceding the injury, all years post-injury if they returned to work. W-2 wage and tax statements. W-2 statement is the statement that you get from your employer at the end of the year that has your annual earnings on there. Sometimes it will show what was paid into a 401K so it gives you a little benefit information as well. Independent contractors would have Form 99s. Again, you'd want those five years preceding injury and all years post-injury.

Self-employed workers, again, part of the 1040 is gonna be the Schedule C profit and loss statements, for self-employed workers. Now if you're on the defense side and somebody was a sole proprietor but they refuse to provide these, you can always go back to the accountant and you can request all the data that the accountant relied on to prepare the tax returns. I've even seen that done in cases where we've gotten boxes of documents which is the data that the accountant used in order to put together the tax return if they refuse to produce the tax return.

For people who didn't file a tax return and didn't work for employers who paid into social security, sometimes you can...if they had a bank account that they kept all their business earnings then you can go into their bank statements. You can go into all the...you can add up all their earnings from the invoices that they sent to customers or you can rely on testimony. Again, these are...the further you get away from sort of the organized data and you start looking at things like bank statement and invoices, you're looking at a lot of data that is...the economist is gonna have to spend a lot of time inputting and that's going to mean hours of work and that's gonna raise your expenses. So, any time when you can rely on something easy like a social security itemized statement of earnings or have the plaintiff produce their tax returns, that's gonna be easier on the budget for the case and it's gonna be easier on the economist. But sometimes, you know, you're just not gonna have that data.

You wanna be careful about bank statements. I had a case a month or two ago wherein the plaintiff was a court reporter and she was in a car accident and she claimed that following the accident, she had posttraumatic stress syndrome and was afraid to drive in traffic. So, I was working on the defense of this case and I had all her bank statements so I went through all of them and she happened to charge gas at Costco and we deposed her and she said, "Yeah. Every time I bought gas from a business, I bought at Costco and it went on my bank statement and went on my bank card." So, we were able to show that following the accident, she purchased even more gas than she had prior to the accident which did something to dispel her credibility. As the matter of fact, the case didn't go to trial, the plaintiff's lawyer okayed but simply because there was just so much information on her bank statements that belied her testimony that it really helped our side of the case. So, you always wanna review data before you're submitting it to discovery to make sure that the data tells the story you want it to tell. Next.

Again, depositions of employer, work supervisor, human resources, plaintiff. These would be particularly valuable if the plaintiff had...you know, was sort of on an upward path at work. They, you know, anticipated promotions, raises, large bonuses, and so forth. Those people's testimonies can help. So, you want the plaintiff's deposition, responses to form and special interrogatories, the responses to requests for production. You want the independent medical expert's report and/or the treating physician's report. You want the return-to-work date. They can all plan on when they think the plaintiff would be able to return to work following the injury. Permanent and stationary date. That's when the plaintiff has recovered from the injury as much as they're going to and no further improvement is expected. So that's really the point at which the plaintiff's sort of not going to improve anymore and from that point forward, if there's still gonna be lost earnings based on their injury, that's kind of the way it's gonna be. Any work restrictions, things they can't do.

Now in terms of work restrictions, under the ADA Act, employers are required to make reasonable accommodations. So, you wanna make sure if the plaintiff has a disability and is claiming they can't work due to the disability that they have requested reasonable accommodations from their employer and been denied or been told that, you know, they can't be accommodated [inaudible 00:40:15] If you haven't, it's probably something that the defense is going to bring up. In medical malpractice personal injury cases, there are offsets. Any social security, private disability payments, state disability payments that the plaintiff has received will be deducted from the loss. Okay. And the economist will wanna see the opposing expert's report, complete file and deposition to understand what the counterarguments to their analysis are going to be. Next.

Matt: Okay. We're gonna take a break here for our first question and answer break. And Nora, we've had a couple attendees ask if you could either speak up or get closer to your speakerphone or headset. You're drifting off a little bit towards the end of...

Nora: Oh, I'm sorry. How's this?

Matt: You got it. That's better. So, we have a bunch of questions here we're gonna get through. First one is from Matt who asked, "When plaintiff works in an industry where earnings are largely based on macroeconomic conditions such as U.S. housing market, how does an economist adjust the earning capacity for market conditions?"

Nora: Well, usually what we would do is we're gonna get...probably try to get as close to that job as possible. So, let's say the person was a loan officer which may depend on the macroeconomic housing conditions or a construction worker. The first thing we'd try to find is whether or not the average wage changed for that job over the period in which the macroeconomics conditions took place because we wanna look at the direct effect on wages. We don't just wanna make a macro...look at a macro-ascension and so forth. So that's very often what we do.

What we have in California is for certain kinds of retail stores and so forth, we have sales tax data that will show dips during recessions and we can use that to measure an expected decline, say, if the person owned a grocery store or something else or a business where their earnings were expected to dip. But again, we're gonna look for the data that is closest to the job or occupation that the plaintiff held and try to find a benchmark that changes from year to year so we can measure the effect on the average worker during the period of loss. We're probably not gonna use something like GMP because that's just too far removed.

Matt: Okay, great, thank you. We have a question here from Laurie who asks, a plaintiff attorney in her case is objecting to the production of employment records that contain tax info including W-2s, paystubs, that show deductions, anything that could be construed as privileged tax info. Any suggestions on how to obtain wage records that show earnings in this case?

Nora: I've not seen W-2s withheld. What you can do is you can go and get the person's payroll records, try to subpoena those. You can get any...as I said before, you can get any inputs to their tax returns. You can request...they may say that all of that is privileged. I've not seen W... I have seen tax returns brought up as privileged, not W-2s so you could get the end of the year paycheck which would show their year-to-date earnings. You could depose their supervisor at work or their employer and just have someone from human resources report those numbers without any tax information.

Matt: Okay, great. We have a question here from Gary who asked, "In cases involving a plaintiff who is receiving SSA disability benefits or Medicare benefits, how do you account for the amounts which will be required to be reimbursed to Medicare or Medicaid services or SSA from a damages awarded for medical expenses?" Also, and that's the question.

Nora: Well, could you repeat? Yeah, that was kind of a long question. Could you just repeat it again because I'm not sure I got all the elements of the question?

Matt: Sure. In cases involving a plaintiff who's receiving SSA disability benefits or Medicare...

Nora: Okay, so social security disability, sure, okay.

Matt: Yeah. How do you account for amounts which will be required to be reimbursed to Medicare, Medicaid, or social security from the damages awarded for medical expenses? So, it's a reimbursement question.

Nora: Oh, well, usually, Medicare will file a lien and they will...usually, the economist doesn't see that. Medicare would just file a lien separate. We don't see that data and whatever the amount of the lien is, is the amount that they said they paid. Now if you were talking about deducting what they have received in social security disability, that's fairly easy. If you know the amount of the monthly payment, you can just project it forward every year. In social security, there's a cost-of-living increase but you can usually sort of do an average of what the increase has been in the past or do a projection. Social security makes that data available and assume that this is what social security disability is gonna be paid out over their lifetime. Social security disability by the way ends with 65 and then it just becomes a regular retirement benefit so you'd project it out to 65. I hope I answered that question correctly.

But usually, if it's someone...if it's some government administration who's coming in and claiming a portion of the damages, they will submit a claim. If you asked an economist to anticipate what the amount of that claim might be, you know, you'd have to produce, I guess, a record of what medical procedures were performed and then the economist could go out and look at, you know, the Medicare reimbursement rate for those procedures. You'd have to have all the CTT codes. But that can be a little hairy because hospitals will throw in a lot of extra expenses. And it's gonna be a fairly rough estimate. I hope I answered that question correctly. I'm not quite sure what the questioner was after. Okay. Next.

Matt: Okay, and this is the last question. Then we'll move on to the presentation of content. James asked, "From a plaintiff's perspective, is it possible for an economist or an economic expert to calculate or formulate a loss of enjoyment of life i.e., loss of recreational enjoyment or interpersonal relationships, those sorts of things?"

Nora: It is possible, okay. There is an area of economics called hedonic damages which is loss of enjoyment of life and what they have done is they have done studies of people who work in extremely dangerous industries like mining and so forth where it's possible to lose one's life and are paid a premium pay for the risk that they may in fact die. And then they've come up with an amount that...the value of a human life. And I've seen estimates from $4 million to $9 million. This is largely struck down in California. It's a battle. There's an economist called Stan Smith who kind of goes around the country testifying to hedonic damages and then there are other experts such as Gary Skoog and Tom Ireland on the defense who go around opposing Stan Smith. And, you know, sometimes he's excluded, sometimes he isn't. The best way to do it would be to look up sort of the history of what has happened with hedonic damages claim in the state you are in to see whether it's worth mounting a hedonic damages claim but those claims are out there.

Some economists have very dim opinions of a hedonic damages claim. I'm not gonna enter an opinion one way or another. It seems to...you know, it has been based on some data. It's not a number just completely pulled out of the air but I think courts tend to be fairly conservative about that. Some states, you know, just have pecuniary damages only in certain kinds of trials. So, there's a certain amount of risk when you're presenting a claim for hedonic damages.

And I have [crosstalk 00:49:36]

Matt: Okay, great. Why don't we [crosstalk 00:49:38]

Nora: Hold on. Hold on. Hold on, hold on, Matt. I've just got one question on the Q&A here that I'd like to answer from Todd Slotter [SP] and it's what methods would you use to calculate the work-life of a 70-year-old truck driver totally disabled by accident? And that is if the truck driver is still working at 70 something I forgot to say about work-life expectancy is that it tends to increase. For instance, if you're still working at 70, you might have a couple more years ahead of you. So, I would look up a 70-year-old on the work-life tables, look at how many more years he would be expected to be active in the labor force. I'd look at what he had earned up until the point of the injury. I don't know if he's an employee or if he's self-employed but I'd look at his...if he was self-employed, I'd look at his average earnings and that would be his...what he made as a truck driver, less his costs, which in truck drivers are considerable. Usually, in my experience, truck drivers make about 30,000 to 35,000 a year. The highest-paid truck driver I ever saw, I think, made something like 50 or 60 but he was working for Walmart. And then that would be his loss. If he's totally disabled, he's probably got a couple of years of loss at, you know, his expected earnings which is probably what he had made for the past couple of years prior to the accident. Okay.

Matt: Okay, great. Yeah, I'm sorry I didn't see that question so thank you for answering it. Why don't we move on to the presentation of content? Would you like the draft analysis of John Doe up?

Nora: John Doe, yeah. Okay, so not the analysis but the slides.

Matt: Right. Let me...I'm trying to...hold on. Oh, here we go. Sorry about that.

Nora: All right. So, this piece...hopefully, everyone can hear me now. Please tell me, Matt, if you're still getting complaints. I'm sorry. I do tend to be softspoken so...

Matt: Oh, no, you're fine. You're just...towards the end, you were kind of drifting off a little bit but you sound strong now and I think we're good to go.

Nora: Okay, this is a personal injury case for...this was a gentleman in his 50s who was an autobody painter. He had a back injury and he was in constant pain. So, he was found to be totally disabled by social security and the question was, "Oh, what were his lost earnings?" So, if you just go back to the first one. So back, okay. So, this is an example of very, very simple boiled down, the slides that I would present at trial to the jury just to sort of summarize what my opinion would be for economic damages. Okay, next.

Okay. And I just say, you know, I'm gonna talk a little bit about Mr. Doe's disability status. I'll talk a little bit about his lost earning capacity. I'm gonna present a summary of what I think Mr. Doe's economic damages are due to his disability and then I'll talk a little bit about calculating present value. Next.

Okay. He was the...Mr. Doe was injured on November 17th, 2008. At the time of his injury, he was between jobs. He had just left a job as an auto painter because of lack of work and he was searching for a new job. As a result of his injury, he's been found to be unable to return to any kind of work until the end of his work-life expectancy at age 63. Notice of the [inaudible 00:53:08] work-life expectancy he might've worked to age 67 but he only...but he would be expected to have, you know, just about 13 more years on the labor force at the time he was injured. At the time of his injury, he had just left a union position and his treating physicians had said he cannot return to work. Next.

Okay. Lost earning capacity. His earnings varied from year to year. Over the years from 2000 to 2008 here in the following amount. Okay, 2000 he made 50,760. The next year was a little bit more. 2002, 61,000. 2003, 43. 2004, he was off work for a period of time. He only made $5,670. Next.

Okay, 2005, made 42,000. 2006, 32,759 and 2007, 48,000 and then right...then he had a partial year, the year he was injured and he made $37,000. I took an average of his earnings from 2000 to 2008. Average was $49,902. We used his average earnings from 2000 to 2008 to estimate what he would've earned if he had not been injured. Next.

Okay. He also received fringe benefits from his employer. Okay. If he...as I said, at the time of his injury he was not employed but he had just worked for an employer who had offered union benefits. So, if he...in the next job he found, if he worked for an employer who contributed to his union, he would've received $13,353 per year in medical insurance benefits, 3,060 per year in social security benefits, and contributions to a pension. If he didn't work for a union employer, he would receive about 2,700 in medical insurance benefits, about 3,000 in social security benefits, and about 2,400 in retirement benefits. Next. And that's from the generic government study employer costs for employee compensation. So that's where I got that if we just don't know where he's gonna work again. Next. Next. Okay.

If he had worked in a union job to the end of his work life expectancy, his total damages would be $127,020. Now that's divided into past damages and future damages. Past damages is everything from the date of the injury up until the date of trial and it's not reduced to present value because it's in the past. So up until today, Mr. Doe has earned...has lost $203,657. From today up until the date at which we would expect him to leave the workforce, he's lost about $623,363, okay. You'll notice in future damages he's lost pension, okay. That would be what he would be expected to earn in pension benefits over the remainder of his working life. And so, he's lost that as well. Next.

Okay. If he didn't find a union job from now until the point at which he'd be expected to earn...leave the workforce, his losses would be a little less largely because the union benefits are fairly generous. So, his past damages would've been $106,907 and his future damages would be $532,112 and his total damages would be $709,019. Now in this particular case, this is an interesting one, there was no economist on the other side and there really wasn't any sort of cross-examination about the likelihood of this particular individual holding a union job from, you know, from the point of his injury up until his date of retirement.

Consequently, what the jury did is they took the two numbers and split the difference. And so, they did write an award for $768,000. That was due to a little extra research by me by calling the former employer and requesting the benefit information and finding out how much union benefits were worth which turned out to be worth quite a bit of money to the plaintiff or about $50,000 more than he would've gotten if we hadn't gone out and found the data about union benefits. So, there's another reason why you really don't wanna overlook fringe benefits when you're doing your discovery. Next.

Okay, present value is the amount of money that would equal a given value at a future date if invested at a prevailing interest rate. Okay, what does that mean? If we invested a dollar at an interest rate of 10% a year, the dollar investment would be worth $1.10 at the end of one year. So, we say the present value of $1.10 today in one year at a 10% interest rate is $1. $1.10 is a futured value, okay. So, as we're going forward in time, money's gonna be worth more and more because people get wage increases over time. But then we also have to account for the fact that there's a time value of money and we have to discount it back to the future. So, the present value of $1.10, if we're applying an interest rate of 10%, is less than $1.10. It's a dollar and that's what we're doing when we're reducing future damages to present value. Next.

Okay. I explained that. Next.

Matt: That's it. That's the last slide.

Nora: All right. So that's the boiled-down version. Now I'm gonna show you a copy of the actual report which is far more detailed. And this is where...this is usually the report that the opposing attorney will see during my deposition and it very often...usually, I control my depositions because the opposing attorney really doesn't understand how to read the report and so I'm gonna try. Looks like we've got about half an hour more. Is that correct, Matt? Hello? Okay. Next.

Matt: Three o'clock, yeah. We have about five minutes more.

Nora: Oh, five minutes more? Okay, I'm gonna go through this very quickly. Next. Okay. This is just a list of the tables in the report. Next. Okay. This is the summary, nonunion benefits loss again is 709,000. With union benefits is 827,000. Next. Okay. This is a table of lost wages, okay. You'll notice that upper left-hand corner, the analysis begins November 17th, 2008. That was the date of the injury. At that time, the plaintiff was unemployed so I looked up...there's a study put out by the BLS of the expected duration of unemployment. I estimated the amount of time it would've taken Mr. Doe to find another job as an auto painter. Okay, that would take him out to probably...he wouldn't find a job until the end of the year, okay. That was 10.23 weeks. And then we would expect him to find another job at an auto painter and we begin his loss beginning January 1st, 2009 at a wage of $49,051.

Going across, we give him his lost health and welfare benefits, about $2,900, lost social security benefits, 6.2% of 49,000, $3,000, lost retirement benefits, $2,400. So, his total loss with his fringe benefits is about 57,500. All right. So, we give him 57,500. Goes up. I increase his wages a little bit every year depending on the average weekly earnings of autoworkers that's stated from the Bureau of Labor Statistics. Take him up to the date of trial which is January 29th, 2012. Total lost up to the date of trial is about $176,907. Then we say that he probably would've spent the remaining time up until October 8th, 2021, that would be the end of his work-life expectancy. So, this is the number of years he would be expected to continue working.

All right. Again, I take 49,351 plus all the fringe benefits. He would be making about $57,604 every year up until he'd be expected to retire. Now you'll notice that over in the third column from the left, there's something that caused the present value factor. I'm multiplying his annual wages by a number that's less than one to get to the present value of it. So, it's reducing that. If we get to...you'll find that the 57,000 in 2020 is really only worth about $52,973 today. So, we're discounting it just a little bit every year. Add those all up. We get 532,000 in present damages and total losses of about 709,000. All right.

Then footnotes explain all the assumptions that's in the report. One thing when you're deposing the opposing expert, you wanna find out what they relied on that's fact and what they relied on that's assumption. Okay. Usually, the assumptions are the things that you can attack because they're the things that aren't grounded in fact. They're decisions that the economist made. Maybe not decisions you would agree with about how they're gonna value the loss. Okay, in this particular analysis, I would think that the things that you would wanna question is why did...if he was injured in 2008, why did I go back all the way to 2000 to take an average of his lost earnings? His earnings were declining over time. Would he really have...if he was this prone to injury or had back problems, would he really have worked, you know, another 9 or 10 years? That's another question. Would he really have been able to get a union job? That's another question. Next.

Okay. This is the same analysis, just with the union benefits. We've already gone over that. Next. Okay. This is the calculation of his lost union pension and again, I am... this is...he would be expected to start receiving this at age 65 and end of his life expectancy is right down there in red, second column, April 11th, 1940. This is fairly heavily discounted, if you look at the present value factor, you'll notice in 2040, the $1,600 is gonna be multiplied by...it's gonna be 44%. It's gonna be worth about $676 today. So, the further out you go into future, the discounting is really gonna reduce those numbers quite a bit. Now another way to value this pension would've just been giving him the contributions that they made to the pension plan, so the actual pension he would receive during the future loss period. And it wouldn't have been subject to discounting. It probably would've been maybe a little bit more but this is...boy, that I did it. Next.

Okay, this is actuarial data. You'll notice that he was 50 years old at the time of the injury. He was 53 by the date of trial. We would've expected him to work to age 63 and we would expect him to live until aged 82 approximately which is the last date that he receives his pension. Okay. His work-life expectancy was based on his education. He only had a high school diploma. If he had had a college or advanced degree, we might expect his work-life expectancy to go a little bit later, maybe at age 67 or 68. Next.

Okay. You can just pass this. These are some rates that I rely on for various analyses but I'm not gonna spend any time on them now. Next. Okay, this is just to bolster his lost earnings rate of about 50K, I went and looked at what automotive body and related repairers make in the Oakland, Freemont, Heyward, California area, and again, their 50-percentile median wage, most of them make about 51,000. So, I wasn't way off in my analysis of what his earning capacity was. Next.

Okay, this was his social security earning history. This was interesting. For people that I've been talking about why you want to get the social security earning history, this is everything he's earned from the year 1974 up to 1999. Next. And 2000 through 2008. Okay. That's the best way to get an earning history on your plaintiff if they haven't kept all their W-2s and stuff like that but you're gonna have to have the plaintiff go and get it for you. I don't think you can compel it unless it's an asbestos case if you're on the defense. Next.

Okay. This was his past earnings and then because they were in the past, I had to adjust them up to what he would've been making had he made the same wage in 2008. So that's what those adjustments are. Next.

Next. Oh, okay. These are the generic fringe benefits I gave him from employee compensation. Next. Okay. This is when I talked to his former employer and found out that he was eligible for union benefits. Next. Okay. This...oh, okay. This was talking about how he had had a union membership and what the employer contribution to health and welfare benefits were and employee pension benefits under the union. Next.

Okay. These were...this was looking at how his wages would have changed from year to year. This is the average weekly earnings of autobody and interior repairers. Someone who was asking me what happens to wages over a recession, notice 2008, wages went down 1.71%. In 2009, 2010, they went down about 11%, and then only in 2011 did they go up a little bit. So that's a little index that I would use to measure how wages changed on average for someone in a particular job. You'll notice a very detailed job description, automotive body, and interior repair. And that's information from the Bureau of Labor Statistics. Next.

Okay. And this was to adjust his health insurance premiums. And again, they went down over the recession too because a lot of people were having those benefits taken away. 2009, -3%. 2010, -3%. 2011, -2%. Next.

Okay, this was the amount of time it would be expected for him to find another job. Did it by occupation, service occupations, median duration is 8.9 weeks. Other services, 9.9 weeks. Men 45 to 50 years, about 12 weeks. So, I said on average it would take him about 10 weeks to find another job as an auto painter. Next.

Okay. And this was just how I calculated his pension plan. I'm not gonna go into that detail. Next. Okay. Next.

Matt: That's it.

Nora: Okay. So again, a very detailed report so that in deposition if somebody asked me why I made a certain assumption, again, based on objective data, this is why I thought it would take him 10 weeks to find another job. This is why, you know...this is what his benefits were in the union. The more information you have at your disposal, the stronger your claim. Are we gonna do questions?

Matt: Yeah, would it be okay to kinda wrap things up with two questions and then have some concluding remarks.

Nora: Yeah. Let's do it. Let's do it.

Matt: Okay, great. We have a question here from Stewart who had asked, "How do you generally maximize and calculate wage loss for undocumented construction workers if they're W-2 employees with incorrect social security numbers? How do you suggest that he would eventually become a union worker?"

Nora: How...okay. An undocumented...

Matt: So basically, if an undocumented worker with invalid or incorrect social security number...how would you calculate the wage losses based on an invalid W-2?

Nora: Okay. Based on an invalid W-2? Okay. Well, there's a couple of issues here. First, if they have an invalid social security number, I guess my first question would be are they an illegal alien. Okay. If they're an illegal alien in California, their earnings loss would be the wages they could earn in Mexico if the defense can prove that it was most likely they would've been deported. So that's the first question. Is this person an illegal worker? If you're just saying there's an invalid social security number and we can't go back and get his or her social security earnings history and he's a construction worker and there's no W-2, I'd go back to the former employers. Construction, again, is hard. You know, sometimes these companies dissolve. You can't get any records. You try to get the testimony of their coworkers or even their paystubs, bank statements. Where was he depositing his earnings, you know? I'm assuming he wasn't paid in cash. It had to go somewhere. You could look where those earnings went. Or you could just go to again the BLS data. What does the average construction worker earn and rely on testimony? But I would first try to go back and get any kind of documents I could either from former employers or bank statements or something to show what he actually made.

Otherwise, you're gonna have to rely on just sort of generic data about what construction workers work on average but it's tough for construction workers because, you know, they're not usually salaried workers, you know. They're kinda on again, off again and there's gaps in employment and you can't necessarily...you're gonna have a hard time proving that he was working, you know, full 40 hours a week, 2,080 hours a year. Next question.

Matt: Sure. This is the last one from Joel who asked, "Do you have any suggestions for demonstrative evidence that can be used to illustrate the reduction of future losses to present value?"

Nora: Demonstrative evidence that can be used to illustrate the reduction? I think probably the best thing that would be for the jury would be a bar chart and you'd show, you know, what it's worth today and then you could show each successive year and you could have the bars going down one by one by one and then you could say, you know, "And we add up all these little bars and this is what it's worth." That, I think, would be the best way to do it. My experience is that when I discuss what present value is, even the attorneys' eyes glaze over. They're just not interested in the numbers so I usually just kinda speed through that when I'm giving that part of my testimony.

And also because these days the interest rates are so low that it's not a big contest. It used to be a big contest when we had high-interest rates and the defense would come in with 3% or 4% and the plaintiff would come in with 1% or 2%. And it was a high-value case and the difference between the net discount rates really made a lot of difference. But these days, everybody is so low is that it's not so much a point of contention anymore and it's not really worth going into. That's just my take on it.

Matt: Okay, great. I think we're gonna wrap things up this afternoon. Nora, thank you for the time and the effort that you put into the presentation. would you like to make any concluding remarks?

Nora: Yeah. I'll be happy to answer any other questions and then there was one more slideshow that's gonna be posted on the website which is working with an economist and it sort of gives you some practice pointers that will help you get your damages case organized and also reduce costs which is a big one because economists are expensive so...and especially if you hire them through a service like TASA, you know, you're paying a partial premium as well. So, you really want to get all that information, all the information your economist needs, organized and just have them produce a final report in the minimum amount of time to sort of save on those bills.

Matt: Excellent. Well, again, thank you for the time and the effort that you put into the presentation and for all those in attendance, we will be sending out an email tomorrow morning with a link to the archive recording of this program as well as all of the documents that were used during today's presentation and the one PowerPoint presentation that we didn't get to. As Nora alluded to, it covers working with an economist.

If you'd like to speak with Nora about a specific matter that you're working on, you can contact us here at TASA. Our telephone number is 800-523-2319. As I mentioned, tomorrow morning I'll send out the link to the archive recording of this program. The archive recording of this program as well as all of our previous programs can be found on the TASA Knowledge Center. If you visit our website, tasanet.com and click on the knowledge center tab, you'll be directed to our webinar programs.

Our next webinar for legal professionals, "Slips, Trips, and Falls" will take place next Tuesday, April 9th at 2:00 p.m. Eastern Time. You should've received an invitation to that program. If you did not receive one, I will make sure that I include a link to it in the follow-up email that I send out tomorrow. And finally, if you have any questions or comments, please feel free to contact me at any time. We do take all of your comments under consideration. They do help us to put on better programs. So, I would encourage each and every one of you to submit your comments to me.

With that, I will end today's program and I look forward to seeing you at future TASA events. Thank you so much.

Nora: Thank you.