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Calculating Foregone Earnings In Personal Injury and Wrongful Death Actions

2008-01-10 - Wrongful Death

Foregone earnings calculations in personal injury cases depend on an assumption that the plaintiff cannot earn as much money as might have been earned as a result of the injury. In some cases it is shown that the plaintiff is totally disabled (cannot work at all), and in some cases the plaintiff cannot work in his/her previous occupation. Evidence must be brought that the disability is permanent or if it is a temporary disability, how long it is expected to persist.

In addition to foregone earnings, personal expenses (medical, rehabilitative, transportation, etc.) may increase as a result of the disability. On the other hand, in wrongful death cases, foregone earnings are reduced to some extent by the absence of personal consumption of the deceased.

Foregone earnings are estimated based on the person's

  • past earnings
  • past earnings growth
  • the number of years of expected future earnings absent the injury or death.

In situations where past earnings are not available or reliable, an industry average or the occupation average can often be obtained from the Bureau of Labor Statistics or the Census Bureau. An age earnings profile can be prepared to reflect the rise, peak, and decline in earnings that is characteristic of most individuals over time. The profile can then be adjusted to reflect inflation and discounted back to present value.

Non-labor market contributions are also valuable. Foregone services of housewives as well as foregone household services of working wives and working husbands are computed based on published research reports. Foregone fringe benefits are also computed. These may include pension benefits, health and life insurance, vacation pay and sick pay.

In a recent wrongful death case, the actual earnings of a taxi driver were not available and had to be recreated from FICA records, confirmed with industry and occupational averages and presented with an understanding that drivers' reported earnings will tend to be biased downwards. In a recent case of an injured construction worker, consideration of the depressed state of the construction industry had to be taken into account in estimating his foregone future earnings.

Each case is unique, the numbers cannot simply be entered into a computer program. The data often have to be reconstructed and the personal circumstances as well as the economic environment must be taken into account.

Complications always arise in estimating foregone earnings. Whether in obtaining past earnings data, in forecasting earnings increases, or in selecting the discount rate. Here, the opinion of a highly credentialed expert will be acceptable in court while the same evidence would otherwise be rejected as too speculative.