The Witness Box

Commenting on expert evidence, economic damages, and interesting developments in injury, wrongful death, business torts, discrimination, and wage and hour lawsuits

Wednesday, September 29, 2004

Calculating the value of lost child support payments: An Ohio Example

Valuing lost child support payments in injury and death cases is very similar to lost wage analyses. The main difference is that the attorney must obtain information on how the child support payments are calculated. Child support formulas vary significantly by state. Below is an example from the state of OH.

Things the attorney needs to get to prove up damages in a loss of child support case

1. Gather information on the parent obligation data. In OH, the attorney should be looking for a summarized data sheet on what the deceased family member has already paid. This will give you a good idea on what future child support payments should look like.

2. Review and obtain the child support formula. These documents are used to determine the future parent obligation that would have been made by the deceased. In OH, the attorney would be looking for the Basic Child Support Schedule of the Ohio Revised Code ([§ 3119.02.1] § 3119.021.)

In OH, the parent obligation is recalculated when a parent has a 10% or higher increase in salary. Based on the OH code, if a person's salary just kept pace with inflation, the parent obligation would be recalculated every four years.

For OH documents on child support, a good reference site is:

online.andersonpublishing.com






Tuesday, September 28, 2004

Smoking and economic damages

Most studies show smoking will reduce a person's life expectancy by about 10 years. Depending on the case, however the reduced life expectancy may not have a significant impact on the economic damages in the case.

Below is a discussion of frequently cited studies on smoker's mortality (thanks Beth Berridge) from an forensic economics listserve

The "top guy" who has published a number of articles on smoking mortality is Robert A. Hummer. A key article with him as lead author is "Adult Mortality Differentials Associated with Cigarette Smoking in the USA", Population Research and Policy Review 17:285-304, 1998.

This article examines all-cause mortality - this is important because most articles tend to focus on deaths from lung cancer or from cardiovascular disease, which is misleading because smoking results in elevated mortality for many other reasons. The authors do not develop life expectancy values, but they do calculate mortality rates by age and sex and underlying cause of death.

A person familiar with actuarial concepts could use this article to develop a life expectancy calculation for a "current heavy smoker" or for a "current light smoker". In this calculation, the smoker's mortality rates would be rated up for the all-cause mortality (total) shown in the appropriate tables from pages 292-293.

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Tuesday, September 21, 2004

Household services and the age of the plaintiff

Once criticism that economists typically encounter when calculating the loss of household services is that it is unrealistic to use the average number of hours spent on household services because the number of hours that a person will spend performing household services will decrease as the person ages.

Data on the how people allocated their time within a given day (time use surveys) suggest that this criticism is unfounded. For instance, according to time use data from the U.S. Environmental Protection Agency and calculations performed by economic demographers at Expectancy Data (www.expectancydata.com) the opposite is true. That is the amount of time spent performing household services such as housework, food cooking, outdoor chores, home maintenance, and time spent obtaining goods and services actually increases as a person ages. For example, a male who is between 25 and 34 will spend 11.7 hours performing household services; where as a male between the ages of 65 and 74 will spend 21.3 hours performing household services.

Thursday, September 16, 2004

Occupational Spotlight 9.15.2004: The retirement age of physicians

In this period series we examine the work life experiences and related data for different occupations and professions. Today's focus is on: The Retirement Age of Physicians


From the AMA: Doctors work longer on average.

“An unpublished American Medical Association study shows the average age of doctors who retired dropped from 69.8 in 1980 to 67.4 in 1995. During that same period, the average retirement age for U.S. males dropped from 64 to 62..."

See for more discussion:

http://www.findarticles.com/p/articles/mi_m0FBW/is_8_2/ai_76289155
http://www.texmed.org/cme/phn/eirp/trends.asp


Wednesday, September 15, 2004

Two views on the role that an attorney should play in the drafting of an expert report

From the www.daubertontheweb.com, Blog 702:

A sonnet from an attorney who wants to 'help' his expert:

My expert wants to write his own report.
He thinks he knows exactly what to say To stave off every possible retort.
It’s true he has a fancy resume And quite bestrides his world of academe, Much held in awe by friend and foe alike.
But I do fear that if he sets the theme, The other side will promptly move to strike.
Of course, I know they’ll do that anyway, But we might have a chance, if I could pen The testimony that could save the day.
Why be content with dreams that might have been?
It’s sauve qui peut, in this economy.
I pay this guy. Screw his autonomy.

A sonnet from an attorney who does not 'help' his expert:

I think I shall never see
An expert report penned by me.
For if he should admit on cross
That his words were viewed as dross,
Toss'd aside for those of mine,Loudly parroted line for line,
What'd be left of his credibility?
"A mouthpiece of slim ability!A dummy! A quack! A for-pay leech!"
So opposing counsel would impeach.It may be hard, it may be tough,
But I cannot stress enough,Pay a fellow who can think and write
To ably win the expert fight.

Tuesday, September 14, 2004

Quick check of the opposing expert's future income projections in a wrongful death case

Need a quick check of the reasonableness of income projections that the opposing economic expert made in a wrongful death case? Check out the following:

For income statistics go to:

http://www.census.gov/prod/2004pubs/p60-226.pdf

For household and person income distributions go to:

http://www.census.gov/hhes/income/dinctabs.html


Wednesday, September 08, 2004

Making sure that the plaintiff is not under-compensated or over compensated

As yesterday's post demonstrated, it is possible to create a situation where the plaintiff in a lawsuit involving lost wages could be under or over compensated simply because of the economist choice of interest rates. That is, if the economist selects an interest rate that is too high then the estimated damages would be too low. For example if the economist chose an interest rate of 3.0% nominal (including inflation) when even a 'safe investment' only pays 1.75%, then the lump sum suggested by the economist damage report would under compensate the plaintiff.

So how can you make sure that you get the damages right?

1. Use a economic expert to estimate the economic damages and present the damages to the jury

2. Use a annuitist (a person who sells annuities) to set up the actual annuity

Tuesday, September 07, 2004

The Prudent (Wo)Man's Present Value Discount Factor in Injury and Death Cases

One of the central debates in forensic economics, revolves around the selection of the interest rate discount factor used in present value calculations. It is not uncommon for two economists to arrive at damage calculations that are 20% or more apart, simply due to the choice of the interest rate discount factor in a given analysis.

On the one side of the issue, are those that believe that the 'prudent (wo) man' concept should be applied to the choice of interest rate factors. That is, these economists believe that the interest rate that should be used in a these types of calculations should be equivalent to the rate of return that a prudent investor could earn from a diversified and balanced investment portfolio. On the otherside of the issue are those that believe that the interest rate from a completely risk free treasury security should be applied as a discount factor. In most situations, the 'prudent man' approach will produce lower economic damage estimates. Most economist use the risk free rate.

Below is interesting, but 'unreal' deposition testimony of an economist who used the risk-free treasury approach (excerpt from forensic economics listserv post, thanks) :

Q: Dr. Ross, isn't it true, everything else remaining equal, that the present value lump sums resulting from calculations using treasury securities versus a diversified portfolio of stocks and bonds or index based mutual funds as supported by the prudent investor rule, would be radically different?

A. Yes, the reason for that is the difference in risk associated with the two types of investments.

Q. Is it fair to say that the prudent investor rule is highly regarded in financial planning, and in fact is supported by federal law under ERISA?

A: Yes

Q: Dr. Ross, I would then like you to calculate the present value of the loss in this case based on a return over the last twenty years to a portfolio based on investing in under the prudent investor rule.

(Plaintiff attorney) Objection, such a calculation is not supported by case law.

A: (me)I don't believe it is a correct calculation to make.

Q: Dr. Ross, I didn't ask your opinion on whether you though it was correct, I asked you do the calculation as a hypothetical.

(Plaintiff Attorney: Same objection. You may answer if you can.)

(Dr. Ross complies, and let's just say the difference is $100,000)

Q: So then, if the plaintiff used the prudent investor rule to invest his award, by your own calculations my client would owe $100,000 less than what you say he would owe using your treasury mix?

A: That's right, but I don't believe the law would allow such a calculation.

Q: Thank you, Dr. Ross. When I want your opinion on legal matters I'll let you know.


Thursday, September 02, 2004

How good of a predictor is the SAT of minor's future earnings?

Economic damage calculations involving minors are tough. One of the major debates concerning calculating losses for minors involves the S.A.T. Simply put some economic experts think the S.A.T. is a strong predictor of future earnings. For examples, some studies, such as http://nces.ed.gov/pubs2000/2000043.pdf, suggest that better performance on the S.A.T. suggest higher earnings in the future. Some studies have suggested that a 100 point increase in S.A.T. is correlated with a 6 to 10% increase in post-college wages.

Other studies, such as the study performed by Daniel Hammermesh et al. in 2002 (They examined the post graduation wages of economics majors) showed either a weakly positive or a statistical unimportant relationship between S.A.T. score and post-graduation earnings.

In practical terms, this suggest that the attorney should if the data is available collect information on the S.A.T scores of an injured or deceased minor.