Personal Injury and Wrongful Death Economic Losses

Written by: Jay Sickler, CPA, CFF, ABV, ASA

You can’t help but notice in the news that there has been a proliferation of seven and eight-figure lawsuits filed by plaintiff attorneys representing individuals relating to personal injury or wrongful death claims. I have never seen anything like it in my 30+ years of practice in the area of economic damages. I look at some of the headlines and shake my head. How could this personal injury claim be worth $XX,XXX,XXX?  You fill in the blank.

In our experience at Cogence Group, a very large percentage of the overall monetary claim in a personal injury or wrongful death case is of a non-economic nature. We do not opine on or rebut non-economic damages. Our focus is exclusively on the economic damages claims. For personal injury claims, our analysis typically involves computing lost wages due to the injury over a period of time until the individual can return to their pre-loss earnings level.  In some cases, these losses may be considered permanent and are computed through an estimated retirement age.  If the economic losses extend into the future, those losses must be present-valued to the estimated time of trial using what’s called a discount rate.  Any claimed losses must be offset by mitigating wages the plaintiff earned or could have earned during the loss period.

For wrongful death cases, the analysis is more complicated. That is because, in this type of case, the economic losses are projected out into the future until the decedent’s assumed actuarial date of death had the wrongful death not occurred.  The economic measurement in a wrongful death case is what the decedent would have likely earned over their expected life, and what residuary amount would have been left to their estate. This necessarily involves incorporating into the analysis the concept of consumption.  For example, if the decedent was a modest wage earner supporting a family of four, most, if not all, of their future wages may have been consumed by costs of living. What might have been left to their estate may be very small.  On the other hand, an extremely high wage earner who maybe owned a business supporting a family of four, may have been able to amass a very large estate if they had lived until their assumed actuarial date of death.

Here at Cogence Group, we have extensive experience analyzing economic damages in both personal injury and wrongful death cases. Everyone on our team holds a license as a CPA and each of us has significant auditing experience with large public accounting firms.  Give us a call on your next case so that we can demonstrate our value to you and your client in this specialized area of economic damages analysis.