Economic Losses in Alabama PI and WD Cases

1. Economic Losses in Alabama PI and WD Cases Charles L. Baum II Calculating Economic Losses in Personal Injury and Wrongful Death Cases in Alabama Charlie Baum Professor of Economics Middle Tennessee State University

2. Economic Losses in Alabama PI and WD Cases Charles L. Baum II Introduction Alabama statutes and case law for WD torts only allow for punitive—not compensatory—damages. Alabama courts acknowledge that this is designed to discourage future homicides rather than to compensate survivors for pecuniary losses. An important exception to this is for WD torts brought under the 1908 Federal Employers Liability Act (FELA) for railroad workers and the 1920 Jones Act for maritime workers. Jury instructions for Alabama FELA and Jones Act cases state that compensatory damages may include, among other things: (a) benefits of monetary value, including money, goods and services, that the decedent customarily contributed to each survivor; (b) decedent’s present and future earnings; (c) other money or assets the decedent would have received in the future during his lifetime. Alabama Pattern Jury Instructions §17.15 - §17.19. Alabama PI cases allow for compensatory damages for those injured.

3. Economic Losses in Alabama PI and WD Cases Charles L. Baum II Introduction Earnings Capacity Employment Benefits Household Services Growth Rates Worklife and Life Expectancies Mitigating Factors Personal Consumption Discount Rates Pre-judgment Interest Taxes

4. Economic Losses in Alabama PI and WD Cases Charles L. Baum II An Example

5. Economic Losses in Alabama PI and WD Cases Charles L. Baum II 1. Earnings Capacity Forensic economists typically measure economic losses from lost earnings using “lost earnings capacity.” Compare earnings with and without the injury. Stay-at-home moms and children. Back pay and front pay. Alabama courts allow recovery for the pecuniary value of lost earnings in PI cases and in FELA and Jones Act matters: In a personal injury action, a plaintiff is entitled to recover both the value of the work time lost prior to the trial (“lost earnings”) and the value of the reduction in his ability to earn a living (“impairment of earning capacity”) Carnival Cruise Lines v. Snoddy, 457 So.2d 379, 381 (Ala.1984). The courts, in their instructions to juries, provide factors to consider when awarding damages for what would reasonably have been earned absent an injury, which include: The plaintiff’s earning capacity, his earnings, the manner in which he ordinarily occupied his time before the injury, (and) his inability to pursue his occupation. Alabama Pattern Jury Instructions §11.10.

6. Economic Losses in Alabama PI and WD Cases Charles L. Baum II 2. Employment Benefits Forensic economists often include lost employment benefits as part of economic losses. Common employment benefits include various types of insurance (e.g., health, dental, vision, disability) and employer contributions, on behalf of the worker, to retirement funds and government programs (e.g., Social Security programs, workers’ compensation, and unemployment insurance). Employer cost versus replacement cost? Bureau of Labor Statistics’ Employer Costs for Employee Compensation for civilian, private, and public workers (currently, benefits are 26% of wages). Alabama courts consider damages from lost employment benefits, but these losses must be proven to be awarded. Alabama statutes do not provide unique instructions for calculating the value of lost employment benefits, and such losses should likely be treated in the same manner as lost wage and salary earnings.

7. Economic Losses in Alabama PI and WD Cases Charles L. Baum II 3. Household Services Lost household services are recoverable for the same reasons lost earnings are recoverable. Economists understand lost household services to be household chores that would otherwise have been provided, such as: cleaning; cooking; lawn and garden work; shopping and consumer goods purchasing; household management; and caring and helping other household or family members. Expectancy data (based on ATUS time data with OES wage data).

8. Economic Losses in Alabama PI and WD Cases Charles L. Baum II Household Services Alabama statutes and Alabama case law do not mention this source of loss, with perhaps one exception: parents have been awarded damages for lost services that would have been provided by an injured minor child in Alabama PI cases. Tiffany’s parents may recover for any loss of household services caused by Tiffany’s injuries. Next, Camoi’s parents seek to recover $6,178.00 for the loss of household services caused by Camoi’s injuries. Dr. McDaniel opined that Camoi’s injuries will reduce his ability to contribute household services. Based on this opinion, Dr. Hebert calculated a present day dollar value for the loss of those services. The Court finds the testimony of Drs. McDaniel and Hebert credible. Gessv. U.S., 991 F.Supp. 1332, 1347, 1350, (M.D.Ala.1997). An area for Alabama courts to evaluate further? FELA and admiralty-maritime cases filed in Alabama have considered the value of lost household services.

9. Economic Losses in Alabama PI and WD Cases Charles L. Baum II 4. Growth Rates Earnings typically grow over time with inflation and productivity. Past raises v. averages from the Current Employment Statistics (CES) [average weekly earnings of production and nonsupervisory employees in the private sector], the Employment Cost Index (ECI) [wage and salary index for all civilian workers], and the Current Population Survey (CPS) in their Annual Social and Economic Supplement (ASES) [wage and salary income for workers aged 15 and older] v. forecasts made by the Congressional Budget Office, the Social Security Advisory Board, and the Economic Report of the President. Alabama courts allow awards of front pay to grow over time with anticipated raises. In making a determination for any future damages, the court must take into consideration inflation and the time-value of money. Alphonso v. Esfeller Oil Field Const., 2009 WL 857392, *2 (S.D.Ala.2009). The growth rate to be used is not specified by Alabama statutes or case law.

10. Economic Losses in Alabama PI and WD Cases Charles L. Baum II 5. Worklife and Life Expectancies Worklife expectancy is often used when calculating front pay to estimate the number of years an individual would have remained in the labor force and been employed. Tables versus LPE method versus fixed ages.

11. Economic Losses in Alabama PI and WD Cases Charles L. Baum II Worklife and Life Expectancies Worklife expectancy is often used when calculating front pay to estimate the number of years an individual would have remained in the labor force and been employed. Tables versus LPE method versus fixed ages.

12. Economic Losses in Alabama PI and WD Cases Charles L. Baum II Worklife and Life Expectancies Alabama courts recognize the appropriateness of examining losses over one’s worklife, but they state no preference over methodology. Alabama statutes mandate that life tables be provided regularly by the superintendent of insurance. Life tables not necessarily considered conclusive. Information these tables provide may be adjusted for a case’s circumstances and supplemented with additional information. In Fovil Manufacturing Co. v. Watts, 569 So.2d 406 (Ala.Civ.App.1990), this court held that where “no other evidence was offered at trial regarding the employees'slife expectancy, ... it was error for the circuit court to take judicial notice of any mortality table other than that provided for in § 35-16-3[, Ala.Code 1975].” 10 However, the facts of this case are distinguishable from the facts of Fovil. In this case, we conclude that the trial court properly considered “other evidence” of life expectancy that was offered by Adderholdat trial and admitted into evidence without objection by Bostrom. Bostrom Seating, Inc. v. Adderhold, 852 So.2d 784, 798 (Ala.Civ.App.2002). Remaining worklife expectancy is less than remaining life expectancy.

13. Economic Losses in Alabama PI and WD Cases Charles L. Baum II 6. Mitigation Forensic economists typically assume that those harmed take reasonable actions to limit damage and offset losses with mitigating factors. Returning to work? Collateral income sources? Alabama rules traditionally have made pecuniary benefits from collateral sources other than the defendant inadmissible. Legislative tort reforms passed in 1987 currently require collateral medical (and hospital) benefits in cases involving medical expenses to be disclosed but not necessarily deducted from economic losses. Code of Alabama 1975 §12-21-45.

14. Economic Losses in Alabama PI and WD Cases Charles L. Baum II Mitigation No rule of evidence expressly supersedes § 12–21–45, and Grammer has not directed this court to any rule that directly conflicts with § 12–21–45 so as to impliedly abrogate that statute.Thus, we conclude that the adoption of the Alabama Rules of Evidence did not in any way diminish the effect of § 12–21–45. Crocker should have been allowed to introduce into evidence third-party medical and hospital payments made on behalf of Grammer, and she should have been allowed to argue to the jury that Grammer’s damages should be reduced on account of those payments. Crocker v. Grammer, 87 So.3d 1190 (Ala.Civ.App.2011) Subrogation rights? Alabama FELA and Jones Act cases require mitigation.

15. Economic Losses in Alabama PI and WD Cases Charles L. Baum II 7. Personal Consumption Forensic economists may deduct an amount that the decedent is projected to have spent on their own consumption, had they lived, from the economic losses. Personal consumption expenditures versus personal maintenance factors. Since only punitive damages are allowed in Alabama WD cases, neither Alabama statutes nor Alabama case law mention personal consumption deductions. Economists have deducted consumption expenditures in WD cases with federal guidelines.

16. Economic Losses in Alabama PI and WD Cases Charles L. Baum II Personal Consumption Martinez v. Puerto Rico Marine Management, 755 F.Supp. 1001, 1008 (S.D.Ala.1990)

17. Economic Losses in Alabama PI and WD Cases Charles L. Baum II 8. Discount Rates Economists discount future losses to their present value to identify the lump-sum payment—paid in the present—that will grow when invested to the amount lost earnings and benefits would have been in the future. Nearer versus more distant future. Risk and rates of return (stocks v. bonds; Rule of 72). The risk-free rate. Historical averages v. current rates v. forecasted future rates. Net Discount Rates. The Total Offset Method.

18. Economic Losses in Alabama PI and WD Cases Charles L. Baum II Discount Rates Alabama Pattern Jury Instructions state, “In arriving at the amount of your award for any loss of [future earnings] [earnings capacity], you should consider…the present cash value of any loss of [future earnings] [earnings capacity] which you are reasonably satisfied from the evidence in the case that plaintiff is reasonably certain to suffer in the future, as a proximate result of the injury in question. … ‘Present cash value’ means the sum of money needed now, which, when added to what the sum may reasonably be expected to earn in the future, will equal such earnings at the time in the future when these earnings would have been received.” Alabama Pattern Jury Instructions, § 11.11. The specific rate and methodology to use is not currently stipulated or defined. The below-market discount rate method (ignoring inflation and incorporating taxes) for discounting to present value is to be used in Alabama FELA and Jones Act cases.

19. Economic Losses in Alabama PI and WD Cases Charles L. Baum II 9. Pre-judgment Interest Just as economists discount future losses to their present value, economists may add interest to past losses. In Alabama, pre-judgment interest may only be awarded when damages are certain. Fox, by way of a cross-appeal, argues that the trial court erred in refusing to award prejudgment interest of six percent (6%) on the $95,000 underinsured motorist judgment…. Prejudgment interest is awarded in Alabama only when the amount due is certain or capable of being made certain…In the present case, there was no offer of proof by Fox of the amount of State Farm’s liability under the underinsured motorist coverage. With only punitive damages recoverable in wrongful death cases, it is doubtful that in such cases the amount of an insurer’s liability under underinsured motorist coverage can be proven with the specificity necessary to recover prejudgment interest from the insurer. State Farm Mut. Auto. Ins. Co. v. Fox, 541 S.O.2d 1070, 1072 (Ala.1989). Alabama WD cases are punitive, courts believe it will be rare that pre-judgment interest will be awarded in those cases. Economists have included pre-judgment interest in Alabama FELA and admiralty-maritime cases.

20. Economic Losses in Alabama PI and WD Cases Charles L. Baum II 10. Taxes Forensic economists may deduct projected income taxes from their measure of economic losses. Alabama law does not address whether income taxes should be incorporated. In some instances (in PI cases), Alabama courts have held that income taxes need not be deducted. But Wal-Mart identifies not a single authority for the proposition that Alabama law requires a jury award of lost wages to be reduced by the finder of fact to account for federal and state tax withholding. This Court will not perform movant's research for it. In any event, review of the leading treatise on Alabama's law of damages, as well as the relevant pattern jury instruction, does not disclose that Alabama courts have adopted such an approach... the Court will not artificially constrain Portis's recovery of lost wages to post-tax earnings, nor will it oblige Portis to present expert testimony at trial concerning the impact of federal and state taxes on her lost earnings as a precondition to any award of same. Portis v. Wal-Mart Stores East, L.P., 2008 WL 2959879, *5 (S.D.Ala.2008). Federal guidance requires income taxes to be deducted from losses in FELA and Jones Act cases.

21. Economic Losses in Alabama PI and WD Cases Charles L. Baum II An Example