As with most cases, many of the disputes that arise in estimating damages for lost personal income can be resolved by applying the basic damages framework. Damages are the difference between the but-for and actual earnings, where the actual earnings reflects any mitigating factors. Estimating such damages also involves issues that are unique, such as calculating losses over a person’s lifetime, valuing fringe benefits, estimating lost income in wrongful death cases, and calculating damages for economic losses other than lost wages. These issues can be addressed by answering a series of supporting questions:
Base Earnings: What were earnings (or income) just before the event took place? What is the expectation the level of earnings would have continued in the future?
Work-Life Expectancy: In cases involving an extended absence from the workforce, what is the plaintiff’s work-life expectancy?
Fringe Benefits: What were fringe benefits just before the event?
Retirement Benefits: What are the anticipated retirement benefits and what potential impact does the event have on those benefits?
Earnings Growth: What rate of growth in earnings was expected “but-for” the event that limited earnings? Is earnings growth dictated by contract?
Loss Duration: How long are earnings expected to be limited?
Mitigation: During the loss duration period, can any earnings reasonably be expected in spite of the event?
Household Services: Has the event impacted the plaintiff’s ability to conduct various household activities?
Consumption: In cases involving wrongful death, what impact did the decedent have on the consumption of household income?
Other Benefits: Is the plaintiff receiving any other benefits as a result of the event, such as workers compensation or social security disability?
Discounting: What is the value of lost earnings at the trial date? Lost earnings are the sum of net lost earnings for the time after the event to the trial date, called the “past damages” and “future damages,” meaning the net lost earnings for the loss duration period after the trial.
To reach an assessment of loss, the damages expert finds it useful to construct a model that contrasts what would have been a likely economic outcome, such as a stream of future earnings or income, with what is likely to happen due to some event causing an earnings or income disruption. The disruption may have arisen from an event like an accident causing an injury or death, or employment termination; in general, some event occurs that leads to a claimed loss of financial benefits. The supporting questions are a useful tool to assist the damages expert in determining the economic impact of the event.