Update to Assessing Economic Damages in Personal Injury andWrongful Death Litigation: The State of Utah
Abstract Current changes to personal injury and wrongful death litigation in the state of Utah.
THE ECONOMICS AND PERPLEXING UTAH LAW OF PREJUDGMENT INTEREST
The law has long recognized that some grasp of economic principles is required to properly fashion damage rules that accurately compensate injured plaintiffs. Economists are typically qualified to provide judges and juries with expert testimony on this topic, and economic analysis, often filtered through law review commentaries, has long guided the jurisprudence in this area. Moreover, the conceptual issues that arise in damage analysis have many parallels with problems with which economists have grappled for a long time. The issue of delay between an event and a later payment is precisely one of these long-studied economic issues. Accordingly, our analysis of how Utah law deals with delay is informed by substantive economic understanding and methodologies. In Part I, we discuss the role of time in the calculation of damages and set forth three simple economic principles that inform our subsequent analysis of Utah law. Part II describes the determination and application of prejudgment interest that would be consistent with these economic principles. Part III outlines how Utah courts award prejudgment interest. We show that Utah’s approach violates basic economic principles and undermines the well-defined purposes for awarding prejudgment interest. A short conclusion follows as Part IV.
Sources of Error in Estimating the Personal Consumption Offset in Retirement
The economic loss appraisal in a wrongful death action typically includes a year-by-year calculation of the personal consumption expenditures of the deceased, which is then subtracted from earning capacity in order to determine a net loss of support to the survivors. 1 Sometimes, perhaps even often, this is simply done over the period of the worklife expectancy with consumption in the retirement years either ignored altogether or implicitly included by applying the offset factor to the component added to earnings for contributions to a retirement program during the worklife. For lack of a better term, the latter will be referred to as the “worklife only” or WLO appraisal approach. Generally, part of the fringe benefit payment includes the employer’s contribution to Social Security and to a private retirement program. To the extent that such contributions for retirement income are made to programs that are actuarially fair, 2 then applying the offset factor against such contributions does at least partially account for income and consumption in the retirement period. That is, the contribution is the present value of the future retirement benefit, and, by applying the offset factor against that contribution, at least part of the foregone future consumption of the deceased also is accounted for. However, such adjustments are likely to be imperfect at best. Unless the deceased died on the first day of his worklife, the approach will not account for contributions made in previous years that will generate retirement income and consumption from that income. Further, the consumption offset factor during the earlier working years tends to be lower than in the retirement years due to