Workers' compensation matters call for economic analysis at several points: valuing the future indemnity and medical benefits at issue in a settlement, measuring the economic loss in a third-party action arising from the same injury, and quantifying the wage loss that determines the benefit itself where loss of earning capacity is the measure. The economist brings the same earnings, benefits, and present value methods to each, structured to the question the compensation system actually asks.
In short
Depending on the setting, the claim consists of the present value of future indemnity payments under the schedule that applies, the wage loss or reduced earning capacity that benefits are meant to replace, the lost fringe benefits and household services that the compensation system does not pay but a third-party claim may, and the present value of future medical treatment where a settlement closes future medical liability. The drivers are the pre-injury wage records, the carrier's payment history, the post-injury earnings if any, the work-capacity opinions in the record, and the treatment projection when future medical is being valued.
In a settlement, the present value of a long stream of indemnity payments is the central figure, and the discount rate and the claimant's life or worklife expectancy control it. In a third-party action the exposure resembles any personal injury claim, with the added task of identifying the benefits already paid so the lien and offset questions counsel raises can be answered from the same numbers. Where the benefit turns on earning capacity, the gap between pre-injury wages and what the person can now earn is the contested figure, and the post-injury wage level is the assumption that moves it.
The economist assembles the pre-injury wage base from the employer's records and tax documents, establishes the post-injury earnings path from actual earnings or the work-capacity opinions in the record, and measures the loss over the applicable worklife with wage growth. Future indemnity streams are valued with the mortality and discount assumptions stated, future medical is grown and discounted by category when a treatment projection is available, and the report separates the amounts the compensation system pays from the components a third-party claim adds. Because the compensation system and the civil claim measure loss differently, the report presents each on its own terms and reconciles the two so the same facts support both.
Stage-by-stage guidance on working with a forensic economist in workers' compensation litigation.
A present value of the future indemnity and medical benefits at issue, with the assumptions stated, so both sides negotiate from a documented number rather than a rule of thumb. The economist can also show how the value changes with different discount rates and life expectancy assumptions.
The report identifies the indemnity and medical payments made by the carrier so counsel can address lien, offset, and collateral source questions under the governing framework. The economist reports the gross loss and the paid amounts separately rather than netting them, unless counsel asks for a net presentation.
Yes, where the jurisdiction measures the benefit that way. The economist compares the pre-injury wage with the earnings the person can achieve given the work-capacity opinions in the record, and expresses the reduction as a percentage or dollar amount as the system requires.
No. The treatment projection comes from the treating providers or a medical cost projection prepared by others. The economist takes the items, frequencies, and costs from that document, applies cost growth, and calculates present value.
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