Economics ·
An economic damages report is a set of schedules connected by stated assumptions. This post walks through the components in the order they appear in a well-organized report, what each one rests on, and where opposing economists usually disagree, so counsel can read a report critically in an hour.
An economic damages report answers one question, what the loss is worth in present dollars, through a series of components that build on each other. Reading a report component by component, with attention to the source of each input, is the fastest way to evaluate it, whether it was prepared for your side or the other. The order below follows the structure of a personal injury or wrongful death report; commercial reports follow a parallel structure with revenue, costs, and the loss period in place of earnings, benefits, and worklife.
The first component is the records reviewed and the assumptions adopted from other experts. The report lists the tax returns, pay records, benefit statements, medical and vocational opinions, and, where relevant, the life care plan it relied on, and it states which facts were taken from which source. This section tells the reader what the economist knew and what the economist assumed, and it is the first place to look for a gap: a missing year of returns, a medical opinion the economist did not have, or a capacity assumption without a stated basis.
The second component is the earnings base. The report shows the person's earnings for several years before the event, identifies the components carried forward, such as base wages, overtime, bonuses, or self-employment income, and explains any adjustment for an unusual year. For a self-employed claimant the report separates the owner's labor from the return on the business. The earnings projection then carries the base forward with a stated growth rate from a published series over a stated horizon.
The third component is the horizon. Earnings run over a worklife expectancy drawn from published tables for the person's age, sex, education, and labor force status, and the report names the table and the edition. Household services and future care run over life expectancy from the current published life tables. A report that uses a fixed retirement age instead should explain why the record supports it.
The fourth component is fringe benefits. The report lists the benefits the person received, values each at the employer's cost from plan documents or, where those are unavailable, from published employer cost data, and states which benefits continue post-event. The common error is a percentage add-on applied on top of wages that already included the benefit, or a published average applied where plan documents were available.
The fifth component is the post-event stream and the offsets. The report projects post-event earnings and benefits on the same basis as the but-for stream, using pay records where the person has returned to work and the vocational and medical evidence where the person has not, and nets the two streams year by year. In a death claim the report applies a personal consumption deduction from household expenditure data for a household of the same size and income and states the percentage. Collateral payments are shown separately so counsel can apply the venue's rule. The mitigation and offsets page describes each deduction.
The sixth component is household services: the hours the person performed before the event, from the household's account and time-use data; the hours the person can perform now, from the functional evidence; and the replacement wage rates for the area, from occupational wage data. The schedule shows hours and rates by task category and runs over life expectancy with the household's composition changing over time.
The seventh component is present value. The report states the discount rate, the instruments and period it came from, and how it relates to the growth rates applied to each stream, and it discounts each year's future loss back to the valuation date. Past losses are shown separately, in the dollars of the years they occurred, and carried forward where the governing framework allows. The net versus gross discount rate comparison explains the two presentations.
The last component is the summary and the sensitivity analysis. The summary shows past loss, future loss, and the total by category. The sensitivity analysis shows how the total changes under the alternatives most likely to be contested, usually the growth rate, the discount rate, the worklife horizon, the post-event earnings, and the consumption percentage. A report that presents its sensitivity is harder to attack, because the economist has already shown what a different input does to the number.
Most disputes between opposing economists come down to a few of these inputs, not to the framework. Reading a report in this order, and asking for the source of each input as you go, narrows the disagreement to the schedules that actually differ, which is where deposition and trial preparation should concentrate. The rebuttal service applies this review to an opposing report.
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