Assessment of Personal Injury Damages

Assessment of Personal Injury Damages Fifth Edition Christopher J. Bruce, Ph.D. Kelly A. Rathje, M.A. Laura J. Weir, M.A. f LexisNexis*

Acknowledgments About the Authors Tables How to Use This Book v vii xvii xxiii Chapter 1: Personal Injury Excluding Cost of Care 1 I. Loss of Earnings Capacity 1 1. Earnings Stream If Accident Had Not Occurred 2 (a) Base Year Income 2 (b) Growth Rate of Income 7 (c) Positive Contingencies 8 (d) Negative Contingencies 11 (e) Retirement 14 (f) Forecasting Female Earnings 15 (g) Minors and Young Adults 16 (h) Self-employed Individuals 17 (i) Sample Calculation 20 2. Earnings Stream After Accident Has Occurred 21 (a) Base Year Income 22 (b) Growth Rate of Income 23 (c) Positive Contingencies 23 (d) Negative Contingencies 23 (e) Retirement 24 (f) Loss of Earning Capacity 25 (g) Sample Calculation 25 II. Loss of Pension Income 26 III. Replacement of Household Services 27 IV. Calculation of Lump Sum Damages 28 1. Calculation of the Pre-Trial Loss 28 2. Calculation of the Lump Sum Value of the Future (Post-Trial) Loss 29 (a) Mortality Adjustment 29 (b) Calculation of the Lump Sum Loss 30 V. Impairment of Marital Prospects 37 VI. "Lost Years" 39 VII. Non-Pecuniary Damages ("Pain And Suffering") 43 Appendix: The "Multiplier" 45 Chapter 2: Personal Injury Cost of Care 49 I. Base Year Costs 49 1. Non-Disabled Consumption Expenditures 50

2. Disabled Consumption Expenditures 51 3. Medical Expenditures 53 4. Goods and Services Tax 54 II. Growth Rate of Costs 54 III. Calculation of Lump Sum Damages 55 1. Evaluation of Annual Costs of Care 55 2. Duration of Expenditure/Life Expectancy 56 3. Sample Calculation Without Income Tax "Gross Up" 56 4. The Income Tax "Gross Up" 57 (a) Method of Calculation 57 (b) Determination of the Income Tax Rate 59 Chapter 3: Fatal Accident Claims 61 I. Earnings, Pensions and Household Services 62 1. Earnings Stream 62 2. Pensions 62 3. Household Services 63 (a) Valuation of Services 63 (b) Two Legal Issues 63 II. The Dependency 64 1. Dependency on Wage and Pension Income 64 (a) Dependency Rate 64 (b) Cross-Dependency versus Sole Dependency 67 2. Dependency on Household Services 72 (a) Dependency Rate 72 (b) Cross-dependency versus Sole Dependency 73 III. Calculation of Lump Sum Damages 73 1. Life Expectancy, Divorce and Remarriage 73 2. Duration of the Children's Dependency 76 3. Division of Income Among Family Members 77 IV. Losses of Estate and of Care, Guidance and Companionship 78 1. Loss of Estate 78 (a) Stocks, Bonds, Registered Retirement Savings Plans (RRSPs) and Other Financial Investments 78 (b) Investments in a Business 79 (c) Consumption by the Deceased 79 (d) Housing and Other Physical Assets 80 2. Loss of Care, Guidance and Companionship 80 V. Impact of Loss of Parent on Child's Earning Capacity 81 VI. Both Parents Have Been Killed 82 (a) Loss of Dependency 83 (b) Cost of Child Care 83 VII. Death of a Minor 85 1. Loss of Valuable Services 85 2. Loss of Dependency 85 3. Loss of Care, Guidance and Support 85

xi 4. Negligent Infliction of Nervous Shock 85 5. Negligent Infliction of Mental Suffering 86 6. Loss of Pecuniary Benefit 86 7. Hedonic Damages 87 Chapter 4: Base Year Earnings 89 I. Employed Adults 89 II. Minors 91 1. Family Background 96 (a) Intelligence Quotient ("IQ") 96 (b) Education 97 2. Earnings 105 3. Parental Absence Due to Divorce or Death 108 4. Summary 110 III. Young Adults 113 1. Aspirations 113 2. Early Work Experiences 120 3. Other Factors 126 IV. Using Earnings Data for Males to Forecast the Earnings of Females 127 V. The Self-Employed 132 1. Hire a Replacement Worker 133 2. Sell the Business 134 (a) Estimating Annual Pre-accident Income 135 (b) Forecasting Post-accident Income 137 3. Lease the Business's Assets 138 4. Continue to Operate the Business without Replacement 138 VI. Other Special Cases 139 1. Immigrants 139 2. Aboriginals 144 3. Alcoholics 150 Chapter 5: Rates of Growth of Earnings 153 I. Inflationary Increases 153 II. Industry-Wide and Economy-Wide Increases in "Real" Wages 154 1. Economy-wide Changes in Productivity and Real Wages 155 2. Occupation-specific Changes in Real Wages 157 (a) Measurement 158 (b) Theory Industry Wage Levels 158 (c) Evidence 160 (d) Conclusion 163 III. Individual Earning Patterns 163 1. Education 164 2. Occupation 165 3. Sex 169 4. Past Performance 172

xii TABLE OF CONTENTS IV. Promotional Advances 172 Chapter 6: Positive Contingencies 173 I. Fringe Benefits 173 II. Overtime and Shift Differential Pay 177 Chapter 7: Negative Contingencies 181 I. Labour Force Participation Rates 181 1. Male Participation Rates 183 2. Female Participation Rates 187 (a) Age 188 (b) Education 190 (c) Family Income/Marital Status 192 (d) Children 192 II. Long-Term Disability 194 1. Wilkins and Adams 194 2. Canada Pension Plan 196 3. Workers' Compensation Boards 197 III. Unemployment 199 1. Average Rates 199 (a) Age and Sex 199 (b) Education 202 (c) Occupation 202 2. Individual-Specific Rates 205 3. Employment Insurance Benefits 206 IV. Mortality 207 Chapter 8: Earnings Prospects of the Severely Disabled 209 I. Impact of Severity of Injury on Earnings: Canada, 2006 209 II. Spinal Cord Injuries 211 1. Employment 214 (a) Severity 214 (b) Current Age 215 (c) Age at Injury 215 (d) Education 216 (e) Disability Payments 217 (f) Area of Residence 217 (g) Employment History 217 (h) Pre-injury Wage 218 2. Education 219 3. Income 220 4. Problems When Seeking Employment 222 5. Marital Status and Its Association with Employment and Earnings 222

xiii 6. The Use of Computers in the Workplace 223 7. Summary 223 III. Visual Impairment 223 IV. Hearing Impairments 231 V. Brain Damage 238 VI. Back Injury 247 VII. Epilepsy 251 VIII. Amputation 255 IX. Burn Injuries 256 X. Arthritis 257 XL Concluding Comments 260 Chapter 9: Retirement 261 I. Retirement Ages in Canada 261 II. Studies of the Determinants of Retirement Age 269 1. Pension Income 269 2. Mandatory Retirement 270 3. Employment Income 271 4. Other Financial Considerations 271 5. Ability to Work 271 6. Occupation 272 7. Education 272 8. Retirement Decision of Spouse 272 9. Summary 273 Chapter 10: Household Services 275 I. Three Theoretical Approaches 275 1. Opportunity Cost 275 2. Replacement Cost 278 3. Housekeeper 280 4. Summary 280 (a) Fatal Accident Full-time Housework 281 (b) Fatal Accident Part-time Housework 281 (c) Personal Injury Full-time Housework 282 (d) Personal Injury Part-time Housework 282 II. Hourly Cost of Household Services 282 III. Time Devoted to Household Services 283 1. Analysis of Current Expenditures 284 2. Recall 284 3. Time Diary 284 4. Survey Data 285 Chapter 11: Dependency Rates 293 I. Family-Specific Dependency Rates 293 1. Dependencies by Category of Expenditure 293

xiv TABLE OF CONTENTS (a) Food 297 (b) Shelter 300 (c) Household Operation 300 (d) Household Furnishings 300 (e) Clothing 301 (f) Transportation 302 (g) Healthcare 302 (h) Personal Care 303 (i) Recreation 303 (j) Reading 304 (k) Education 304 (1) Tobacco and Alcohol 304 (m) Games of Chance 304 (n) Miscellaneous 304 (o) Personal Insurance Payments and Pension Contributions 305 (p) Gifts of Money and Contributions 306 (q) Money Flows Assets, Loans and Other Debts 306 2. The Total Dependency 307 3. Application of the Methodology to Specific Cases 311 II. General Dependency Rates 311 III. Children's Dependency When Both Parents Have Died 313 1. Dependency on Parents' Income 314 2. Child Care Costs 315 Chapter 12: Remarriage and Divorce 317 I. Remarriage 317 1. Education 319 2. Age at First Marriage 320 3. Age at Separation 321 4. Children 321 5. Work Status 322 6. Welfare 323 7. Health 323 8. Income 323 9. Other Factors 324 II. Divorce 324 1. Age at Marriage 326 2. Education 328 3. Earnings and Income 329 4. Employment 330 5. Number of Children 330 6. Length of Marriage 331 7. Religion 332 8. Parents' Marital Status 333 9. Time of Conception 333

XV 10. Job Loss and Disability Effects on the Stability of a Marriage 334 11. Other Factors 334 Chapter 13: The Discount Rate 337 I. The Discount Rate 337 1. The Real Rate of Interest 337 2. Selection 338 (a) Secure 340 (b) Liquid 340 (c) Summary 341 3. Historical Data Government of Canada Bonds 342 4. Forecasting the Discount Rate 345 (a) Alternative Techniques 345 (b) A Caution 348 II. Management Fees 348 Appendix: Real Rate of Interest 351 Chapter 14: Experts 353 I. The Role of Expert Evidence 353 II. The Experts 357 1. Doctors 357 2. Rehabilitation Nurses 357 3. Vocational and Rehabilitation Psychologists 358 4. Home Economists 358 5. Accountants 359 6. Economists, Finance Experts and Industrial Relations Experts 359 7. Actuaries 360 8. Statisticians/Methodologists 360 III. Employing the Expert 361 1. Identifying the Expert 361 2. The Expert's Fees 362 (a) Retainer Fee 362 (b) Hourly Fee 362 (c) Expenses 363 (d) Payment 363 3. Information Required by the Expert 364 (a) The Division of Responsibility Between Counsel and the Expert 364 (b) Information to be Provided by Counsel 367 IV. Expert Testimony 375 1. The Expert's Report 376 2. Qualifying the Expert 377 (a) Procedures for "Qualification" 377 (b) Standards of Qualification 377

xvi TABLE OF CONTENTS 3. The Examination-in-Chief 381 4. Cross-examination 385 (a) Counsel 385 (b) The Expert 388 5. Re-examination 389 Chapter 15: Structuring the Settlement 391 I. Alternative Methods of Disbursing the Award 391 1. Capital Expenditures 391 2. Investment in Financial Markets 392 3. Structured Settlements 392 (a) Payment Period 393 (b) Determination of Payment Values 394 II. Structuring the Settlement 394 1. Capital Expenditures 394 2. Financial Markets versus Structured Settlements 395 (a) Advantages 395 (b) Disadvantages 396 III. Determination of the Plaintiffs Preferences 397 1. Children 398 2. Spouse 399 3. Age 399 4. Type of Disability 400 IV. Summary 400