Myth, Math & a Modern Approach to Economic Damages in Catastrophic Injury Cases

“Health is not valued until sickness comes.”
Dr. Thomas Fuller, GNOMOLIGIA, 1732

The stakes are extremely high for attorneys litigating on behalf of catastrophically injured plaintiffs. Victims of catastrophic injury face lifelong medical and custodial care expenses, and the results of their personal injury cases can make the difference between being able to afford life sustaining care and becoming a ward of the state. Catastrophically injured plaintiffs rely heavily on their lawyers to evaluate whether a proposed settlement will provide for their future needs, to decide whether to settle a case or take it to trial, and ultimately, to maximize recovery to meet the plaintiff’s future economic needs. Catastrophic injury cases are vigorously defended, and the plaintiff’s attorney must be especially creative and careful in order to obtain an outcome which will provide life long care for the client.

Many lawyers in Utah were surprised at the $16.4 million verdict we obtained in 2001 inGallegos v. Dick Simon Trucking. The defense reasoned that Utah was a conservative state and Utah juries do not generally award big sums for general damages. Believing that a jury in Utah would never award an eight figure sum in a personal injury case, the defense offered slightly more than $8.0 million at the courthouse steps. This offer, though substantial, was not sufficient to fund a quality care plan for our client, so we chose to try the case. We were not surprised by the verdict because the economic evidence presented at trial predicted the award, nearly all of which was ultimately paid by the defendant’s insurer. ¹ Now that the case is finally over after nearly eight years of litigation, we will share some thoughts concerning how to present economic damages effectively on behalf of a catastrophically injured plaintiff.

In our view, most eight figure verdicts in catastrophic injury cases are driven by the economics of health care rather than a broken legal system in need of reform. ² The cost of caring for the catastrophically injured continues to rise at alarming levels, with no solution in sight. In particular, the cost of nursing home and long term custodial care, which the most catastrophically injured patients require, continues to increase at rates much higher than other sectors of the U.S. economy.

Legal counsel must understand some economics specific to health care and know the law relating to economic losses in personal injury cases to make the right decisions and to develop a presentation at trial that ensures a full and fair recovery. This article is not intended as a comprehensive primer on proof of damages in catastrophic injury cases. Indeed, in order to persuade a jury to award a multimillion dollar verdict, the trial lawyer must present a compelling and emotionally moving story before the jury is presented with economic testimony. We will leave the discussion of courtroom theater to another day and focus on selected issues in presenting economic testimony, and on strategies which trial lawyers can use to maximize economic damages in catastrophic injury cases.

We believe that the traditional methods used by many lawyers to present forensic economic testimony in catastrophic injury cases often undervalue future economic damages. As a result, some settlements and verdicts fail to fully provide for the client’s economic needs. Cases are undervalued for many reasons, including the following:

Predictions of future inflation in the cost of custodial care fail to consider economic data specific to the costs of nursing homes and custodial care facilities for patients paying with private funds;
Forensic economists sometimes fail to analyze supply and demand factors that predict high future inflation for custodial care;
Lawyers wrongly assume that care provided by friends and family members at no charge (sometimes referred to as “gratuitous care”) is not compensable in economic damages;
Lawyers do not understand the “collateral source” rule and wrongly assume that defendants can offset private insurance and government benefits against a jury award; and
Lawyers wrongly assume that evidence of the cost of annuities, authorized by the Utah Court of Appeals in 2004 ³, will have a significant impact on jury verdicts and settlements.

USING CASE SPECIFIC ECONOMIC DATA RESULTS IN INCREASED DAMAGE PROJECTIONS

Perhaps the single most important factor in determining a catastrophically injured plaintiff’s economic losses is the forensic economist’s prediction of future inflation for custodial or nursing care services. As we will see, even small variations in future inflation rates can have a dramatic impact on economic damages. Many forensic economists rely primarily upon data from the U.S. Bureau of Labor Statistics as foundation for their prediction of these inflation rates and the client’s lifelong care costs. In many instances, the historical Consumer Price Index for all goods and services (CPI) or the historical Consumer Price Index for all Medical Services (MCPI) is used to generate assumptions about inflation for nursing home, residential care facilities, and home health care. Many forensic economists take this historical data and simply assume that the next 20 to 30 years will mirror past historical trends.

Unfortunately, forensic economists sometimes make their predictions without performing any real evaluation of the market factors that impact future inflation rates. This analysis often results in a prediction by the economist that the client’s custodial or nursing care costs will increase at rates which are lower than the interest rate which the forensic expert predicts will be earned on the jury award after it is safely invested following trial. ⁴Therefore, the economist predicts that a smaller verdict is required to take care of the client’s future financial needs, as some investment interest will cover future care expenses.

However, the assumption that investment returns will beat cost increases for nursing and custodial care can be disastrously wrong. Close analysis of economic data from the last 25 to 30 years reveals that prices for nursing homes and related facilities, when paid for with private funds rather than Medicaid or Medicare funds, have actually risen much faster than the rates of return on “safe” investments, and many economic experts expect this trend to continue long into the future. ⁵ The result is that an injured plaintiff requires a much larger verdict or settlement to pay those life long costs.

To achieve full recovery of anticipated future care expenses, we employ a more data specific approach to valuing catastrophic care expenses. Rather than relying solely on the forensic economist and the CPI or MCPI price data, we also hire experts who specialize in the study of health care economics. Depending on the case, these experts may either testify in trial or prepare reports which the forensic economist can use to assess future inflation in connection with the calculation of future damages. These experts have studied long term, historic price trends specific to nursing care facilities and are involved in forecasting future nursing home, home health, and other custodial care costs for academia, government and industry. We have employed experts from leading institutions such as the University of Chicago Department of Economics, The Rand Corporation, and Harvard University Department of Heath Care Policy. In several recent cases, these economic scholars testified that long term nursing and custodial care costs for persons who pay with private funds have increased at rates of 8% to 10% annually over the last 25 to 30 years. The experts also predict that these costs will likely continue to increase at annual rates of 8 % or more for the foreseeable future. ⁶

Let’s look at some recent statistics which show that even in times of historically low inflation, interest rates on safe investments have not kept up with the inflation in nursing and custodial care costs. From 2002 to 2004, prices of all consumer goods rose at an average annual rate of only 2.5%. ⁷ However, from 2002 to 2004, overall medical care costs (including costs paid with Medicaid and Medicare funds) increased by an average of 4.2% per year. ⁸ During the same period, the cost of a private room in a nursing home increased by 7.0% per year, ⁹ but average annual interest rates on 90 day U.S. Treasury Bills were less than 2.0%. ^{10 11}

Economists will generally use a longer period of time than 3 years to figure “present value,” reasoning that economic trends are better measured over a longer periods. But even when a much longer period of time is measured, it is clear that money managed in safe investments cannot hope to earn enough interest to keep up with rising prices for custodial care for catastrophically injured persons. For example, from 1977 to 1999, according to data from the National Nursing Home Survey conducted by the National Center for Health Statistics, nursing home prices increased by an average of 8% per year.¹² During this same time, the average safe investment in short term government securities returned less than 6% per year in interest. ¹³

A two percent difference may not sound terribly significant. However, for a person who will require medical and custodial care for many years, a 2% per year “spread” between rates of inflation and interest can be enormous. When a jury must decide how much money must be awarded today to take care of a catastrophically injured person’s lifelong care expenses, the spread can actually double the damage calculation.

Let’s take a real world example. “Johnny” sustains a severe traumatic brain injury (TBI) and now must live at a facility specially equipped to care for TBI patients. Johnny is 16 and will likely live into his mid 70’s. While such care can cost $1,000 a day or more for the most severely disabled, Johnny’s facility charges him $400 per day. How much money must the jury award to pay the facility charges for the rest of Johnny’s life?

An economist is hired to answer this question and is given two assumptions. The first assumption is that the long term inflation rate for custodial care, and the long term rate of return on the investment of money, are both projected to average 6% per year. In other words, the rate of return on investment equals or cancels out the projected rate of inflation, resulting in a “net discount rate” of 0%. Thus, it is a simple mathematical calculation to determine that the present value of Johnny’s lifelong facility care totals $8,760,000.

In the second scenario, the forensic economist uses the report from our heath care economic expert to predict future inflation in the residential care costs. This report predicts an 8% annual rate of inflation in the cost of residential care, while the projected rate of return on the investment of money remains 6%. The present value calculation is startling – the lifetime cost of residential care is now over $16,000,000! Costs nearly doubled due to the compounding effect of the 2% spread over Johnny’s life expectancy of 60 years.

Presenting this testimony in trial is actually much more complex than it sounds from this example. The health care economist and forensic economist must be able to explain and defend their views concerning why facility care expenses, like college expenses, will likely continue to rise at rates far in excess of general price inflation. There are many reasons. For one, future demand for facility care will soon increase as the baby boomer generation reaches its elder years. Second, supply for the labor pool needed to staff these facilities will likely be restricted and therefore, unable to keep pace with demand. This relative labor shortage for qualified care givers will drive facility costs upward. There is already a shortage of qualified nurses and related health care workers in many regions of the country.

In addition, private pay clients may face even steeper increases because many clients are, effectively, cared for at below market rates when the government pays the bill. In particular, Medicaid, Medicare, and other government funding programs impose caps on the rates that are reimbursed to care facilities. There is some evidence that private payors effectively subsidize these costs by being charged more. ¹⁴

Of course, the defense will hire experts to refute these predictions. The plaintiff’s lawyer can expect defendant to argue that future costs will be much lower than our analysis here suggests. In several cases we have prosecuted, the defendant’s economist has opined that future cost inflation for these services will increase at rates of only 3% annually in the future. Using Johnny’s case as an example, if the jury concluded that prices will only rise 3% while investments will return 5%, as predicted by one local expert, Johnny’s lifetime care costs could be paid for with a lump sum award of less than $4,000,000.

There are many other nuances to presenting this economic testimony that are beyond the scope of this paper. For example, understanding concepts such as the compounding effect of differences in inflation rates and interest rates has proven to be a difficult challenge for many juries. However, we believe that in most cases, if presented properly, the economic evidence can persuade the jury that the 8% growth of facility care prices is realistic. In such cases, juries are likely to award economic damages to victims of catastrophic injury which reflect those cost projections. To convince the jury to do otherwise, the defense lawyer must sell the point that care costs have been, or soon will be, brought under control. That obviously has not happened. Americans understand that their medical expenses continue to rise faster than their wages or investments. The average American strongly relates to the statement, “I worry about how I am going to find the money to pay for medical bills; they are rising faster than my paycheck.” ¹⁵

Finally, our approach to economic valuation of facility care expenses has its greatest effect in cases where the plaintiff is relatively young and has a long life expectancy. This is the result of the compounding effect over time when costs increase faster than the rate of return on the investment of funds earmarked to pay those costs.

THE COLLATERAL SOURCE RULE, GOVERNMENTAL BENEFITS AND GRATUITOUSLY PROVIDED CARE

One of the primary arguments advanced by defendants in catastrophic injury cases is that the plaintiff’s economic losses should be reduced based on governmental benefits available to the plaintiff, and that care provided to the plaintiff at no charge by family members or charitable organizations should not be given economic value. For example, defendants routinely seek to admit evidence that numerous benefits are available to the plaintiff through governmental programs such as Social Security, Medicare, Medicaid and even the public educational system, and to argue that the plaintiff’s economic losses should be reduced accordingly. Moreover, life care planners retained by defendants often include services provided free of charge by the plaintiff’s family or local charities as part of the care plan, thereby reducing the cost of the care required by the plaintiff. Indeed, many families of catastrophically injured clients decide to care for a client at home, with family members providing a good part of the care in lieu of hiring outside help. We have had many clients who chose to give up jobs, reduce their hours, curtail overtime work, or forego graduate studies to care for their catastrophically injured son, daughter or spouse.

Avoiding these attempts to minimize damages is a simple matter of understanding and arguing the law, because evidence of governmental benefits and gratuitously provided care is inadmissible under the collateral source rule. “The collateral source rule provides that a wrongdoer is not entitled to have damages, for which he is liable, reduced by proof that the plaintiff has received or will receive compensation or indemnity for the loss from an independent collateral source.” DuBois v. Nye, 584 P.2d 823, 825 (Utah 1978).

The Utah Supreme Court has made it clear that no evidence may be admitted concerning benefits received by an injured plaintiff unless the benefits were paid by the defendant.Mahana v. Onyx Acceptance Corp., 96 P.3d 893, 901 (Utah 2004). The Mahana court rejected the argument that the collateral source rule only applies to benefits such as health insurance which plaintiffs pay for out of their own pockets:

Rather, the collateral source rule is applicable unless the collateral recovery comes from the defendant or a person acting on his behalf. If the benefit was a gift to the plaintiff or established for him by law, he should not be deprived of the advantage that it confers. The law does not differentiate between the nature of the benefits, so long as they did not come from the defendant or a person acting for him.

Id. at 901.

The Mahana court based its ruling that the collateral source rule applies to benefits provided by any source other than the defendant on Restatement (2d) Torts, §920A, which states in pertinent part, “Payments made to or benefits conferred on the injured party from other sources [than the tortfeasor] are not credited against the tortfeasor’s liability, although they cover all or a part of the harm for which the tortfeasor is liable. Comment (c) to Section 920A makes it clear that the collateral source rule applies to gratuitously provided care, and all governmental benefits:

(c) The rule that collateral benefits are not subtracted from the plaintiff’s recovery applies to the following types of benefits:
(3) Gratuities. This applies to cash gratuities and to the rendering of services. Thus the fact that the doctor did not charge for his services or the plaintiff was treated in a veterans hospital does not prevent his recovery for the reasonable value of the services.
(4) Social legislation benefits. Social security benefits, welfare payments, pensions under special retirement acts, all are subject to the collateral-source rule.

Given the wide ranging application of the collateral source rule under Utah law, attempts to reduce the plaintiff’s damages based on governmental benefits and gratuitously provided care can be avoided through motions in limine. Plaintiff’s counsel should seek exclusion of all evidence concerning benefits available to the plaintiff under any governmental programs, as well as any testimony from the defendant’s economist concerning calculations of the plaintiff’s economic losses which take governmental benefits into account.

Plaintiff’s counsel should also ask the court to prohibit the defense from presenting any evidence or argument that the plaintiff’s economic losses should be reduced because all or part of the plaintiff’s care is being provided at no charge by family members or charitable organizations. Utah law provides for recovery of the “reasonable value” of all care and services required by an injured plaintiff, ¹⁶ and the vast majority of jurisdictions to consider the issue have held that a plaintiff may recover the reasonable value of gratuitously provided care. ¹⁷ Thus, any evidence of life care plans or calculations of the plaintiff’s economic losses which are based in part on care being provided at no charge by any third party should be excluded.

MAXIMIZING THE PLAINTIFF’S LIFE EXPECTANCY

Another defense argument concerning damages which can be avoided through motions in limine arises in cases where the plaintiff requires medical care for the rest of his or her life, but the plaintiff’s life expectancy is reduced as a result of the injuries caused by the defendant. Suppose, for example, Johnny suffers multiple injuries in an accident for which he will require care and treatment for the remainder of his life. However, the defendant’s medical expert testifies that Johnny will most likely die before reaching his normal life expectancy due to the injuries sustained in the accident. The defendant’s economic loss analysis only provides for the cost of Johnny’s medical care for the duration of his reduced life expectancy, rather than for the life expectancy Johnny enjoyed prior to the accident. As a result, the value of Johnny’s claim for future medical care expenses is significantly reduced due solely to the severity of the injuries which the defendant inflicted on him in the accident.

While no Utah appellate court has specifically addressed the issue, in Smith v. Dept. of Veterans Affairs, 865 F.Supp. 433 (N.D. Ohio 1994), the court refused to allow a reduction in future economic losses based on the fact that the plaintiff’s life expectancy was reduced as a result of the injuries caused by the defendant:

It is a maxim as old as the law that a wrongdoer must not benefit from his misdeeds. If this court reduced Smith’s damages as a result of his reduced life expectancy as a quadriplegic, then the government would benefit from its negligence in having made Smith a quadriplegic in the first place. While the resulting damages award may modestly overpay Smith in light of his actual life expectancy, it is more appropriate to overpay Smith than to allow the government to realize a windfall because of its negligence.

Id. at 440. See also Stein on Personal Injury Damages, § 7:24 (“The plaintiff’s normal life expectancy is used in determining future medical damages, even if his or her life expectancy was shortened by the tortious injury.”) ^{18 19}

Any attempt to reduce an injured plaintiff’s future economic losses based on a determination that the plaintiff has a reduced life expectancy due to injuries sustained in the subject accident should be countered with a motion in limine to exclude testimony concerning the reduction in life expectancy and any economic loss calculation based on a reduced life expectancy.

IS ANNUITY EVIDENCE A “SILVER BULLET” FOR THE DEFENSE?

In Gallegos v. Dick Simon Trucking, 110 P.3d 710 (Utah App. 2004), the Utah Court of Appeals held by a 2 to 1 vote that, assuming proper foundation is laid, evidence of the cost of annuities may be admitted in a personal injury case if offered as a method of determining the present value of a future loss. In a recent article published in the Utah Bar Journal, ²⁰ the author suggested that annuity evidence will likely lower settlements and jury verdicts in future cases involving catastrophic injuries. We believe these predictions concerning annuity evidence are untested and may not be borne out by future events.

There have been few Utah trials of catastrophic injury cases since Gallegos was decided, and virtually none where annuity evidence was introduced. We are aware of at least one case in which annuity testimony was excluded by the trial judge because defendant could not lay proper foundation. ²¹ However, even if the defendant lays proper foundation, there are factors which indicate that in many cases, annuity evidence is not likely to reduce jury verdicts.

First, we know of no insurance company which will even offer an annuity contract which guarantees 8% annual increases in the annuity payments. In fact, most annuity companies will not offer anything higher than a 6% annual increase in payments. Since 8% is the inflation rate our experts believe will most likely prevail for custodial care expenses over the long haul, it can be persuasively argued that annuities are unsuitable to fund long term catastrophic care expenses.

Second, we have found that the price of an annuity is actually sometime more than the calculation of future damages based on traditional “present value” methods. ²² A recent case will serve as an example. Our economist was asked to compare the present value of “Jim’s” lifetime facility care expenses by comparing the cost of an annuity with payments increasing at 6% per year versus an investment in T-bills assuming the average T-bill yield over the past 25 years. The monthly payments going to the client to pay his custodial care bill were the same under both plans.

It turned out that $19 million was needed to fund Jim’s care plan if the award were invested in T-Bills. By contrast, some of the actual annuity quotes were as high as $26 million for the same stream of payments, though some quotes were as low as $15 million.

Why were some annuity quotes 25% more expensive than the cash needed to provide the same stream of payments to Jim if invested directly, rather than through the annuity? And why was the cost quoted by one annuity issuer nearly 40% more than the quote from its competitor? We contacted several insurance company “insiders” seeking these answers. Although annuity providers keep their processes confidential, we learned some interesting facts.

First, the investment return paid by the annuity company to the injured client is actually fairly low. The broker who sells the annuity takes a 4% commission off the top. After this commission is paid, the remaining 96% is invested. However, insurance regulations prohibit companies issuing long term annuities from investing in high risk/high return investments such as stocks, commodities and real estate. The annuity companies are required to make investments in safer but lower return products, such as “Triple A rated” corporate bonds.

Of course the annuity company has to make its profit, so a portion of the bond yield goes to the annuity company and is not passed through to the injured plaintiff. ²³ We think a Utah jury will understand that the substantial hidden fees in an annuity make it a marginal investment for many catastrophically injured plaintiffs.

We also learned that when the annual inflation escalator requested is higher than 4.5% to 5%, and the plaintiff’s life expectancy is longer than 20 to 30 years, many life insurance companies tack on a significant “surcharge” to the cost of the annuity due to increasing risk. It turns out that the annuity market is quite volatile, and market conditions effect the prices offered at any given time. This may account for the 40% disparity between the actual quotes obtained in Jim’s case.

Another major disadvantage of using annuities to fund catastrophic care is that annuity payments cannot be accelerated or changed once the annuity is purchased. If a client suffers an unexpected medical complication that increases his or her need for care, the annuity cannot be restructured to provide higher monthly payments.

In addition, we argue that a catastrophically injured person should not be forced to turn over his jury award to an insurance company and place his fate in the business acumen of the annuity issuer. Our forensic economist believes in investing the plaintiff’s award in U.S. treasury notes and bills, which are guaranteed against default by the U.S. government. In contrast, an annuity is not guaranteed against default. An annuity is nothing more than a contract under which your client gives all his or her money to the insurance company, the insurance company assigns the contract obligation to another insurance company , and the second company promises to make payments every month as long as the client remains alive. Although relatively few insurance companies have become insolvent in recent years, some have. The recent bankruptcy of Reliance Insurance illustrates the dangers of assuming that any insurance company will be solvent twenty, thirty or forty years into the future.

If annuity evidence is admitted at trial, the plaintiff’s lawyer should ask the jury to consider the client’s position when deciding economic damages. When the plaintiff is totally dependant on an investment to keep them alive, is it prudent to require her to hand all her money to an insurance company with no guarantee that the promised payments will be made? When the plaintiff cannot work or take care of herself, shouldn’t she have the peace of mind that her investments are guaranteed against default? Won’t she worry for the rest of her life if she invests instead in a private company’s promise to pay? Is it fair to place this worry on her to save the tortfeasor money?

CONCLUSION

Eight figure verdicts in catastrophic injury cases draw an immediate emotional reaction from the public: “How can an injury justify so much money?” When we read the Court of Appeals’ decision in Gallegos v. Dick Simon Trucking, we sensed that the court’s decision was driven, at least in part, by this same concern. However, when a jury was confronted in that case with the evidence concerning what it would really cost to care for a catastrophically injured person for sixty years, the verdict was fully justified. Until an answer can be found to the problem of out of control price inflation for catastrophic care, we predict there will be more eight figure verdicts and settlements in Utah catastrophic injury cases.

FOOTNOTES:

Dick Simon’s insurance carrier ultimately paid a total of approximately $15.9 million to resolve the case.
A common myth is that large jury verdicts awarded in recent years in catastrophic injury cases are the result of “runaway” juries, bent on punishing corporations rather than compensating injured plaintiffs. While “runaway” verdicts occasionally occur (and are nearly always overturned following trial), large catastrophic injury verdicts are more often a byproduct of rapidly increasing medical costs, projected over the plaintiff’s lifetime.
Gallegos v. Dick Simon Trucking, 110 P.3d 710 (Utah App. 2004).
The forensic economist is charged by law to calculate the “present value” of the future loss by assuming that any lump sum jury award will be invested in a safe investment and will earn interest. By comparing inflation of costs with interest rates on safe investments, forensic economists “discount the jury award to present value.” If the economist’s model forecasts higher investment returns than the rate of price inflation, interest on the award pays for part of the necessary nursing or custodial care.
Source data comes from U.S. National Center for Health Statistics, Accessed: “National Nursing Home Surveys,” 1977, 1985, 1995 and 1999, and Metlife Mature Market Institute Survey 2002-2004. Data analyzed in Lakdawalla DN, Philipson T., “Public Financing and the Market for Long-term Care,” In: Garber AM, ed. Frontiers in Health Policy Research. Vol 4. Cambridge, MA: MIT Press; 2001; Lakdawalla and Philipson (2002) “The Rise on Old-Age Longevity and the Market for Long Term Care” American Economic Review, 92(1):295-306.
The law firm of Cutt, Kendell & Olson has obtained deposition testimony and forensic reports from David Grabowski, Ph.D., Associate Professor, Harvard University Department of Health Care Policy, Darius Lakdawalla, Economist, Rand Corporation, and Tomas Philipson, Professor, Department of Economics, University of Chicago. Copies are available from the authors.
U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index, all goods and services, 2002-2004.
U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index, all Medical goods and services, 2002-2004.
Metlife Mature Market Institute, MetLife Market Survey on Nursing Home and Home Care Costs, 2002-2004.
U.S. Federal Reserve Board.
Catastrophically injured persons face huge monthly medical bills and are not generally in any position to take risks with settlement funds or jury awards. The funds are needed to generate income to pay the bills. Government insured T Bills and Treasury Bonds are most appropriate for those clients. Stocks and bonds are too risky, and while some argue that life insurance annuities are good investments, they are not guaranteed against the default of the corporation issuing the annuity.
See, sources cited in footnote 5.
See, sources cited in footnotes 4,5 and 9.
Lakdawalla DN, Philipson T., “Public Financing and the Market for Long-term Care,” In: Garber AM, ed. Frontiers in Health Policy Research. Vol 4. Cambridge, MA: MIT Press; 2001.
In 2001, Cutt, Kendell & Olson hired Dan Jones & Associates to conduct polling of jury eligible residents of Salt Lake County to study attitudes relating to this and other topics concerning medical economics. Over 90 percent of all polled agreed that medical prices were not under control and were increasing faster than their paychecks. Full survey results are proprietary.
See, e.g., MUJI 27.3, which permits the jury to award “the reasonable value of medical care, services and supplies reasonably required” by the plaintiff.
See, e.g., “Valuing Damages in Personal Injury Actions Awarded for Gratuitously Rendered Nursing and Medical Care,” 49 ALR5th 685 (listing numerous cases holding that plaintiff may recover reasonable value of gratuitously provided care); Werner v. Lane, 393 A.2d 1329, 1335 (Me. 1978) (“The overwhelming weight of authority in the country is to the effect that the fact necessary medical and nursing services are rendered gratuitously to one who is injured as a result of the negligence of another should not preclude the injured party from recovering the reasonable value of those services as part of his compensatory damages in an action against the tortfeasor.”); Hill v. United States, 81 F.3d 118 (10th Cir. 1996); Adams v. Erickson, 394 F.2d 171, 172 (10th Cir. 1968).
Utah courts have recognized the doctrine of preventing a tortfeasor from deriving any benefit from its wrongful conduct in the context of the collateral source rule. See DuBois v. Nye, 584 P.2d 823, 825 (Utah 1978); Green v. Denver & Rio Grande W. R.R. Co., 59 F.3d 1029, 1032 (10th Cir. 1995) (“public policy favors giving the plaintiff a double recovery rather than allowing a wrongdoer to enjoy reduced liability . . .”)
It can be argued that this argument was rejected by the Utah Court of Appeals in Gallegos v. Dick Simon Trucking, 110 P.3d 710 at f.n.4 (Utah App. 2004). However, the issue was only collaterally before the court in a case which addressed the admissibility of annuity evidence.
Morse, A., ” Gallegos v. Dick Simon Trucking: The Use of Price-of-Annuity Evidence as Present Value of Compensatory Damages,” Utah Bar Journal, Vol.19, No.3, p.36 (2006).
Starley v. Crete Carrier Corp., Third District Court for Salt Lake County, Civil No. 020907021.
Annuities that only pay “for life” will cost considerably less than the plaintiff’s economist’s present value calculation only when the plaintiff’s life expectancy is markedly reduced. For, example, where a plaintiff is a ventilator dependant quadriplegic, the annuity will most certainly be cheaper than a lump sum based on traditional economic models. However, in one of our recent cases, some annuity quotes were higher despite the fact that the annuity company assumed an 18 to 24 year reduction in the plaintiff’s life expectancy.
While the annuity providers quote “internal rates of return” in the 5% range, this is deceiving. These rates assume payments to normal life expectancy, but often the client’s life expectancy is greatly reduced.