ICC's Seminars Coming Soon To Dallas Texas. Know the Difference between Hedonic and Economic Damages Register to be Notified on upcoming Dates
my Name is Dan Martinez and I have been asked to speak to you about the
differences between Economic and Hedonic Damages. My goal for today’s
presentation is to help everyone here better understand each of these damages
while also showing you how they are related to injury claims, specifically dealing
with car accidents. Also, at the end of the presentation I will be utilizing a
current case file to help relate this material to an everyday claim. Let’s
start by first defining and discussing Economic Damages after which we will
move on to Hedonic Damages.
- Wisi nulla phasellus.
- Bibendum lacus, lectus enim.
In general economic damages are damages that can
be calculated from documents or records. These documents usually involve
medical bills and expenses (past and future), loss of income production (past
and future), future lost earning capacity and profits / economic opportunity as
well as damage to a person’s real and personal property, such as a damaged
vehicle. That being said, there are also economic damages which can be
presented which are not necessarily provable through financial documents and/or
records but are just as devastating to the injured party. Some examples of this
type of Economic damage would be loss of personal/social/family relationships
due to the new disability and/or “home maker services.” Let’s take a look at
some of these examples and see if we can break them down to better understand
how they can relate to a claim.
- Wisi nulla phasellus.
- Bibendum lacus, lectus enim.
- Arcu donec porttitor, libero quis, massa a auctor.
Many of you may be asking yourselves what is needed to
present an economic damage claim to an insurance company. The first step would
be to gather the medical bills and expenses related to the injury in question.
These bills and expenses help the insurance company paint a picture as to the
extent of the injury that is being claimed. Please keep in mind that in some
cases the injury may be deemed severe enough to award the injured party future
expenses as well to compensate for their future medical bills and treatments
which we will discuss later.
So what kind of documents comprise of Medical bills and
expenses? Medical bills can include but are not limited to emergency room
visits, primary care physician bills, X-Ray’s, chiropractic, rehabilitation
therapy and expenses. Like medical bills, the injured party’s injury expenses
can be documented in multiple ways. For example, injury expenses can run the
gamut from cab fare needed to get to the doctor’s office to the repayment of
the injured party’s loss of income while they are injured. But before we can
start talking about loss of income we will have to first discuss how to
properly document the injury in question which will then give support to the
loss of income portion of the claim.
So, how can the injury itself be documented properly in
order to present it to the insurance company? First and foremost the insurance
adjuster is going to investigate the claim making sure the medical treatment
was necessary and appropriate, according to standard medical practice. So, what
does the phrase “necessary and appropriate, according to standard medical
practice” mean? In general this phrase can be summarized by simply stating that
any services rendered to the injured party must be clinically appropriate, in
terms of type, frequency, extent, site and duration while also being considered
effective for the patient's illness, injury or disease. The injured party can
obtain this evidence through their treating physician. In this documentation,
the physician must provide a diagnosis, prognosis, previous and future
recommended treatment methods, an assessment of the injury, the patient’s
history, and the current health and treatment plan. This documentation should be
reviewed by the submitter to make sure the physicians diagnosis is detailed and
includes all injuries and illnesses related to the treatment and medication
provided for the injury(s) in question.
Also, the injured party’s medical evaluations such as diagnostic test
results may be required, including x-rays and scans.
It is imperative that the injured party have the proper
documentation upon submission as any incomplete information can cause a delay
or even a denial of their claim. A good practice when dealing with any type of
claim is to have a constant dialog between the claims adjuster handling the file
and the injured party and/or representative. This will help by giving all
parties a clear understanding of what is expected. Also the adjuster will be
able to further explain to the document submitter / injured party exactly what
documentation they will need to review the claim quickly and fairly. Now that
we have discussed the documentation surrounding the claim let’s talk about the
loss of income.
So why would an injured party’s loss of income be
considered as part of an injury claim? Simply, the injured party’s loss of
income can be a huge financial burden not only for the injured party but also
his/her family unit. It can be argued that this hardship would not have
happened in the event that the injured party was not exposed to this devastating
injury and/or disability which the negligent party caused. The term Loss of
income is used in multiple claims arenas within the insurance industry. When dealing with a personal injury, the term
“Loss of Income” refers to wages or benefits that are lost due to the
injury. For example, if a person was unable to work for one week due to a
car accident, they will have “lost income” for the period of that week they
were unable to work.
To start the consideration process, the injured party
will first need to prove that the injury stopped him/her from working. In most
cases the injured party would have received a note from his/her doctor. This
doctor’s note will describe the injury and then recommend the amount of time
the injured party should be off of work to allow for proper treatment of the
injury. Also, the injured party can obtain financial documentation from his or
her work place that shows the days the injured missed due to the injury in
question. For a loss of income claim it is important to have documentation
showing there was a drop in income brought on by the injury.
Because loss of income claims can be a
bit complex it’s necessary to dive in a bit further. Let’s recap, Loss of earnings / income claims
are filed to compensate the injured party for the money lost as a result of
injury. These injuries may prevent the injured party from working altogether,
or they may have a partial disability that prevents them from doing portions of
their job. In some cases the injured party is still able to work but will be
required to take time off of work to attend doctor appointments, physical
therapy or medical tests such as an MRI’s.
In the case where the injured party
cannot work full or light duty the insurance carrier will require paperwork
form the treating physician. Without this documentation the time off may not be
considered. Should the injured party require an extended amount of time off
from work it will be required that the injured party visit their doctor
periodically to extend their time off should it be needed.
Once the medical support has been
collected the injured party will need to establish a value of their time off. Typically,
this can be calculated by the rate of pay. This rate of pay can be calculated
as an hourly, daily, weekly or monthly rate. Unfortunately this calculation may
not be as easy for a self-employed person.
As you may expect, generally it is more
difficult to prove a loss of income for someone who is self-employed. Most
self-employed people are paid based upon the profitability of their businesses.
This does not lend itself to easy calculation on an hourly, daily, weekly or
monthly basis. Extended time away from work can be analyzed by comparing
earnings during a similar period of time before the injury. Like the
non-self-employed worker it is important that a self-employed person keep records
which support any loss of income being claimed.
Records that may be required to prove loss
of income can include pay slips, bank statements and tax returns over the given
period which will help prove a drop in income. As not all insurance companies
and/or adjusters are alike these documents may not be enough. In some cases it may
be required that the injured party fill out the Nevada Wage Verification Form, (Pursuant to NRS 616C.045(2)(d)) which
can be found on the states website (http://dirweb.state.nv.us/FORMS/d-8.pdf) .
This is mostly the case for a non-self-employed person. Now that we have
discussed the loss of income that can occur as a result of an injury we can now
discuss Lost earning Capacity.
The “Lost Earning Capacity” refers to a
decrease in a person’s ability to earn income. It is sometimes called
“Future Loss of Earnings” or “Impairment of Earning Power”.
There have been numerous court cases
that have used this concept, including, for example, Sarah Beth Clingan
Overstreet v. Shoney’s Inc., Court of Appeals of Tennessee, 1999.
Overstreet, an educated, driven person received a graduate nursing degree and
had minimal job experience in her field prior to her injury. The injury she
sustained caused her to lose eyesight in one eye. Ms. Overstreet has continued
to work as a nurse; however, her clinical skills and outlook for further
education and professional advancement have dwindled. Nevertheless, the jury
based her future earnings on her future education plans to pursue a nurse
As shown this type of injury qualified
her for lost earning capacity, and entitled the injured party to damages over
and above those which she would have received for lost income. So how is
Lost earning capacity calculated? Lost earning capacity is determined through a
complex calculation, which might involve:e, health, age and employment history.
- Using current market values and wage rates to determine
how much income they would have lost in the future
- Hiring an expert medical witness to determine the
extent of the injury and how it would affect future work performance
- Hiring of a vocational and economist expert
As you can see, lost earning
capacity is much more difficult to prove than lost income. Calculating someone’s
lost earning capacity involves making intelligent predictions about the
person’s work ability at a later date in the future. Of course, this is
difficult to determine exactly.
In addition, the reviewer may have
to make room for other factors such as future promotions, raises, and
improvements in talent or skill. In other words, the injured party should
be prepared to make the case showing a projection of how his or her entire
career would have unfolded if they hadn’t been injured.
each case is based on its particular factors. The idea to bring to light is
that earnings capacity represents what the injured party could have been
capable of earning but for the impairing incident. However, the desire alone of
attaining a particular employment without any specific evidence would likely be
mere speculation. That being said, uncertain or speculative damages are
prohibited only when the existence, not the amount, of damages is uncertain.
The evidence required to support a claim for damages need only prove the amount
of damages with reasonable certainty.
One type of expert that can be
utilized to help prove the extent of lost revenue and future earnings is called
a vocational expert. A
vocational expert is an expert in the areas of vocational rehabilitation,
vocational and earning capacity, lost earnings, cost of replacement labor and
lost ability/time in performing household services. They perform evaluations
for purposes of civil litigation, as an aspect of economic damages. Although
vocational experts can be a valuable component in helping determine loss of
income, economic experts can also be utilized should the claim become
Vocational experts identify what the
person could have earned prior to the incident, compared to what they are
likely to earn following the incident. Economic experts calculate the value of
those earnings over time, so the difference, if any, between the two income
streams is clearly understood. Those who act as vocational/economic experts
blend the two disciplines, and offer testimony in both arenas.
Contrasting the more complicated and
somewhat speculative economic damages mentioned previously, a person’s real
property is much easier to prove and present to the adverse. For
example, if the injured party was involved in a car accident causing a cracked
rear bumper, they will have sustained “real property damage” for the physical
damage to their vehicle. In most cases the adverse will send out their auto
property claims adjuster who will evaluate the damages to the vehicle. This
damage will be documented and handed to the involved party as a damage
the word “estimate” suggests, an estimate is a roughly calculated or judgment
of value, number, quantity, or extent of something. This is an important point to make as the
initial property damage estimate should not be deemed the final real property cost.
In most cases the assigned property adjuster does not have the opportunity to
see what lies behind the vehicles visible damages. Because of this the initial
estimate may not represent the full extent of damages and/or the true cost of
repair. This is important as the extent of damages can help in the evaluation
of the severity of impact the injured party was involved in.
the damaged vehicle has been moved to repair shop it will be torn down. Upon
the completion of the tear down a complete and final estimate of damages will be
written. This final estimate is important as it will encompass all of the
damages that were hidden from the adjuster on the initial inspection.
I mentioned before personal, social and family relationships can also entail
economic damage. For a lot of people relationships can be very challenging.
This does not just refer to relationships with spouses though, but also includes
relationships with family, friends, coworkers, and even acquaintances. Add an
injury to the mix, and these relationships can become even more stressed.
can become stressed in many different ways. These stresses can include physical
but also social and psychological ramifications for the injured person. The
physcosocial problems that can affect an injured party can include sexual
dysfunctions, problems with social adjustment, strained spouse relationships,
and even sleep disturbances which can be classified as hedonic damages. Also,
the frequent doctor’s appointments, hospitalization, inability to return to
pre-injury employment, limited mobility and lack of independence can adversely
affect their quality of life as well. However, the injured party is not the
only person who is affected by the injury as family members can also bear a
burden from stress, grief, and depression surrounding their loved ones
clearly take on more responsibility as a result of their partner becoming
injured in an accident. Frequently the burden of caregiving falls on the spouse
which can cause stress in both parties’ lives. These caregiving spouses are
stressed particularly due to the health issues that arise in their partner’s life
after an injury. In some cases spouses have been known to suffer emotional
stress that is comparable to or greater than those of the injured partner. Some
examples of stress associated with caregiver spouses can include physical
stress, emotional stress, burnout, fatigue, anger and resentment.
The family unit
as a whole can also become a source of stress as it may not be prepared to cope
with such a life altering injury. In addition the family unit is losing tangible
things that a spouse used to contribute to the running of the household, such
as financial support and/or household services in the form of chores and other
activities. As the injured family member is no longer able to fulfill these
functions other family members are often called on to help fill this void.
Family members may be forced to reallocate their personal time to adjust for
these new family challenges. These changes can in turn causes family members to
lose a portion of their personal time hindering them from taking advantage of
the activities they once enjoyed. As shown, an injury not only affects the
injured party’s life but also everyone involved in that persons life which is
why additional economic damages may be considered.
In most cases the
additional economic damages refer to a spouse who is acting as a caregiver to
their partner while they are recovering. Because of this a caregiver who is a member of the victim's family may
be entitled to attendant care reimbursement. Although the law does not set a
specific hourly rate for the caregiver, the reimbursement should reflect the
type and complexity of the services that the injured person receives taking
into consideration the state for which the services are rendered. The
services of a forensic economist to calculate the present day value of such
losses, drawing on government statistics, life expectancy charts, past earning
history, projected future earning history, etc. can also be used.
The Spouse can also
present a claim for those intangible (but still important) things that a spouse
used to contribute to the marital relationship, such as love, companionship,
affection, society, sexual relations, comfort, support, and solace. In some
states that law is written that when a spouse can no longer contribute those
things to the marital relationship to the level or degree that they were
contributed before the accident, then the other spouse is entitled to
compensation in the form of money damages to make up for the loss of that love,
companionship, affection, society, sexual relations, comfort, support, and
solace. This type of claim is called loss of consortium and is strictly for the
partner, family member and/or spouse of the injured party which is considered
independent from the injured parties claim.
you can see, generally, economic damages are easier to prove because there are
documents and records that can be used to calculate and determine the amount of
medical bills, lost earnings and property damage. However, Hedonic damages are
subjective and require a different kind of analysis and proof to determine a
monetary value since there are no specific records or documents that can be
calculated as with economic damages. So what are Hedonic damages and how are
they proved? First let’s define Hedonic damages.
refer to damages for compensation for the loss of enjoyment or value of life. In
most cases it is referred to as the loss of enjoyment of life. It's the
intangible impact an injury has on your life. Therefore, court awards for lost
pay and for pain and suffering are inadequate to make the injured party whole.
how did the concept of Hedonic Damages come to be? In 1846, the Lord Campbell’s
Act was passed by the English Parliament. This Act provided for liability for
the death of a party caused by someone else’s negligence. Since then every
American state has put into place a statutory remedy for wrongful death. The
initial intent of this statutory remedy was to help benefit the family of the
victim, often left both destitute and without remedy. Each state has however
created its own statute which has led to inconsistency from state to state. For
example, some of these statutes place restrictions on the amount that can be
recovered without taking into consideration the actual financial loss suffered.
Hedonic damages, the loss of the value of life, are allowed in almost every state
for Non-fatal injury Claims. Although Hedonic damages can be presented in every
state it can also be viewed differently by each state. States predominantly
view Hedonic damages in three (3) different ways. First there are a minority of
jurisdictions that do not recognize Hedonic damages and will refuse any
recovery to the injured party in this regard. Second, the majority of states
take the position that consideration may be given to Hedonic damages, but only
as part of general damages for pain and suffering. Supporters of the Third
position argue that the loss of enjoyment of life, Hedonic damages, is a
separate element of damages for which compensation should be awarded to the
injured party separate from any other settlements (i.e. Loss of earnings, pain
and suffering, etc.).
use of Hedonic damages can be best shown in Huff v. Tracy, 57 Cal App 3d 939,
129 Cal. Rptr. 551 (1976), when the jury was instructed that they may award the
injured party reasonable compensation for the physical and mental effects of
the injury on his ability to engage in those activities which normally
constitutes that enjoyment of life. What does this statement mean in a
nutshell? This meant for example, if the injured party enjoyed playing softball
before the accident and now was unable to play he/she could be awarded compensation
for this lost enjoyment of life i.e. not being able to play softball any longer.
Also, this gives the jury the ability to compensate the injured party for the
mental anguish of knowing he/she cannot play softball any longer as well.
Hedonic damages can also apply in cases that have no
injury. For example, cases that involve wrongfully accused inmates have been
won utilizing hedonic damages. Such a settlement was awarded in a case for
which William Gregory and David Pope were convicted and later exonerated on
rape charges. William Gregory, who served 7 years in prison, received a $4.5
million settlement, while David Pope, who served 15 years in prison, received
$385,000. Although the inmates had been exonerated and were now free, they were
still “living the nightmare every day”. Hedonic damages were presented and
awarded in this case as a portion of their settlement in an attempt to
compensate and/or place a value for their suffering.
So how are Hedonic damages calculated? Today many courts
have allowed triers of fact to award these damages, lost pleasure of life, in
death and injury cases. What is new is that more and more state and federal
courts are allowing expert economic witness testimony to assist juries in
quantifying hedonic losses, acknowledging that there is much that economists
can teach juries about how contemporary society contemporary values life. In
some cases the lost pleasure of life has become a separate element of
compensable loss. I’m sure you’re asking yourself, how exactly can economists truly
provide useful guidelines for evaluating and placing an actual dollar amount on
something like lost pleasure of life?
the last few years, economists have developed a way to measure, and to put a
financial value upon, the happiness induced by different kinds of life events.
To do so, they take random samples of individuals, record the mental well-being
levels of those people at different points in time, study the incomes of and
events that occurred to the individuals, and then use simple statistical
methods (regression equations) to work out the implied consequences upon
well-being of different occurrences in life. In this way, economists use
happiness surveys to average across individuals in order to understand an
Think of a person who experiences
good and bad events. Imagine, too, that the person enjoys money—preferring more
income to less income. In principle, then, it might be possible to calculate
how much extra income would have to be given to that person to compensate
exactly (neither too much nor too little) for a bad occurrence in life. That
amount of cash can be thought of as a measure of the unpleasantness of the
The monetary valuation of events can
be determined by using an equation in which the dependent variable is mental
well-being or happiness as a type of utility function. When estimated as a
regression equation using actual data, the equation might take the form: U = + Bι Sι + B²S²+ ...+ ΥóχΣ¹
where u is a measure of
individual utility or happiness or well-being, A is a constant, Y is some
measure of income, the Si are dummy variables for various kinds of labor
market and life events (such as whether in work and whether married or single),
and X is a vector of other influences. The X vector is known, in
practice, to include demographic variables, regional location, day-of-the-week
effects, variables from childhood such as whether parents divorced, and so on.
The estimated coefficients from equation (1) can be used to calculate the
pleasantness or unpleasantness of the Si events. Imagine that an
individual changes from employment to unemployment (respectively states S1
and S2, say*). The compensating differential for
this transition is the amount of extra money, or increment to Y, which would be
required exactly to compensate the worker for being unemployed, i.e. to keep
the worker at the same level of subjective well-being.
what this method does is to face up to the fact that many factors shape human
happiness. Relationships matter; health matters; money matters. Within an
equation, these and other factors are allowed for at the same time, and their
respective weights in well-being can then be calculated. The marginal impact of
each life factor is assessed by reading off its coefficient in the well-being
regression equation. Now that you have a clear understanding of what economic
and hedonic damages are and how they’re calculated, we can move on to
evaluating a real life case study.
case study which I will be utilizing today is a claim which took place in 2012 which
consisted of two separate accidents occurring on the same day. I have changed
the names of the involved parties for their privacy but the facts remain
consistent and are as follows;
Jake Smith was involved in an automobile accident. Jake was traveling south on Maryland Parkway
in the right hand lane. As Mr. Smith was
preparing to make a right turn onto E. Vegas Valley Drive his 2008 Hyundai
Sonata was struck from behind spinning his vehicle 180 degrees as he rounded
the corner east bound, and his vehicle came to rest facing west bound on Vegas
valley drive. His vehicle sustained left
rear damage estimated at $2,500 according to the body shop. The driver who struck Mr. Smith’s vehicle did
not stop but was apprehended shortly after by the police. This driver was
charged with hit/run, inattentive driving, following to close and DUI. At that
time Mr. Smith complained of neck pain to the police officers at the scene, but
refused to go to the hospital because he did not want to have an ambulance
bill. He had his car towed and called Good
Cab Company to drive him home. Mr.
Smith got into the back of the cab failing to buckle his seat belt as requested
by the driver. During the trip, Mr.
Smith kept telling the cab driver that his neck felt as though it was
fractured. A few minutes later the
passenger let out a loud yell, which startled the cab driver and the cab driver
rear ended the car in front of him that was stopped for a red light. There was
less than $500.00 damage to the front bumper of the cab, as the front bumper
absorbed most of the impact. The cab
driver looked in his rear view mirror and saw Mr. Smith fall forward and hit
his head on the back side of the front passenger seat. The cab driver then observed his passenger
on the back seat floor complaining that he could not move his neck, arms,
shoulders or legs. The cab driver
immediately called for an ambulance and Mr. Smith was taken to the emergency
room while being fitted with a neck brace.
At that time, it was elected to perform an Anterior Cervical Discectomy
at (C-3, C-4) surgery to help Mr. Smith.
Mr. Smith was in the hospital for 5 days and was required to have
physical therapy. Mr. Smith is employed
as a black jack dealer at one of the Casino’s in Las Vegas and has been in that
profession for over 5 years.
this example we are going to concentrate on the 2nd loss occurring
on this day while also assuming the liability decision has been made. This way we
can focus on the injury claim exclusively. First let’s take a look at the potential
economic damages that may be presented as a result of this loss.
we have already learned these economic damages may include medical bills and
expenses (past and future), loss of income production (past and future), future
lost earning capacity and profits / economic opportunity as well as damages to
Mr. Smith’s vehicle. As all of these can be directly related to the injury
being claimed, it is imperative to have a complete understanding of the
severity of the injury.
above example explained that Mr. Smith was taken to the hospital shortly after
the second accident. At that time it was determined that an Anterior Cervical
Discectomy at C-3, C-4 with fusion would be performed. Based on this
information the first question we should be asking ourselves is, “What is the
cost and recovery time associated with this type of procedure?”
any surgery there are many factors that determine the associated costs.
Typically the cost of discectomy surgery can vary from $15,000 plus hospital
and anesthesia bills up to $75,000 if a spinal fusion surgery is required to
stabilize the spine. Hospital fees and anesthesia bills will typically be
around $15,000. Taking all of that into consideration, the worst case scenario
would run you close to $100,000 if a spinal fusion is required. Now that we
have a general idea in regards to the cost of the medical procedure lets discuss
what this surgery entails and Mr. Smith’s potential recovery time.
First let’s discuss the anatomy of
the neck so we can fully understand the extent of Mr. Smith’s injury and what
was performed. There are seven vertebrae in the neck (cervical region),
numbered C1 (top) through C7 (bottom). The discs between the vertebrae are
also abbreviated. For example, C3-C4 refers to the disc between the third
and fourth cervical vertebrae.
Anterior – surgical approach from
Cervical – refers to the neck
Discectomy – removal of a disc
Fusion – bone graft fuses vertebrae
together during healing
A discectomy can be performed
anywhere along the spine from the neck (cervical) to the low back (lumbar). The
surgeon will reach the damaged disc from the front (anterior) of the spine
through the throat area of the patient. This is done by moving aside the neck
muscles, trachea and esophagus, in order to expose the disc and vertebrae.
Surgery from the front of the neck is more accessible than from the back
(posterior) because the disc can be reached without disturbing the spinal cord,
spinal nerves, and the strong neck muscles. After the disc is removed, the
space between the bony vertebrae is empty. To prevent the vertebrae from
collapsing and rubbing together, a spacer bone graft is inserted to fill the
open disc space. The graft serves as a bridge between the two vertebrae to
create a spinal fusion. The bone graft and vertebrae are fixed in place with
metal plates and screws. Following surgery the body begins its natural healing
process and new bone cells grow around the graft.
times will vary per patient and it is unusual to need any further additional surgeries
other than the removal of the fusion plate in regards to this type of injury.
In most cases many patients go home the same day as surgery but in some cases
the patient will remain hospitalized for a day or two should the patient
require observation. After the completed
surgery the patient will be prescribed a cervical brace or collar to be worn in
order to help support the neck during healing. During this time patients will be
required to follow up with their doctor to evaluate his/her progress. During
these checkups it may be necessary to take x-rays of the neck to confirm the
healing is taking place as it should. A general recovery time of 6 to 8 months
can be expected for a fusion to heal completely.
For some time after surgery it is important to note
that the patient, in this case Mr. Smith, will not be able to drive until he is
no longer required to wear the collar given to him by his surgeon.
After the collar is removed Mr.
Smith will still be required to wait to drive until the pain has decreased to a
mild level and mobility or his neck has improved. Mr. Smith should anticipate
this time to be between 10-14 days after surgery. When driving for the first
time after surgery, he will be required to make short drives only and have
someone go with him, in case the pain flares up and he needs help driving back
home. This will be Mr. Smith’s routine until he feels comfortable with a short
drive at which time he will begin driving longer distances alone.
Based on the above restrictions most patients will be off work 2-3
weeks after surgery, depending on when the surgical pain has subsided. Of
course this depends upon the nature of the work that the patient does for a
living as well. For example; if they have an active, physical job, they
may need to be off work longer. Ultimately the surgeon
will decide when the patient will be released back to work but generally
patients may return to heavy work and sports as early as
8-12 weeks after surgery.
So how will these restrictions affect Mr. Smith?
First, Mr. Smith will not be able to work at least 2-3 weeks after surgery. Also,
the fact that Mr. Smith is a Black Jack dealer must be taken into consideration.
This is the case as his position will most likely require him to stand and bend
for extended periods of time consequently agitating his injury. Because of the
physical demands his career requires, Mr. Smith may need to be placed on light
duty or have his hours restricted until he can return to regular duty without
discomfort which could be 12 weeks after surgery.
As we already know, the full fusion recovery time can
take up to 8 months. Knowing this, it will be necessary to begin collecting Mr.
Smith’s income documentation to help determine the potential cost of his loss
of income claim. The collection of pay stubs, tip information and any other disruptive
income revenue streams Mr. Smith may have will need to be collected. Once this
documentation has been compiled a dollar amount can then be justified for the
loss of income portion of Mr. Smith’s claim.
But what if Mr. Smith is not able to completely return to his chosen
profession full time?
If it is determined that Mr. Smith will be unable to
return to Black Jack dealing indefinitely there may be a future lost capacity earnings
claim. If this is the case Mr. Smith may be awarded loss of future earnings based on his potential to
make money, even if he never would have actually exercised that potential. So,
what does all of this mean? Well, we know Mr. Smith has been a Black Jack
dealer for the past five years. Consequently by utilizing his past income
documentation, it should be fairly easy to accurately predict the amount of
income Mr. Smith will potentially make for years to come. In most cases this
amount is easily attainable and straight forward.
what happens in the event that the injured party is working their job
temporarily in order to do something else? For example, what if we find out
that Mr. Smith has been attending classes to be a floor supervisor or that he
has been going to college to be a surgeon when this car accident occurred? Now,
as a result of this accident Mr. Smith was required to drop out of training
classes or school due to his new physical limitations. If either of these scenarios
were true Mr. Smith’s future income potential could be severely hindered as opposed to a scenario
in which he was making no attempt to progress out of his current position. In
other words if Mr. Smith was trying to make a career change or something to
that extent there may be a greater potential for him to earn more money in the
future which may now have been lost due to this injury.
In the above example Mr. Smith’s loss of earnings would not be calculated based on his actual
dealer earnings, either before or after the injury. Instead, the damages will
be calculated based on his ability to earn money. In this case it will be
necessary to estimate his earning capacity, and then compare it to the reduced
earning capacity resulting from the injury. Based on these findings a
settlement /award may be issued exclusively on the difference in Mr. Smith’s potential
earning power, not on what he actually earned in the past.
As you can
see communication with the injured party is critical throughout the course of
the claim. Without this communication it will be very difficult to understand
the true nature and all the relevant aspects of the claim. In essence, to be
prepared, it is necessary to understand
what Mr. Smith’s life consisted of before the accident took place and how the
injury will affect him for the remainder of his life. In this example we were
not made aware of any pursuits by Mr. Smith that would drastically change his
earning potential in the foreseeable future. Also, according to what we have
learned about Mr. Smith’s injury and the associated recovery times, it is
unlikely that a future earning capacity claim will be presented but it’s always
a possibility to be aware of.
economic portion of Mr. Smith’s claim we will discuss is the physical property damage
to the vehicle he was riding in. Per the example, there was $500 worth of
damages done to the taxicab that Mr. Smith was riding in when the second
accident occurred. That being said, since Mr. Smith does not own this vehicle he
will not be entitled to any property damage awards. Although, the damages to
the vehicle are not pertinent in regards to any financial property payouts to
Mr. Smith, it is still important to analyze this damage as it can give light to
important clues when determining comparative negligence, possible pre-existing vehicle
damages and claimed injuries.
In some cases insurers, self-insurers, and TPA’s
find themselves presented with claims that have a very low property damage
value while the presented injuries are very high. In cases like these, carriers
may decide to hire a biomechanical analysis. This is done in order to evaluate
whether there were forces and an “injury mechanism” present in the specified
collision that would have been sufficient to produce the alleged injury.
some to be somewhat of a controversial science, a biomechanical analysis can
often reveal many claimed injuries to be quite unlikely given the forces
involved in the incident in question. Some low-speed claims may involve
claimants with real back, shoulder, neck, wrist, and knee injuries; however,
the vehicle contact forces in the specified incident did not approach the level
required to produce an injury mechanism consistent with the claimed injuries
and/or generate forces high enough to receive any injury at all. In other
words, the insurer may not dispute that the claimant has the injuries, but may
very well question whether they could have been received during this event.
Based on the damages and injuries being claimed in Mr. Smith’s case the
possibility of a biomechanical analysis being performed is obviously higher
than other cases in which injuries being claimed are lower.
will discuss the possibility of hedonic damages for this claim. Again the
term "hedonic damages" refers to the loss of enjoyment of life
i.e. the intangible impact an injury has on someone’s life, in this case Mr.
Smith. In Mr. Smith case a couple different
types of Hedonic claims may be presented and come to mind. Some such claims
could be lost relationships with coworkers, emotional harm causing lack of
sleep, or a claim stating that he
can’t participate in the activities that had once brought him the most joy which
could include things like hunting, fishing, and tending to his yard.
relationships can be a very serious consequence of an injury. If Mr. Smith is
unable to return to work indefinitely, it is a possibility that his coworker friendships could potentially fall apart. Even worse, if Mr. Smith’s injury is
significant enough to exclude him from participating in activities with his family
and/or friends whom he once enjoyed, he may begin to notice the deterioration
of these relationships as well.
What would cause these relationships to
start breaking down? These things tend to happen because coworkers and family
members are not able to understand what Mr. Smith is going through physically
or mentally. In some cases people may also perceive Mr. Smith as likely faking
his injury to get out of work. Perceptions like this can easily cause friends and
family to suddenly abandon him causing him to feel a loss
of enjoyment or value of life.
It is understandable to experience a loss of
enjoyment of life should personal relationships start to breakdown but can
losing sleep cause Mr. Smith to experience loss of enjoyment of life as we’ll? As
we know car accidents can cause serious physical injury, but they can also
leave the driver and passengers with mental and/or emotional injuries that may
not be as apparent. People with even mild cases of mental or emotional distress
can experience bouts of crying, severe anger, loss of appetite, lack of energy,
sexual dysfunction or loss of interest in sex, mood swings, and/or sleep
disturbances. If Mr. Smith truly had a mild case of mental or emotional distress
it might go away relatively quickly allowing him to sleep, but a more severe
case might require professional medical or psychological assistance.
Like the loss of relationships and
emotional stress, coming to the conclusion that you may never enjoy favorite
hobbies such as hunting, fishing, or tending yard can be
very traumatic. Any one of these alone may also cause a loss of enjoyment claim.
Of course based on the current claim example we have not been given any facts
about Mr. Smith’s personal life that would suggest any of the above Hedonic
damages would be claimed. Therefor we can only anticipate and prepare for these
types of possible claims until all facts are known.
Today we have discussed a great deal of material in
regards to the differences between economic and Hedonic damages. I realize
there was some subject material that we could have easily explored to a fuller
extent had time not been an issue. With
that in mind I hope I was able to give
you a better understanding of these two types of damages while also showing you
how they are utilized, calculated and understood in the claims industry. I
would like to thank you for your time and would be more than happy to answer
any questions you may have at this time.