Life-Care Plans and the Forensic Economist

Veterans in Law Special Issue

In personal injury cases, forensic economists are best known for analyzing lost earnings. When we work for the plaintiff, we calculate the injured person’s lost earnings. When working for the defense, we might critique the plaintiff’s expert’s work instead. But some PI cases involve a life-care plan as well, and a forensic economist is needed to place a dollar value on that.

A life-care plan (LCP) is a summary of the medications, treatments, and therapies likely to be needed by the injured person in the future. The plan provides estimates of the costs of these items over the injured person’s remaining life. The economist takes the LCP, applies appropriate inflation rates, and uses a discount rate to collapse it all into a single number, the present value. The forensic economist doesn’t specify the costs or the frequency of treatments, and yet an economic analysis of an LCP can be time-consuming.

Advertisement

Answering Legal Banner

Rule 1

The main rule for a forensic economist – let’s call it Rule 1 – is to analyze the LCP that’s placed in front of you by your client. We economists don’t have the expertise to choose between opposing LCPs. Rule 1 sounds obvious, but it occasionally gets challenged.

In a recent defense case, I was quizzed in deposition about why I’d analyzed the defense LCP instead of the plaintiff’s LCP. Was I claiming that the defense LCP was superior to the plaintiff’s LCP? Of course I wasn’t. I was just following Rule 1. I won’t get drawn into choosing between LCPs. I’ve done this for more than 25 years, and I know how to stay in my lane.

Rule 1 implies that if I’m working for the plaintiff, I’ll calculate the value of the plaintiff’s LCP. If the defense produces its own LCP, it can get its own economist to put a value on it. Does that mean I’d never calculate the value of a defense LCP while working for the plaintiff? No, but it’d have to be a request by the plaintiff’s attorney. And so far, I’ve never been asked to do that.

Advertisement

LexReception

Despite Rule 1, there are exceptions. In one case I worked on, the life-care planner produced an incomplete LCP, and the attorney asked me to fill in the blanks. That was not my lane, and I knew it. But the assignment involved costs only, so my assistant looked up relevant drug prices and treatment costs. I completed the LCP and disclosed everything I’d done in my report.

Working for the Defense

Rule 1 also applies when I work for the defense, but there can be variations. If there’s a defense LCP, then it’s simple: I calculate its value. But if there’s no defense LCP, my assignment can go in a few different directions.

I might rebut the plaintiff’s economist’s valuation of the plaintiff’s LCP. I couldn’t say anything about the medical recommendations, but perhaps the plaintiff’s economist used inappropriate inflation rates or assumed an unreasonable life expectancy.

If a defense medical expert amends parts of the plaintiff’s LCP, my valuation would be based on the amended LCP.

Occasionally, the defense attorney asks me to make a few assumptions about the plaintiff’s LCP, and the LCP so amended would be the one I’d analyze. For example, the defense attorney might ask me what the value of the plaintiff’s LCP would be without around-the-clock attendant care (which is often hugely expensive).

Ex Ante vs. Ex Post

A lost-earnings analysis is done from an ex ante perspective, implying – among other things – that a pre-injury life expectancy should be applied. However, the analysis of an LCP is ex post, meaning that a post-injury life expectancy is used. If an injury cuts a person’s life expectancy from 75 to 45, then in the cold calculation of forensic economics, the projection of that person’s medical expenses shouldn’t go beyond age 45.

LCPs can be complicated, with different numbers vying for your attention. But an economic analysis will put it all in context and perspective.

Dr. Andrew Brod

Dr. Andrew Brod is the president of Brod Forensic Economics in Greensboro, NC. Dr. Brod has worked as a forensic economist for 25 years and focuses on economic damages for both plaintiffs and defendants: lost earnings in personal injury and wrongful death cases, lost profits in complex commercial cases. He has also conducted other types of economic analyses. Dr. Brod is a senior research fellow in the Bryan School of Business and Economics at The University of North Carolina at Greensboro. He holds a Ph.D. in economics from the University of Minnesota and did his undergraduate work at the University of Illinois. Learn more about him at www.AndrewBrod.com.

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Posts