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Personal Injury Litigation: What Is It Worth?

Personal Injury Litigation: What Is It Worth?

by Sheldon Wishnick, FSA and James Cohen, Ph.D.


The plaintiff has been injured through a clear case of negligence on the part of the defendant. As the attorney for the plaintiff, you have completed all the depositions, research and case citations and feel confident that you will win on all the liability issues. Assuming that you are correct, how much should the plaintiff expect to collect?


One approach in common use is based upon some multiple of medical expenses incurred tied to a rough wage loss estimation. While this approach is simple to understand and calculate, it is completely removed from reality. Should medical bills be the basis for defining the economic loss incurred by all individuals, regardless of type of injury (or equivalent medical cost), age, gender or occupation? Could the number of days missed from work be a better measure? Should other considerations be taken into account?

This article illustrates a scientific approach to determine economic loss for someone injured sufficiently to be unable to return to his/her prior occupation, in the same employment capacity as before the injury. Through the information obtained from a vocational expert and a financial expert, the actual economic loss to your client can be clearly documented and defended.

Employability and Earnings Capacity

Although the plaintiff may not be employed full time, or at all, he may be capable of full- time work. It is only through the services of a vocational expert that the employability and earning capacity can be accurately ascertained.

Interviewing and Testing

The process of determining employability involves specific stages of investigation beginning with an evaluation of medical records and related files. Medical restrictions and physical capacities are of considerable importance to the vocational expert. An injured client who cannot sit for more than 30 minutes at a time may be unemployable if employers will not provide a sit/stand job site modification; a client who is in constant pain may not be able to concentrate on the job tasks at all, rendering the client unemployable.

A one-on-one interview with the injured party would follow this medical review. Here, data regarding the plaintiff’s educational background, past and present work experiences and personal history, as well as an analysis of transferable work skills (the skills brought to any other job he/she is capable of performing) would be recorded.  This interview would often uncover pertinent vocational information frequently overlooked by others – a history of drunken driving, previous incarcerations, facial ticks and emotional problems are some examples.  The expert would then administer, score and analyze standardized vocational assessments. The tests include ability assessments that measure work skills such as verbal ability, perceptual speed and accuracy, manual dexterity, math ability and spatial relations. These tests also help size up the injured party’s current functioning level and portray a picture of how the plaintiff might function in the workplace. Interest testing uncovers the types of jobs the person would feel most comfortable in performing in the workplace; as well as how past jobs fit his/her current profile.

Next, research would be conducted including both national and local employment opportunities based on the mix of skills the injured party retains after the injury.  A vocational determination would emerge after analyzing past work functions and whether or not new employment is appropriate. Employers would be contacted to determine if suitable jobs exist in the local economy and, in some instances, whether these jobs might be performed with or without job site modifications for the injured party.

Interestingly, it is entirely possible that an injured person with a 5% to 10% soft tissue injury may be unemployable with no earnings capacity, while an injured person with more serious injuries may be employable with a full earning capacity. Compare the future employability of a 60-year-old, fifth grade educated, Italian speaking floor tile finisher having bilateral carpal tunnel syndrome with a 30-year-old accountant who lost both legs in an automobile accident.

Employability is the result of numerous variables: age, gender, educational background, medical concerns, specific vocational training, transferable skills, current opportunities in the local economy as well as the ability of the person to be hired. It also includes the job application, interviewing skills, and the use of trial work periods.


Determination of Employability and Capacity

Employability determinations occur at five distinct levels: full-time employable, employable in a structured worksite, part-time employable, part time employable in a structured worksite, and unemployable. (A structured worksite is a work environment made accessible to the client by the employer and may include physical modifications to the existing job site through sit/stand options, ramps or specially adapted tools, assistance from other workers in tasks too difficult for the client to perform alone, flexible work hours or frequent breaks, when necessary.)


The vocational expert would furnish specific national salary averages for each job with appropriate salary ranges. Salary data would come from nationally recognized sources, such as U.S. Department of Labor, the Occupational Outlook Handbook or Dictionary of Occupational Titles, as well as state salary documents, such as those developed by the Connecticut Department of Labor. Thus, a baseline earning capacity for each job the client is capable of performing becomes the basis of mitigation.


Economic Loss


Once employability is determined, economic loss can be ascertained. The calculation of economic loss is the difference between an individual’s earning capacity before and after the injury. The pre-injury potential earning capacity is typically derived from the actual earning status of the individual as it existed prior to the incident. However, prior employment is not always the basis for such calculation.[1]. If an individual were unemployed or underemployed at the time of the injury, special methods would apply which are beyond the scope of this paper.  The post-injury capacity is that derived by the vocational expert using the methods described above.



Future Loss

The development of future loss is the individual’s earning potential prior to the injury, reduced, or mitigated, by the post-injury potential. The financial expert will use the current earning capacity of the injured individual as a starting point in the development of mitigation for future income loss. The initial capacity is defined by selecting an amount that is within the income range provided by the vocational expert. By anticipating income increases that are appropriate to the industry and the individual, the financial expert is then able to build a stream of expected earnings for the remainder of the individual’s working lifetime.

Future potential earnings on a pre-injury basis are calculated in a manner similar to that described above, except that the earning increases would be based upon the prior employment status.


Present Value

The loss in each future year is defined as the potential, pre-injury earnings less the mitigation expected. However, the income loss is not calculated as the sum of these annual losses between the present time and the anticipated retirement date. A present value needs to be calculated that moves the losses from the future date to the valuation date, which is the anticipated date of trial or settlement. The basic components of a present value calculation involve interest and mortality.



Winning a jury verdict at the trial or arriving at a settlement means that future losses will be paid currently, in advance of when they are anticipated to occur. Since these funds are now available for investment, an interest discount (reduction) is made to the loss claimed so that the amount received, with interest earned in the interim, will be sufficient to cover future losses as they are anticipated to occur.



The mortality assumption also serves to reduce future loss because it recognizes that a future loss is incurred only if the individual survives long enough to experience it. Therefore, each annual loss is associated with a factor representing the probability of the individual surviving from his/her attained age to the year of each loss.


The present value calculation is the multiplication of each annual loss by the product of the associated interest factor and mortality factor. As anticipated losses move further into the future, the factors decrease. The sum of the present values for all of the future years is the total future income loss


Past Loss

Past losses are those losses occurring between the time of the injury and the date of settlement or trial. In a typical case, the loss is defined as the difference between the income that would have been earned less any mitigating payments received, such as, for example, disability payments or unemployment insurance received. An interest adjustment is made to bring past losses forward to the date of trial. In this case, the adjustment increases the amount of loss because the plaintiff could have invested these funds and earned interest from the date of loss to the date of trial.

Total Economic Loss

The sum of the future loss and the past loss produces the total income loss. Although not specifically addressed in this article, any employee benefits that were lost or reduced because of a lower income level would also be elements of the loss calculation. These might include life and health insurance, 401(k) plan and defined benefit pension plan.



Both the vocational expert and the financial expert contribute important elements of analysis and documentation to the determination of economic loss in a personal injury case. The impact of the injuries on earnings capacity is the province of the vocational expert. The process of vocational assessment coupled with current labor market and employment opportunities give the court an independent analysis of the impact of the injuries sustained.

Using the input of the earning capacity developed by the vocational expert, the financial expert is able to produce a realistic picture of the total past and future losses. The analysis is developed as the difference between the potential, pre-injury income and the anticipated, post-injury income accumulating past losses with interest and discounting future losses with interest and mortality to the date of trial or settlement.

It should be clear that by using this scientific approach in case development, your client will be more likely to receive compensation that is much closer to the actual economic losses incurred.


Sheldon Wishnick is a Fellow of the Society of Actuaries and a Member of the American Academy of Actuaries. He provides actuarial consulting to the legal community through his firm, Actuarial Litigation Service in Newington, CT.

Dr. James Cohen is a Certified Rehabilitation Counselor, a Diplomat of the American Board of Vocational Experts and is a Vocational Expert for the Social Security Administration. He assists both plaintiff and defendant attorneys in his Vernon, CT practice.

[1] R. Newman and J. Wildstein, Tort Remedies in Connecticut, (1996), Section 7-6(c)(2).