Services

 

Our Services


Select a topic from below.

Income Loss
Non–Wage Benefits
Costs of Care
Tax Gross-Up
Loss of Household Services
Fund Management
Immigrant Earnings
Pension Valuation
Household Expenditures
Wrongful Death
Disability Analyses
Earnings in the Lost Years

 

Present Value of Earnings in the Lost Years



Where life expectancy is shortened as a result of injury, the plaintiff’s projected incomes need to be reduced for the “necessary costs of living” or "personal living expenses" that would have been incurred by the injured person over the period of reduced life expectancy. This adjustment is required by the court to avoid over-compensation for losses during the “lost years”.


The reduction usually is estimated in a two-step procedure. First, the present value of earnings in the lost years is calculated. This is done by taking the difference between the present value of the person’s earnings assuming a normal, or average life expectancy and the present value of the person’s earnings assuming a reduced life expectancy. Second, “necessary costs of living” or "personal living expenses" are estimated as a percentage of the present value of earnings in the lost years.


Unfortunately, there is no clear definition of what constitutes a “necessary cost of living” or "personal living expense" and an array of possible reductions have been applied in the past. Deductible amounts may include one or more of the following:




In the extreme, if all expenditures other than savings were considered “necessary costs of living” or "personal living expenses" then the only amount that would not be deducted during the lost years would be the person’s savings. (In our view, such an approach would not be appropriate in situations where the presence of a spouse and/or dependent children is assumed.) Given the broad range of possible deductions for “necessary costs of living” or "personal living expenses" for an individual, we make no recommendation as to the magnitude of a “lost years” deduction. However, statistical information on expenditure patterns in Canada is included in our reports to assist with a determination in this regard.


The statistical information we rely on in our analysis consists of data from the Survey of Household Spending (or “SHS”), the successor to the earlier Family Expenditure Survey (or “FAMEX”). In our analysis, we show how much of the household’s income is spent on average for the exclusive benefit of the independent spouse (assumed to be the injured person), in absolute and in percentage terms. The analysis is done for households similar to that of the injured person in terms of income and composition.


The information can be used to estimate the plaintiff’s “necessary costs of living” or "personal living expenses" as a percentage of his or her income (as opposed to the household’s income), once a definition of what constitutes a basic living expense has been agreed upon.


It may be determined that “necessary costs of living” or "personal living expenses" should be only those expenses that would be necessary, at a minimum, to maintain the plaintiff’s life as well as his or her general ability to work. In that case, data pertaining to single persons with comparatively low incomes might be considered a more appropriate basis from which to develop an estimate of “necessary costs of living” or "personal living expenses" (in terms of an average dollar amount which then could be expressed as a percentage of the plaintiff’s income). Relevant statistical information on the spending patterns observed for single-person, low-income households often is included in our reports.