When an attorney hires a forensic economist for a personal injury or wrongful death case, it’s usually because the case involves lost earnings. A plaintiff’s attorney needs an economist to do a projection of the client’s lost wages, while a defense attorney needs a review of the other side’s projection. I work for both plaintiffs and defendants, so I do both.
Lost earnings tend to be the star of such cases, but let’s not forget the co-star, lost household services. When a person is unable to continue earning income, he or she is often also unable to continue doing household chores. There are exceptions, of course. The injury might be cognitive rather than physical, with the person still able to do laundry, mow the lawn, etc. Or the loss of earnings might be due to something other than an injury, such as a wrongful termination.
The basic idea is that household chores that can no longer be done by the plaintiff will have to be hired out. The cost of doing so is, in principle, part of the plaintiff’s economic loss.
How It’s Done
The task for the forensic economist is to determine which chores used to be done by the plaintiff and which ones can no longer be done. Once the categories of chores are known, the economist can ask the plaintiff how much time was spent on them or use published data to get an average amount of time. The reduction in the number of hours per week spent on such tasks is the lost service time.
Some people can say precisely which tasks they can no longer do. Others provide a percentage loss, say 75%. Obviously, in a wrongful-death case, the loss is 100%.
To translate the lost time into a dollar value, the economist multiplies the lost hours by an hourly wage. Some data sources combine the two steps and report the dollar value directly. But the result is the same: the value of lost services for each year in the analysis. As in a lost-earnings projection, the economist calculates the present value of those annual values.
Implicit Rules
I’ve seen some economists get quite aggressive in claiming service time. One claimed eight hours of sleep time each night, arguing that an overnight security guard would be needed. Another claimed time spent watching TV with the kids. North Carolina law is not explicit about the acceptable categories for lost services, but the implicit rule points to services for which a person would reasonably hire assistance.
Another implicit rule involves what could be called good-faith mitigation. If the injured person’s cousin has been coming over to mow the lawn, that doesn’t mean that lawn care can’t be included as a lost service. As attorneys have explained it to me over the years, the cousin’s work still has value, even if no wages are paid. And who knows how long that arrangement will last?
Analytical Pitfalls
Life-care plans (projections of future medical costs) often include a personal care aide to take care of cooking and cleaning in the injured person’s home. If the economist does a separate projection of lost services, care must be taken not to double-count the household chores in the LCP.
Finally, when placing a value on household services, should the economist assume that the service worker is hired directly or is employed by a company such as a maid service? Some economists build in mark-ups as high as 50% to capture the latter possibility, but we don’t really know how that future service will be provided. In my work, I use a mark-up of 7.65% for FICA, on the assumption that it’ll be part of the cost of the service whether the worker is independent or an employee.
It’s important to remember that economic damages often go beyond lost earnings, and the forensic economist should be open to such possibilities.
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