1

Economic Resources

Experts: Economist Life Care Planners

For links to cites herein, see

www.howardnations.com/lawlinks/economic-resources.html

2

Economic Resources

Bureau of Economic Analysis Personal consumption exp.

Fedstats.gov Stats.bls.gov

Personal Consumption

3

Economic Resources

Economic Report of the President Dept of Commerce

Statistical Abstract of the United States

Guide to Sources

4

Problem Areas

Damage to Wage Earning Capacity

Life Expectancy Tables Work Life Expectancy

Tables

5

Problem Areas

L/E affected by:Mental RetardationPoor Trunk and Head ControlVentilatorG tubeTracheotomy

6

Problem Areas

Economic analysis: Death Cases

Only difference is to take out personal consumption.

Use Consumer Expectancy Study

Measure of Damages is Contributions.

7

Problem Areas

Burn Victims Infant2yrs medicalFuture economic damages: Increase Vocational Rehab Increase Education Increase Counseling Services

8

Problem Areas

Burn Victim74 year life expectancyDisfigurementDisability $250,000Physical Pain Mental Anguish .58 cents per hour

9

The following Relative Impact Analysis is the work product of the outstanding Texas business and economic consultant:

Everett Dillman. Ph.D., Dillman & Associates 306 Thunderbird Drive El Paso, TX. 79912 915 584-1124

10

Relative Impact Analysis

Net Worth Analysis for

American Home Products, Inc.

As of December 31, 2000

11

Measures of a American Home Products, Inc.’s “ability to pay”

Net Worth

Cash and equivalents

Current Assets

Cash Flow

12

Net Worth is the measure of the financial strength of the entity. It is measured by the difference between everything the entity owns (i.e. assets) and everything it owes (i.e. liabilities).

13

For a corporation the net worth is shown on the balance sheet as stockholder’s equity.

Adjustments may have to be made to the balance sheet items, however, to reflect owner interest which show up as liabilities (i.e. loans from stockholders).

14

Net worth, as reflected on the balance sheet of a corporation tends to understate the true financial strength of the American Home Products, Inc. for a number of reasons.

15

1. The assets of the American Home Products, Inc. are usually carried on the books at acquisition cost (less depreciation) and thus are often undervalued. On the other hand, liabilities are usually valued at what is actually owed.

16

2. The true financial strength and value of the American Home Products, Inc. is based on the American Home Products, Inc.’s earning potential. This is reflected in the price of the American Home Products, Inc.’s stock times the number of shares outstanding and is called MARKET CAPITALIZATION.

17

Cash and equivalents represent liquid monies.

Current assets represent cash or balance sheet items which can be expected to be turned into cash within one year.

Cash flow represents income after taxes plus the non- cash expense items of depreciation, depletion and amortization.

18

The net worth, and other measures of the financial strength of a corporation can be quite large. The magnitude of very large numbers, sometimes into the billions of dollars, may be difficult to grasp.

19

For instance, the American Home Products had a net worth of

$2,818,093,000

at the end of 2000.

20

The magnitude of a large net worth may be shown using relative impact analysis and/or graphic techniques.

21

A graphic portrayal of net worth may be made by constructing a grid where each square is equal to $1,000,000 of net worth.

The net worth of the American Home Products, Inc. is $2,818,093,000.

The resulting grid is shown on the next slide.

22

A graphic portrayal of net worth may be made by constructing a grid where each square is equal to

$1,000,000

of net worth.

23

Each square =

$1,000,000

of Net Worth

24

The relative impact analysis is nothing more than a standard type of financial evaluation known as

COMMON SIZE STATEMENT ANALYSIS.

Common size statement analysis allows one to compare relevant financial variables between entities of different sizes. Meaningful analysis is accomplished through ratios, which may be thought of as analogies.

25

“…if Mr. Gates pays the same percentage of his net worth to take his spouse to a movie as the average person does, it would cost him almost $19 million. Analogies also help people grasp other unimaginable large numbers.”

Analogies have been used in the general and professional literature to illustrate the magnitude of large numbers.

Wall Street Journal, Tuesday, August 22, 2000.

26

The evaluation may also use a relative impact analysis.

27

Relative Impact Analysis:

A comparison of how large a penalty would have to be to have comparable financial effects on the average U.S. household and the defendant may be made using the common size statement technique. This is called a relative impact analysis.

28

The relative impact analysis does not purport to suggest that punitive damages should be awarded. Nor does the technique try to suggest any specific amount should the trier of fact decide that such damages are warranted.

29

Data as to the median household net worth has been estimated by the Federal Reserve.

In 1998 median household net worth = $71,600.

In 2000 I estimate median household net worth to be approximately $79,760.

Federal Reserve Bulletin, January 2000.

30

Relative Impact Analysis

Household American Home Products .

$2 $ 70,664

$100 $ 3,533,216

$1,000 $35,332,159

31

Other measures of financial strength and “ability to pay” may be examined by looking at the relationship of the measure to a hypothetical penalty of

$1,000,000.

32

For instance in the case of the American Home Products, Inc. a penalty of $1,000,000 would represent:

0.04% of cash and equivalents.

0.01% of current assets

0.04% of stockholder’s equity

33

Collateral Sources to Consider

Personal Injury Protection Medical Payments: Auto Un/Underinsured Motorist Group/Personal Med Pay Workers’ Compensation

34

Collateral Sources to Consider

Personal Injury Protection Medical Payments: Auto Un/Underinsured Motorist Group/Personal Med Pay Workers’ Compensation

35

Collateral Sources to Consider

Medicare/Medicaid V.A. Hospital Liens Social Security Benefits Disability Benefits Employment Benefits

36

Recoverable Elements of Damages

Physical Pain & Suffering Mental Anguish Physical Disfigurement Physical Impairment (Disability) Bystander Mental Anguish

37

Recoverable Elements of Damages

Loss of Society & Companionship Loss of Consortium Loss of Household Services Value of Nursing Services Loss of Filial Relationship

38

Recoverable Elements of Damages

Loss of Earning Capacity Medical Expenses Funeral Expenses Personal Property Damage Cost of Vehicle Repairs Rental Car

39

Recoverable Elements of Damages

Pre-impact Terror Loss of Chance of Survival Attorney’s Fees Statutory damages Statutory Penalties

40

Recoverable Elements of Damages

D.P.T.A. Violation Contractual Damages Bad Faith Damages Prejudgment Interest Punitive Damages

41

Segmental Approach to Proof of Damages

Pre-impact Terror Instant of Impact – Occurrence Post impact – Unassisted Period of Peril During Rescue

42

Segmental Approach to Proof of Damages

At the scene – First Aid At the scene – Professional Aid During Transportation Emergency Room Care Time to First Relief

43

Segmental Approach to Proof of Damages

Differential Diagnosis Major v. Minor Injuries Therapy – Treatment Between Treatments – M/A

44

Segmental Approach to Proof of Damages

Patient Decision – Making Informed Consent Pre-operative Testing Surgery – Local Post Operative Recovery

45

Segmental Approach to Proof of Damages

Rehab – Physical Therapy Rehab – Vocational Return Home – Duties Recreation – Physical Disability Return To Workplace Future Damages