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New York Medical and Dental Malpractice Actions and the Award of Damages under Amended 50A Article 50-A of the CPLR (PERIODIC PAYMENT OF JUDGMENTS IN MEDICAL AND DENTAL MALPRACTICE ACTIONS) sets out the basic rules to be employed in determining award amounts in Medical and Dental Malpractice cases. Subsequent legislation (Article 45 and Article 5 part 4) expanded the provisions of 50A with detailed reference to the application of taxes to lost or impaired earnings in 50A cases without any reference to 50B, to the manner in which Collateral Source offsets were to be handled in both 50A and 50B cases, and reference to the treatment of elements of future loss in 50A Wrongful Death cases, and Loss of Consortium and Loss of Services in all cases. The New York State Legislature has amended 50A, and particularly Sec. 5031. That amendment was signed into law on June 26, 2003, effective for all cases filed after July 26, 2003. The material changes include,
While in no way attempting to render a legal opinion on the application of the statutes and decisions, the determination of awards for damages proceeds as follows;
1.) Determine the total amount of damages, including any provisions for inflation, and the periods over which the future damages are to be paid. The period for future Pain and Suffering is limited to eight years. The periods for future Medical Expenses are those over which treatment or maintenance is expected to occur. Economic Losses are limited to the period over which income would have been expected to be generated and/or support would have been obligated or provided. [If the jury determines that items of economic or pecuniary loss will be permanent, payments will run for the plaintiff's entire life, increasing each year beyond the period of years determined by the finder of fact at the same rate determined by the finder of fact .] 2.) Establish damage awards, allocate damages between past and future, and generate verdict worksheets including payment details. 3.) Determine whether and how to deduct any Federal, state or local income taxes that would have been incurred on any expected lost or impaired earnings. In cases involving the lost earnings of decedents, determination of deductions for taxes will be made by the jury, but for plaintiff�s lost or impaired earnings, the deduction will be determined by the Court after the verdict is returned. 4.) Determine the damages to be paid in a lump sum. In the event that all damages are to be paid in lump sums, the judgment will be entered for the total of the lump sums without discounting or adjustments. (There will be no discounting and no offsets(?).) 5.) For conscious Pain and Suffering, divide any future damages remaining after lump sum payments by the associated period of years over which the payments are to be made to determine an initial annual payment. Add 4% to the payment for each succeeding year, and apply a discount rate to arrive at the present value. For items of Future Economic and Pecuniary Damages, divide any future damages by the associated period of years over which the payments are to be made to determine an initial annual payment. Calculate a present value for the constant dollar stream, and deduct 35% of that present value as a lump sum payment. Then, reduce the annual payments on a pro rata basis for the lump sum to be paid. (As a practical matter, 35% of the total Award is deducted from the total Award to yield an Award net of Lump sum. The resulting net Award will then be divided by period over which the amount is to be paid to yield an annual payment amount.) 6.) The discount rates applicable to future damages are now determined by using " ... the rate in effect for the 10-year United States Treasury bond on the date of the verdict." The United States issues 10-year Treasury notes, and they are of two types regular and inflation indexed. The rates for the latter are two hundred or more basis points lower than the regular notes (e.g. 7/15/03 - rate on indexed 1.875%, 08/15/03 - rate on 10-YEAR regular 4.250%). There are three rates that can be associated with any 10-year note. They are the �stated interest rate' or the face rate of the instrument, the yield at issuance (i.e. face interest X (face value/discounted price)), and the current yield. These rates can vary fairly widely. The 8/15/03 note had a stated rate of 4.25% and a yield at issuance of 4.375%. The August '03 yield on 10 year notes was 4.45%. Since �rate in effect� does not seem to be further defined, and does not appear to be used by the US Treasury, the choice of rate may be open to question, for that matter so may reference to the type of 10-year bond. [Trial courts seem to have adopted the average daily yield on the date that the verdict is returned as the rate in effect.] 10-year issues can be found at 'www.treasurydirect.gov/RI/OFNtebnd'. Yields can be found at 'www.federalreserve.gov/releases/h15/data.htm'. The rate to employ for any item of future damages is determined by applying the 10-year rate to all elements to be paid out in twenty years or less. For items to be paid out over a period longer than 20 years, determine a weighted average of the 10-year rate for the first twenty years and two percentage points above the 10 -year rate for the years beyond twenty. So if the ten year rate were 4%, a payment stream for a period of twenty years would employ a 4% discount rate, for twenty-one years a 4.0952% discount rate [((20x.04)+(1x.06))/21] and Twenty-two years a 4.1818% discount rate [((20x.04)+(2x.06))/22].
7.) Past and future economic loss may be offset by Collateral Source replacement or indemnification from insurance, Social Security Survivor benefits, Workers Compensation or employee benefits, if payments are reasonably certain. The offset against future economic loss is the current value of future payments increased by any contracted or expected increases for COLA or inflation, and reduced by any costs associated with continuing such payments. In addition, plaintiff�s or decedent�s costs associated with obtaining or maintaining the item of offset in the two years prior to the incident giving rise to the action will be applied to reduce the value of the offset. [Cost of care, cost of custodial care or cost of rehabilitation services can be offset against related awards, in whole or in part, to the extent that there is reasonable certainty of collection, and as long as they are not sources entitled by law to liens against any recovery. The Court has imposed a requirement of direct correspondence between items of loss and the collateral reimbursement. "The Court must also find that the plaintiff is legally entitled to the continued receipt of such collateral source, pursuant to a contract or otherwise enforceable agreement, subject only to the continued payment of a premium and such other financial obligations as may be required by such agreement." It is difficult to envision a care, custodial care or rehabilitative care contract for future services whose sole condition on the rendering of services is the payment of premium, or that does not result in a statutory lien in favor of the care provider.] There is no specification of whether or how Collateral Sources of Payment (Offsets) will be applied in determining the taxes associated with lost or impaired earnings, though it would seem that offset payments should be deducted from earnings only for purposes of determining the amount against which taxes are to be applied. The net economic loss would then be the original economic loss less any taxes. There are also neither specification on how Collateral Source offsets are treated in Wrongful Death actions where there are only past damages and lump sums, nor specification on wheter and how Collateral Source offsets can be applied to any loss elements where a future initial payment date is returned by the jury. 8.) Contingent attorney fees are then determined by applying a sliding scale of rates to the total of past damages, lump sum payments and the value of all future damage elements less litigation expenses, as follows;
9.) The Net Award is then determined by deducting, on a pro-rata basis, litigation expenses and disbursements, and attorney�s fees from past damages, lump sum payments and the value of future damages. The annual payments for future damages, and the amounts for which the liability carrier is obligated, are determined as follows; a. Pain and Suffering. Reduce the future damages by the amount of lump sum payments, divide the resulting amount by the period over which it is to be paid to produce an initial first year amount. Add 4% for each year after the first year to arrive at the next succeeding year�s amount, discount the result, and deduct pro-rata litigation expenses and attorney�s fees to produce a final first annual (monthly) payment. b. Economic and Pecuniary Loss. Deduct 35% the present value of which will be paid in a lump sum, divide the remaining Award by the period over which it is to be paid to arrive at an annual (monthly) payment amount. Deduct pro-rata litigation expenses and attorney�s fees to arrive at a net annual (monthly) amount. Any related Collateral Source offset payments are applied to reduce net annual (monthly) amounts. Items of future lost earnings will be paid in full over the period specified. All other items of future loss or damages will be paid for the period specified or the life of the plaintiff whichever is shorter. All payments for future damages other than lump sums will be periodic (monthly) and due from the date of the verdict unless the jury specifies a different date. CPLR 5002 provides "Interest from verdict, report or decision to judgement. Interest shall be recovered upon the total sum awarded, including interest to verdict, report or decision, in any action, from the date the verdict was rendered or the report or decision was made to the date of entry of final judgment." The Courts have interpreted this to mean that interest is payable on the entire award from the date of the liability verdict. If the Award is determined on a later date and interest is to be awarded from the liability date, the net Award must be further discounted to a value that would have been awarded on that earlier date (removing the implied element of interim interest conntained in the Award). In any action for pecuniary injuries resulting from decedent's death, the Award will bear interest on the principal amount from the date of death. In the event that the elements of loss incorporate interest, the elements of loss will be discounted back to death or some appropriate interim period. Future damages and lump sums are discounted to death while past damages are to be discounted to an interim average period determined by when the past payments should have been made or by discounting each element of past damages to a point at which the payments should have been made. As far as any award or settlement is concerned, there is no easy way to value the award, or the contingent fees associated with it. If offsets and income taxes are taken into consideration, the difficulty is magnified. Finally, a large component of the net award or settlement will be paid in a lump sum. In the case of minors or incompetents that value must be protected. In other cases, it should be protected. Increasingly, plaintiff's attorneys are being tasked with the obligations of performing Due Diligence and gaining a client's Informed Consent. Those obligations suggest that any Award or settlement be fully and fairly evaluated with a built-in reconciliation back to the gross total award. Any proposals to protect (structure) lump sums should be independently valued. The entire award or settlement may warrant deployment in a manner different from that resulting from the net award calculation. Finally, protection or alternate deployment should be executed in a manner that either maximizes subsequent payments or protects them from taxes to the greatest extent possible. New York 50B Data Forms. These forms were designed to assist plaintiff�s attorney to gather the data to develop an Award, and to apply offsets and adjustments and to value the Award. |
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