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INSURANCE - TORT REFORM PACKAGE - DAMAGE AWARDS - FUTURE VALUE - PERIODIC PAYMENTS - ATTORNEY'S FEES - COLLATERAL SOURCE - SOCIAL SECURITY BENEFITS

Damage awards under the tort reform package, N.Y. CPLR 50-A and N.Y. CPLR 50-B, should be calculated according to the following criteria: they are properly calculated according to future value, the 4% additur should be included in the damage award before calculating attorney's fees, and collateral sources of compensation, such as Social Security benefits, may be used to reduce a judgment for the plaintiff if there is a direct correspondence between the item of loss and the type of collateral reimbursement.

[SUMMARY] | [ISSUE & DISPOSITION] | [AUTHORITIES CITED] | [COMMENTARY]

SUMMARY

This case combined two appeals, both dealing with the interpretation of the tort reform package, N.Y. CPLR Art. 50-A and N.Y. CPLR Art. 50-B. As part of the reform, the Legislature enacted structured judgment statutes requiring that the portion of personal injury awards allocated to future losses, for awards in excess of $250,000, should be made in periodic payments over time. The package directs that an initial lump sum payment be made which consists of damages awarded for past injuries, attorney's fees and the first $250,000 of future damages. Defendant then purchases an annuity contract that provides for the compensation for future losses in annual installments. Both cases involve divergent interpretations by the plaintiff and the defendant of the amount to be paid according to the statutory scheme.

The Bryant Case

Bryant, as administrator of the estate of Dorothy Roberts, brought a medical malpractice and wrongful death action against the defendant in connection with the defendant's treatment of Roberts and her subsequent death after undergoing a caesarian section. The jury returned a verdict for plaintiff, totaling $21,150,000. The supreme court set aside the verdict as excessive; then, after remitting the award to $3,968,333, Plaintiff and Defendant proposed different judgments based on varying interpretations of the statutory scheme. Defendant argued that the Social Security child survivor benefit should offset the damages awarded. The supreme court agreed with the plaintiff that there should be no offset for monthly Social Security survivor benefits. The Appellate Division affirmed, yet required a further reduction of the award before an amended judgment was entered.

The Depradine Case

Depradine sustained severe and permanent brain damage as a result of the Defendant's negligence during his birth. A jury awarded him a total of $47,418,603. The supreme court granted a motion for a new trial based upon the excessiveness of the award, unless Plaintiff agreed to a reduction. After remitting the award to $9,109,692, Plaintiff and Defendant proposed different judgments based on their interpretations of the tort reform package. Defendant urged the court to base the annuity contract for future damages on the present value of the damages and to exclude the 4% additur from the damages calculation. The supreme court upheld the Plaintiff's calculations in which the annual payments were based on the future value for the damages, and included the 4% additur in the judgment. The Appellate Division affirmed, citing its decision in Bryant.

ISSUE & DISPOSITION

Issue(s)

1. Whether future damages awards made by annual payments pursuant to the tort reform package are properly calculated according to future value.

2. Whether the statutory 4% additur under the tort reform package should be included in the damage award prior to determining attorney's fees.

3. Whether Social Security survivor benefits should offset a plaintiff's damages awards received pursuant to the tort reform package.

Disposition

1. Yes. Damage awards pursuant to the tort reform package are properly calculated according to the future value of the award, and not the present value of future damages. The Legislature intended that plaintiffs be compensated for the full amount of their damages; therefore, it is the undiscounted future value of the award that is payable over time.

2. Yes. The 4% additur should be included in the damage award before attorney's fees are calculated.

3. Yes. Collateral sources of compensation, such as Social Security survivor benefits may be used to reduce a judgment for the plaintiff if there is a direct correspondence between the item of loss and the type of collateral reimbursement. Social Security benefits can be used to offset future losses provided that with "reasonable certainty" they will indemnify the plaintiff.

AUTHORITIES CITED

Cases Cited by the Court

Other Sources Cited by the Court

  • Nation v. W.D.E. Electric Co., 563 N.W.2d 233 (Mich. 1997).
  • Griffin v. Acker, 659 N.E.2d 659(Ind. Ct. App. 1995).
  • Smith v. Myers, 887 P.2d 541 (Ariz. 1994).
  • Wasau Ins. Co. v. Van Biene, 847 P.2d 584 (Alaska 1993).
  • Profit v. Citizens Ins. Co. of America, 506 N.W.2d 514 (Mich. 1993).
  • Johnson v. Industrial Comm'n of Colorado, 761 P.2d 1140 (Colo. 1988).

COMMENTARY

State of the Law Before Bryant

Future Value Used to Calculate Periodic Payments

New York state courts have asserted that the valuation of a damages award required by the structured judgment statutes should be calculated based on future value. Using present value to calculate periodic payments would undermine the legislature's goal in providing for structured judgments. N.Y. C.P.L.R. 5031 and N.Y. C.P.L.R. 5041 allow for payout of the award via periodic installments, not to substantively alter the award established by the fact finder.

An earlier Court of Appeals decision, construing a provision similar to N.Y. C.P.L.R. 5031 and 5041, based calculations on future value. Schultz v. Harrison Radiator Div. Gen. Motors Corp., 90 N.Y.2d 311 (N.Y. 1997) (interpreting N.Y. C.P.L.R. 4111 as requiring that inflation rates and other relevant information be presented to the jury so that it can calculate the "full amount" of future damages due plaintiff).

In 1998, a lower court arrived at the same solution for abiding by the intent of the Legislature that the Court of Appeals reached in the instant case. Citing numerous cases, the Appellate Division used the future value of the damage award to calculate periodic payments. Fisk v. City of N.Y., 682 N.Y.S. 2d 164 (N.Y. App. Div. 1998).

Including 4% Additur in Future Value Calculation Before Determination of Attorneys' Fees

Prior to the instant case, the ambiguity of the structured judgment statutes had inspired the Court to wrestle with the issue of attorneys' fees. The Court stated that attorneys' fees were to be calculated in a manner that would not award the plaintiff a windfall. Rohring v. City of Niagara Falls, 84 N.Y.2d 60 (N.Y. 1994) (examining the legislative intent of N.Y. C.P.L.R. 5041 to determine that attorneys' fees are to be calculated based on the present value of future damages).

Lower courts previously used the scheme approved by the Court of Appeals in the instant case. Their method included 4% additur before translating the award is translated into present value and calculating the attorneys' fees. Fisk, 682 N.Y.S. 2d at 165; see also Karagiannis v. N.Y. State Thruway Auth., 209 A.D.2d 993, 994 (N.Y. App. Div. 1994).

Social Security Survivor Benefits as Collateral Sources to Reduce Damage Award

The legislature enacted N.Y. C.P.L.R. 4545, replacing N.Y. C.P.L.R. 4010, to ensure that plaintiffs would not be overcompensated by allowing a reduction of damage awards commensurate with any collateral benefits that the plaintiff would receive from other sources. The court interpreted this provision as permitting reductions only for those collateral benefits that the plaintiff is "reasonably certain" to receive and that correspond with the loss for which the award is meant to compensate. Oden v. Chemung County Indus. Dev. Agency, 87 N.Y.2d 81 (N.Y. 1995) (finding that the appellate division appropriately determined that plaintiff's disability retirement pension benefits could be used to reduce compensation for loss of ordinary compensation benefits, but not to reduce the award for loss of future earnings).

Effect of Bryant and Depradine on Current Law

Relying on the language, history, and context of the structured judgment statutes, the Court held that annual payments of future damages should be measured by the future value of the remaining future damages award. The Court desired to extend full payment to plaintiffs and at the same time ensure that medical malpractice insurance premiums would not be raised. Measuring plaintiffs' damage award by future value should ensure that passage of time will not devalue the damages award.

In addition, the Court held that the 4% additur should be included before calculating attorneys' fees. The Court applied a plain reading of the statutory additur requirement and reasoned that attorneys' fees are generally based on a plaintiff's overall recovery; therefore, the instant case should be no exception. However, such calculations appear to overcompensate plaintiffs because the future damage award is already calculated on a future value basis (accounting for inflation of the dollar), and yet the 4% additur requirement adds 4% to the overall amount of the previous year's payment to plaintiffs.

Finally, the Court held that Social Security child survivor benefits are a collateral source that can be used to offset any past or future expenses, because they were intended to replace a parent's earnings. In line with the desire not to overcompensate plaintiffs, the Court also refused to limit Social Security as a collateral source simply because it is not based on a contract or agreement. "Application of the 'contract or otherwise enforceable agreement' requirement should be limited to a situation where plaintiff does not have a protected interest in a government entitlement." Bryant v. NYC Health and Hosp. Corp., 99 N.Y. Int. 0109 (N.Y. 1999) at para.36.

Survey of the Law in Other Jurisdictions

Arizona struck down a similar structured judgment system as repugnant to its State Constitution in Smith v. Myers, 887 P.2d 541 (Ariz. 1994). The Arizona Constitution provides that "no law shall be enacted in this State limiting the amount of damages to be recovered for causing the death or injury of any person." Ariz. Const. Art. II, §31. The Arizona Supreme Court held that a statutory payment scheme for future damages in medical malpractice cases constituted a limit on damages and was therefore unconstitutional.

Many states do not have a statutory scheme for payment of judgments. See, e.g., Baublitz v. Henz, 535 A.2d 497 (Md. Ct. Spec. App. 1988). Most of these states provide jury instructions that explain to the jury how to reduce future damages into present value. Other states such as Michigan require the trial judge to perform a calculation of interest that will reduce future losses to present value. Nation v. W.D.E. Electric Co., 563 N.W.2d 233 ( Mich. 1997).

The Indiana Court of Appeals upheld lump sum payment for personal injury judgments despite recognizing that "some authorities maintain that a present value award for future pain and suffering is improper." Griffin v. Acker, 659 N.E.2d 659, 664 (Ind. Ct. App. 1995).

Most states have settled law that social security survivors' benefits offset damages payable in a wrongful death case. See Johnson v. Industrial Comm'n of Colorado, 761 P.2d 1140 (Colo. 1988); Wasau Ins. Co. v. Van Biene, 847 P.2d 584 (Alaska 1993); Profit v. Citizens Ins. Co. of America, 444 Mich. 281, 506 N.W.2d 514 (Mich. 1993).

Prepared by:

  • Jeffrey M. Berman, '00
  • Kirsten N. Stolte, '01
  • Anna Zhuravitsky, '01
  • Kimmone M. Ottley, '01
  • Angela M. Rea, '01
  • Matthew E. Hanley, '01