Assessing Economic Damages in Personal Injury and Wrongful Death Litigation: The State of Illinois

Abstract

Forensic economics experts (FE) working with attorneys engaged in litigation, whether consulting, preparing a report, or testifying at deposition or trial, generally are expected to have some knowledge (1) of the state's statutory and case law regarding allowable damages and methods; and (2) that certain topics (e.g., taxes, collateral sources) should not be mentioned or considered at certain times since a mistrial could result. This situation creates a tension: forensic economics experts are economics experts and are not attorneys, but nonetheless must have a reasonable understanding of the relevant state law. In this vein, the Journal of Forensic Economics (JFE) continues to publish a series of articles on the ways such damages are calculated in different state jurisdictions, one state at a time.2 The state of South Dakota is included in this issue and this paper adds Illinois to the list.Following the format of previous articles in this JFE series, Section II provides a listing of the controlling statutes, general case law, and court rules. Section III discusses the concept of earning capacity which appears throughout PI and WD case law in Illinois. Section IV discusses discounting to present value. Fringe benefits are discussed in Section V, while Section VI discusses the treatment of income taxes. Household services are discussed in Section VII, and the personal consumption deduction is discussed in Section VIII. Section IX discusses medical expenses and life care plans, and Section X deals with hedonic damages. Section XI addresses various miscellaneous issues of interest to FE's. Section XII is a summary. The Appendix contains Illinois pattern jury instructions (IPI) for personal injury (PI) and wrongful death (WD) law discussed in the paper. Economics experts may find these instructions valuable because they provide the language that judges typically use when explaining Illinois law to juries.Damages in Illinois for PI torts are generally specified by the case law of Illinois courts while damages in wrongful death and improper medical care actions are specified by the Illinois Wrongful Death Act, Survival Act3 and Medical Malpractice Acts, with guidance from case law. Expert evidence, to be admissible, must be relevant, i.e. it must establish a fact of consequence to the determination of the pending action. Further, it must be both material and of probative value. (In Re Elias, 1986) An expert's testimony will assist the jury when such testimony offers knowledge and application of principles “beyond the ken of the average juror.” (Zavala v. Powermatic, Inc., 1995) Evidence is “beyond the ken” of the average juror when it involves knowledge or experience that a juror generally lacks. (Rinesmith v. Sterling, 1997) Following Federal Rule of Evidence 403, which speaks of “prejudice, confusion and waste of time,” even if such evidence is arguably relevant, it may still be excluded if it would confuse the issues or tend to mislead the jury. (Cleary and Graham, 1990) The admission of evidence is within the discretion of the trial court and its rulings will be reviewed on an abuse of discretion standard. (Jackson v. Pellerano, 1991) In turn, jury verdicts stand unless contrary to the manifest weight of the evidence. (Voss v. Tune, 1984) To be against the manifest weight of the evidence requires that the verdict is clearly erroneous and unreasonable based upon the facts and evidence, (Gilman v. Kessler, 1989), or where, the size of the award is the result of passion or prejudice, the amount is palpably inadequate, or that the jury disregarded proven elements of damages. (Collins v. Straka, 1987)This section contains the general case law, statutes, and court rules. We make specific comments on the make-whole theory of compensation, collateral source issues, nature of damages, burden of proof, future damages and life expectancy, punitive damages, mitigation of damages, consortium, and per diem arguments.First, potentially relevant jury instructions are discussed, since forensic economics experts present evidence to jurors typically, and jurors' findings about damages are presented as line item responses to jury instructions. Statutes and key cases are cited as the need arises; many of the cases are found in the comments and notes on use of the pattern jury instructions.In Illinois case law, compensatory damages for personal injury and wrongful death are based on the “make whole” theory—the object of tort damages is to restore the tort victim as nearly as possible to the position he would have been in had the injury not occurred. (Roberts v. Norfolk & W. Ry., 1992) As the IPI (see Appendix) indicate, particularly IPI 30.01, with the appropriate specifics from 30.04 through 30.21 added, the jury is given a large amount of leeway in making these determinations. Pursuant to 735 ILCS 5/2-1109, the jury verdict must be itemized.The collateral-source rule states that benefits received by an injured party from a source wholly independent of, and collateral to, a tortfeasor will not diminish damages otherwise recoverable from the tortfeasor. One application of this principle held that even if an HMO paid rates well below the full reasonable charges, the injured party could recover the full amount. (First Midwest Trust Co. v. Rogers, 1998) This ruling follows the legal theory underlying collateral source rules, namely, that a wrongdoer should not benefit from expenditures made by the injured party, or take advantage of contracts or other relations which exist between the injured party and third persons. Double recovery, also disfavored in the law, may be the lesser of two evils: the Rogers court wrote “although injured parties may receive a windfall from the collateral-source rule, it is usually considered more just for an injured party to receive the windfall than for a wrongdoer to be relieved of full responsibility for his wrongdoing.”(pp. 432, 433, First Midwest Trust Co. v. Rogers, 1998) Reinforcing Rogers, the Arthur v. Catour 2004 court determined that an injured plaintiff may recover as damages the entire amount billed for medical services, not merely the discounted amount actually paid by her insurance carrier. Referring to the plaintiff, the Court said “[t]o the extent that she receives an amount greater than that paid by her insurer in satisfaction of the bill, that difference is a benefit of her contract with the insurer, not one bestowed on her by defendants.” (p. 806)Other collateral sources are wage replacements for sick days, short term or long term disability, Social Security disability payments, workmen's compensation payments, and life insurance; although if an employer is the defendant, some of these may arguably not be collateral sources. When workers are injured on the job, the Illinois Workers' Compensation Act, 820 ILCS4 305/1, permits them to sue the tortfeasors responsible and to receive workers' compensation. If the worker prevails in his personal injury lawsuit, the settlement or judgment received by the worker requires repaying the workers' compensation paid by his employer, 820 ILCS 305/5(b). The employer may claim a lien on the worker's recovery, in an amount equal to the amount of workers' compensation due the worker. 820 ILCS 305/5(b). Section 5(b) of the Workers' Compensation Act provides further that, should the worker prevail, then, from the compensation reimbursed to the employer, the employer must pay its pro rata share of the worker's costs of bringing the litigation and, unless otherwise agreed, 25% of plaintiff's counsel's legal fees, 820 ILCS 305/5(b).The general rule for forensic economics experts regarding collateral sources is, if in doubt, to consult with your employing attorney. If he/she is in doubt, be prepared to express opinions that take all possibilities into account.There are limits to collateral sources, however. In Peterson et al. v. Lou Bachrodt Chevrolet Co. 1979, the Supreme Court affirmed and clarified the law on collateral source issues which apply to medical services. The Court wrote:Illinois statute 735 holds that a judgment in a negligence action against hospitals and physicians can be reduced by up to one-half by benefits that the plaintiff has received from collateral sources, such as private or governmental disability programs. The economic expert report ignores collateral source adjustments, and the trial judge makes them in entering a final verdict upon the proper motion.In Illinois, the plaintiff has the burden of proof as to his damage claims. In cases involving substantial special damages, a forensic economics expert is therefore more likely to be called to testify by the plaintiff rather than the defense. Hence, it is not unusual in Illinois that forensic economics experts show more plaintiff than defense testimonies on their Federal Rule 26 disclosures.Life expectancy tables to support a future damage calculation may be introduced in a personal injury case only if there is evidence that there is permanent injury. In all wrongful death cases (and in some personal injury cases), the issue of joint life survival probabilities has not been specifically addressed. As indicated below, courts have compared individual life expectancies even though, in our opinion, joint survival probabilities may be more appropriate, based on statistical and probability grounds.Mortality-table related jury instructions arise from IPI 31.13 in wrongful death actions and 34.01 and 34.04 in personal injury. There is a warning in both instructions that life expectancy information is not “conclusive.” Instruction 31.13 allows the court to supply the life expectancies of both the deceased and next of kin. In Barry v. Owens-Corning Fiberglas Corp. (1996), the trial judge took judicial notice of mortality tables issued by the U.S. Department of Health and Human Services. He allowed the plaintiff to offer evidence of the life expectancies of the decedent, his wife, and the seven children and gave IPI 31.13 to the jury. In that instruction, the jury was told that in addition to the decedent's life expectancy, it could consider the life expectancies of the widow and the seven children when assessing damages. The defendant contended that where the deceased's life expectancy is less than the life expectancies of the survivors, allowing the jury to consider the life expectancies of the survivors is inappropriate, confusing, and misleading. The appellate court held that:The appellate court cited Baird v. Burlington & Quincy RR Co., (1976), in which the parents of two deceased children sued the railroad under the wrongful death statute, in support of its decision. In Barry v. Owens-Corning Fiberglas Corp. (1996), there was no question concerning the use of the standard mortality tables published by the U.S. Department of Health and Human Services.In Danzico v. Kelly and James Kelly, (1969), it was deemed proper for the trial court to exclude mortality tables when there is no permanent injury, even if there is a claim for future pain and suffering. The appellate court held “Future pain and suffering, without accompanying a permanent personal injury, is not sufficient in our opinion to permit the introduction of mortality tables which attempt to measure the duration of a given plaintiff's life.” (p. 30)In Illinois, punitive or exemplary damages are awarded only when the torts are committed with fraud, actual malice, deliberate violence or oppression, or when the defendant acts willfully, or with such gross negligence as to indicate a wanton disregard of the rights of others. (Consolidated Coal Co. v. Haenni, (1893) at 628) Where punitive damages may be assessed, they are allowed in the nature of punishment and as a warning and example to deter the defendant and others from committing like offenses in the future. Eshelman v. Rawalt, (1921), citing the Restatement (Second) of Torts § 908(2) (1979). (Punitive damages may be awarded for conduct that is outrageous, because of the defendant's evil motive or his reckless indifference to the rights of others).The general principle of the duty to mitigate damages by taking reasonable actions to minimize them applies in Illinois personal injury cases. (Ross Co. v. Blumberg, 1947) An injured party is bound to exercise reasonable care in seeking and accepting medical aid. (Devlin v. Chicago C.R. Co., 1918) There are limits, and one cannot be required to undergo serious surgery. (Howard v. Gulf, M. & O. R. Co., 1957) Despite plaintiff having this duty, the defense has the burden to prove as an affirmative defense that such mitigation did not take place. (Williams v. Board of Education, 1977)The loss of consortium is a claim of damages made by the spouse of an injured person that is separate and distinct from the damage claim of the person who suffered the personal injury. In Illinois, the spouse seeking compensation for loss of consortium must show that he or she suffered damages arising out of the wife's or husband's injuries; it does not follow automatically from one spouse's injuries that the other spouse suffered loss of services. A parent does not have a cause of action for loss of a child's society due to injury to the child. (Dralle v. Ruder, 1988) Similarly, a child cannot recover the loss of a parent's society resulting from an injury to a parent. (Karagiannakos v. Gruber, 1995)The per diem argument reduces the calculation of general non-economic damages down to a mathematical formula based on time units and a dollar value of each time unit. The dollar value of each time unit is multiplied by the total number of time units offered (e.g., time units in remaining life expectancy) which gives a total value of damages. Illinois rejects per diem calculations. In Caley v. Manicke, (1962), the court, hearing such an argument, held:Another authority is Fintak v Catholic Bishop of Chicago, (1977).In Illinois PI and WD cases, the valuation of pecuniary losses includes the evaluation of the plaintiff's earning capacity. However, the words “earning capacity” do not appear in the IPI instructions; the closest compensable items appear to be “time” and “earnings.” The phrase does appear throughout case law, and the issue facing forensic economics experts is to determine how the courts view the proper use of the term. There are connections to the related concept of worklife expectancy and allied measures, which are discussed in a separate subsection below.In Antol v. Chavez-Pereda, (1996) the court indicated that the phrase “present cash value of the time, earnings and salaries reasonably certain to be lost in the future” as part of what was then IPI 30.07 Civil (1995) in fact referred to “impairment of the plaintiff's capacity to earn.” (p.572) That court said “an award of future lost earnings includes consideration of the extent to which plaintiff's capacity to earn has been impaired. Impairment of earning capacity is the difference between the amount the plaintiff was capable of earning prior to his injury, and the amount he is capable of earning after the injury.” (p. 573) also citing Patel v. Brown Machine Co., (1994). We also note that Brown v. Chicago & North Western Transportation Co., (1987), vacated an award for lack of “reasonably certain proof” to sustain the claim of lost future earnings. This is an old standard that goes back before 1909, where Amann v. Chicago Consolidated Traction Co. 1909 held: “To justify a recovery for future damages the law requires proof of a reasonable certainty that they will be endured in the future,” (p. 267) citing Lake Shore and Michigan Southern Railway Co. v. Conway, 1897.“Reasonable certainty,” “lost earning capacity” and “lost future earnings” are linked. What are the evidentiary standards? First, expert testimony is not necessary to establish loss of future earning ability. (Patel v. Brown Machine Co. at 1061) The threshold is relatively low to earn a jury instruction—all that is required to justify the giving of an instruction is that there be “some evidence in the record to justify the theory of the instruction.” (Leonardi v. Loyola University of Chicago, 1995) However, the Brown court at 936–37 noted that “mere surmise or conjecture” is insufficient proof of an existing fact or future condition, quoting Stevens v. Illinois Central R.R. Co., (1922). Thus, “[p]laintiff may himself testify that his injuries diminished his capacity to work, and the appearance of the plaintiff on the witness stand and his testimony as to the nature of his injuries and their duration is sufficient to take the question of impaired earning capacity to the jury.” (p. 360, Shaheed v. Chicago Transit Authority, 1985) Illinois courts require “[e]vidence that plaintiff's injury [is] permanent and that it prevented him from continuing employment [is] generally sufficient to permit a jury to arrive at a calculation of lost future wages.” (p. 574, Antol v. Chavez-Pereda, 1996) In citing the cases above in LaFever v. Kemlite 1998, the Illinois Supreme Court said:The plaintiff wants not just to receive a jury instruction on future earnings, but to prevail. This is a higher standard and a reason for presenting expert economic testimony. Another reason for presenting an economics expert appears in Morris v Milby, 1998; the court wrote: citing Carlson v. City Construction Co., (1992). Economics experts may testify about wage growth as well as duration of future loss, and make the associated present value calculations.We return to the discussion of capacity. The courts have indicated that a worker who is not employed and in fact out of the labor force has the right to be compensated for lost future earnings, and the word capacity captures this idea. Further, capacity is interpreted not as the maximum imaginable, but within reason—earning capacity has quality (rate of compensation) and quantity (number of years, intensity or rate of employment per year) dimensions, and losses may occur in either dimension. For example, injured legal secretaries do not have their capacity calculated as if they were lawyers, or as if they would work to life expectancy. In Christou v. Arlington Park Race Track, (1982) the plaintiff merely had an ambition to become a restaurant owner and simply repeated what he heard some acquaintances say about earnings growth for bartenders. The court deemed this type of “evidence” as inadmissible speculation and could not provide a foundation for a jury instruction on the calculation of lost future earnings based on the average income of restaurateurs and the earnings growth of bartenders. An example of admissible evidence occurred in Long v. Friesland 1988:To sum up, the “capacity” concept permits awards to those unemployed or not in the labor force; it also includes the young without an earnings history (as described in the next section).A commonly observed plaintiff approach appeared in Patel v Brown. Patel could not continue in his pre-injury job, which paid about $50,000 per year. He presented no evidence that he could not work at all post accident, only that he could not continue in his previous job. Defense counsel did not hire a vocational expert to pursue an affirmative defense. The court wrote:The court had no problem with this approach taken by the plaintiff, approving the fact that plaintiffIn the case of injury to a minor or young person commencing a career, proof of past earnings cannot come from an earnings history of the individual. A leading case was Singh v Air Illinois 1988. The decedent had graduated from the University of Illinois in 1982. In late 1982, he and his brother formed a business which involved selling computer office management systems to physicians. At age 26, on his way to deliver a system, he was killed. Plaintiff's economics expert based his testimony upon the earnings of the average male Illinois worker of decedent's age and education level. The Singh court wrote:Illinois courts have consistently realized that self-employed persons can have a diminished earning capacity even though they continue to operate their business. In Buckler v. Sinclair Refining Co. (1966), the court wrote: “An increase in salary in a corporate business where the employee is also the manager and majority shareholder has no essential relationship to earning capacity, and therefore, under this state of the record, evidence of actual income was properly excluded.” (p. 294)There is no jury instruction or case law mandating worklife expectancy, but the concept has been generally accepted by Illinois courts and is found in many opinions. Indeed, by combining IPI 34.01 and its phrase “you may consider that some persons work all their lives and others do not” with IPI 30.07's phrase that present cash value of earnings must be “reasonably certain to be lost in the future,” in our opinion future economic losses should not generally significantly deviate from worklife expectancy. However, case specific facts may with additional evidence allow other scenarios.In Laird v. Illinois Central Gulf Railroad Company, (1991) the court implicitly accepted the concept of worklife expectancy when it wrote “[m]oreover, we do not consider plaintiff's instruction number 18 to be inconsistent with the proposition that future wage loss should be based on work-life expectancy.” (pp. 60, 61)In Branum v. Slezak Construction Co. 1997, the plaintiff economics expert attempted to calculate future losses for an ironworker out to age 65, with no reduction for mortality, or any other adjustment for time out of the labor force. The defense economics expert used worklife expectancy tables, and testified that the actual worklife expectancy would be less. The trial judge barred the plaintiff's economics expert's testimony, and the appeals court wroteWhether this court was impressed with ironworkers having less than an average worklife expectancy, we cannot say, but it is clear that merely running calculations out to age 65 or, worse, to life expectancy, fails reasonable standards.Instructions 30.07, 30.08, 30.09 (personal injury), 31.12 (wrongful death), 32.03 (spousal services) and 32.06 (child's services to age 18) all speak of present value or present cash value, and the need to discount to determine present cash value. The issue has not been litigated in any depth. IPI instruction 34.02 speaks of present value as an amount which, with interest that it could “reasonably be expected to earn” will equal the future losses. In Richardson v. Chapman 1998, the Illinois Supreme Court held that an economics expert's use of net discount rates of 0% and 1% was appropriate and allowable in light of O'shea v. Riverway Towing Co. 1982. Why a federal case would be relevant to an Illinois Supreme Court which had earlier rejected federal guidance on taking income tax deductions into account is unclear. Further, the Riverway court did not comment on the kind (e.g., U.S. Treasury) or duration (e.g., one year) of the securities in its decision; rather it noted that the method behind the calculation required not mixing nominal and real wage and interest rates. The jury instruction IPI 34.02 indicates only that the interest rate must generate a sum that may “reasonably be expected” to be earned.Varilek v. Mitchell Engineering Co. 1990 and Stringham v. United Parcel Service, Inc. 1989, hold that economics experts may take inflation into account or net it out and use real rates. These cases correct American National Bank v. Thompson 1987, which had required nominal interest rates in discounting to present value without permitting nominal wage growth—precisely the error cautioned against in O'shea.The Illinois courts have had little to say regarding fringe benefits other than to consistently recognize them as a part of earning capacity. In Antol v. Chavez-Pereda, the appellate court affirmed a jury award of $636,000 composed of $563,000 in lost earnings and $73,000 for lost fringe benefits in which the main evidence on money earnings and fringe benefits was provided by a union representative. The appellate court referred to the composite of lost money earnings and fringe benefits as simply “lost earnings.” It said, for the recovery of “lost earnings, all that the law requires is evidence that will establish, with a fair degree of probability, a basis for assessing damage.” (p. 573) Therefore, the same evidentiary hurdle and compensatory suitability would seem to apply to what an FE would call “money earnings” and “fringe benefits.”The value of lost benefits in the pre-trial period and the present value of “benefits reasonably certain to be lost in the future” are clear components of IPI 30.07 for damages for personal injury. In addition, IPI 31.01 to 31.07 for the wrongful death of children and adults all mention the loss of benefits. They differ in regard to the presumption of substantial pecuniary loss on the basis of whether the surviving party is a spouse or lineal next of kin (where there is a presumption of loss) or a collateral next of kin (where there is no presumption of loss). Similar recovery can occur in a survival action; but, of course, there can be no double recovery of damages under a survival action and wrongful death for any specific period of time. In a wrongful death action from an accident in 1965, a jury verdict in 1977 (American National Bank and Trust Co. of Rockford, Adm'r of the Estate of Carolyn McClellan v. Robert Bourland, Adm'r of the Estate of Richard Boigenzahn, 1978) included lost fringe benefits. Testimony was properly allowed on the value of those benefits in 1965 and their value in 1977. In determining damages, the appellate court observed that “a jury may consider what a decedent earned or might reasonably be expected to earn in the future” which included the value of fringe benefits. (p. 980)In an FELA case, wherein Illinois courts' rules on substantive issues follow federal law, but also follow the law of the forum for procedural issues, Edwards v. Atchison, Topeka and Santa Fe Railway Company 1997, the court followed the methodology of an Ohio and a Missouri court in remanding an economics expert's calculation of lost Tier II railroad pensions. Citing Rachel v. Consolidated Railroad Corp. (1995) the court quoted it as follows:Rather than use 16.1% as a fringe benefit percentage, the court noted thatThere was no connection between total employer and employee contributions and benefits actually accruing to the plaintiff. Instead, the court required that the plaintiff's lost retirement benefits be calculated by applying the retirement annuity formula in order to arrive at two numbers: (1) the amount plaintiff would have been entitled to if he had continued to work until an assumed retirement age, and (2) the amount to which the plaintiff will actually be entitled. The plaintiffs' lost benefit, according to the court, would be the difference between the two amounts, discounted to present value.Other fringe benefits, such as pension plans in the private sector (especially in defined contribution plans), may not suffer from the gross distortions between costs and benefits present with the Railroad Retirement Board annuity and to a lesser extent with Social Security.In all non-FELA5 PI and WD cases within the State of Illinois, the courts have held that giving a jury instruction that any award was not subject to federal or state income taxes would constitute presumptive prejudicial error which may have tended to influence the amount of the verdict. One early such case was Hall v. Chicago & N.W. Railway Company 1955. This case states what continues to be the Illinois position on subtraction of taxes from lost earnings: they are not subtracted in either personal injury or wrongful death actions.The U.S. Supreme Court case Norfolk & Western Ry. Co. v. Liepelt 1980, required that income taxes be considered in FELA cases. Gulf Offshore Co. v. Mobil Oil Corp. (1981), followed a year later, and the holding was extended to all federal common law cases. It became natural to ask whether Illinois would conform its state law to the federal standard. The answer was articulated in Klawonn v. Mitchell 1985, in the form of a ruling on jury instructions. The Illinois Supreme Court held that defendants were not entitled to a jury instruction that tort awards are not subject to federal or state income taxes. The court said: “In our opinion proof of pecuniary loss, not simple under the best of circumstances, should not be rendered more complex by injecting the question of income tax or other extraneous factors.” (p.458) Justice Blackmun's Liepelt dissent became the majority position in Illinois. Why income taxes should be excluded from the purview of expert opinion when other subtle areas such as interest rates, wage growth, worklife expectancy and an appropriate earnings base are allowed is difficult to justify. We find the Klawonn dissent of Justice Ryan quotable:The Illinois affirmation of the holding of Klawonn on jury instructions was extended to the questioning of the economics expert in his calculations in Suich v. H & B Printing Company, Inc. (1989), citing McCann v. Lisle-Woodridge Fire Protection District 1983. Suich v. H & B Printing Company, Inc. held that “evidence of the effect of taxes on income loss should be prohibited in a personal injury action.”Like fringe benefits, the Illinois courts have had little to say regarding household services other than to consistently recognize them as a part of damages in personal injury and wrongful death. The comments attached to IPI 30.07 (for lost earnings and profits for adults due to personal injury) indicate that “homemaker's lost services are a proper element of damages if value of lost services is established” and cite McManus v. Feist 1966. However, the appellate court in that case upheld a verdict that did not include damages for lost household services because no evidence was presented at trial on the value of such se