Self-Consumption in Wrongful Death Cases: Decedent or Family Income?

Abstract

In most states, it is necessary to deduct self-consumption of the deceased when estimating lost earning capacity from wrongful death. The impact whether this deduction is taken only from deceased earnings or from total family income can be substantial. As an example, assume that the now deceased wife earned $30,000 while the surviving husband earned $100,000. For simplicity, assume that self-consumption is 30% of earnings regardless of the level of earnings. Self-consumption based upon the decedent’s income is $9,000 and the loss would be $21,000. However, self-consumption based upon family income is .3(30,000 + 100,000) = $39,000 and the loss would be -$9,000. It would seem that somehow the surviving spouse is better off financially now that their spouse has died. Such incongruous results are some of the issues that have created a split among forensic economists concerning whether consumption should be based upon income of the family or income of just the decedent. In a recent survey (Brookshire, et al., 2006), the following question was asked: “Given no legal constraints, do you deduct consumption from the decedent’s income or family income?” 53.4% indicated they would use the decedent’s income and 46.6% indicated they would use family income. Comments provided showed a wide range of reasons for supporting either side. For example, several stated that using decedent’s income was a matter of fairness, while those using family income cited the fact that published studies measuring self-consumption are based upon family income. A similar question, with the addition of a numerical example for clarity, was asked in the 2009 survey and the numbers changed significantly. 38.7% indicated they would use the decedent’s income while 61.3% would use total family income, a swing of about 15 percentage points. Still, there is no consensus concerning this question among forensic economists. (Brookshire, et al., 2009) There may be little difference between using the decedent’s income versus family income. If, say, the husband died and he was the sole breadwinner, then decedent’s income and family income are identical. Further, there would be only a small difference if the surviving spouse worked part-time or at a relatively low-paying job. On the other hand, if the deceased were the individual with relatively low earnings in the labor market, then the difference would be significant.