Smith.injury.nj.Redacted.tinari..405

REDACTED REPORT

AN APPRAISAL OF ECONOMIC LOSSSUFFERED BY MARY SMITH

Frank D. Tinari, Ph.D.

TINARI ECONOMICS, INC.220 South Orange Avenue

Suite 203Livingston, NJ 07039

973 / 992-1800 phone973 / 992-0023 fax

www.TinariEconomics.com

November 5, 2004

TABLE OF CONTENTS

Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Purpose of Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Opinion of Economic Damages . . . . . . . . . . . . . . . . . . . . 2

Background Facts and Assumptions . . . . . . . . . . . . . . . . 3

Components of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Net Earnings in Past Years . . . . . . . . . . . . . . . . . . . . . . . 7

Net Earnings in Future Years . . . . . . . . . . . . . . . . . . . . . 10

Pension Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Household Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Social Security Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Exhibit

Appendix of Tables

Qualifications Profile

Statement of Ethical Principles and Principles of ProfessionalPractice

Certification

This is to certify that I am not related to any of the parties to subject action, nor do I haveany present or intended financial interest in this case beyond the fees due for professionalservices rendered in connection with this report and possible subsequent services. Further,I certify that my professional fees are not contingent on the outcome of this matter but arebased on the time expended on the services provided to counsel in connection with subjectaction.

This is to further certify that all assumptions, methodologies, and calculations utilized in thisappraisal report are based on current knowledge and methods applied in the determinationof projected pecuniary losses.

In addition, this is to further certify that I pledge to abide by the spirit and the letter of theStatement of Ethical Principles and Principles of Professional Practice of the NationalAssociation of Forensic Economics, a copy of which is attached to this report.

Frank D. Tinari, Ph.D.

SMITH / Law Firm page 2

Purpose of Appraisal

Counsel requested us to prepare an evaluation of the economic damages suffered by MarySmith as a result of her injury. Background facts regarding the plaintiff were provided in apacket of documents pursuant to this matter. Facts from these sources as well as additionalinformation gathered from published documents are fully referenced at the point of use inthis report.

The purpose of this report, therefore, is to provide a written appraisal of economic loss in thecase of Mary Smith.

Opinion of Economic Damages

Within a reasonable degree of economic certainty, and based on the analysis contained in thisreport, it is our professional opinion that the total present value of the pecuniary lossesresulting from injury to suffered by Mary Smith amounts to between

NINE HUNDRED TWENTY-ONE THOUSAND,THREE HUNDRED THIRTY-FOUR DOLLARS,

AFTER TAXES

[ $921,334 ]

and

NINE HUNDRED NINETY-FIVE THOUSAND,ONE HUNDRED THIRTY-ONE DOLLARS,

AFTER TAXES

[ $995,131 ]

This range of estimated losses is a function of the degree of plaintiffs impairment inperforming household services, a matter ultimately to be determined by the trier-of-fact.Further, these amounts do not take into account the ramifications of intangible, non-economic losses such as human suffering, love, emotional feelings, or consortium that mayhave been suffered by plaintiff or family members.


Background Facts and Assumptions

1) Plaintiff: Mary Smith; female2) Date of birth: May 27, 19603) Date of incident: March 24, 20024) Residence: New Jersey5) Education: some college6) Prior health: excellent 7) Spouse: John (dob: 4/15/62)8) Child: Amy (dob: 10/18/95)

9) Life expectancy: as of the date of injury, persons of Mrs. Smiths age (41.82 years) live,on average, an additional 35.87 years. [SOURCE: Rules Governing the Courts of the Stateof New Jersey, 2004 Edition, Appendix I.] Therefore, persons in plaintiff's statistical cohorthave an expected total life span averaging 77.69 years, implying a statistical date of death ofJanuary 24, 2038.

10) Statistical retirement age: as of the date of injury, females of Mrs. Smiths age (41.82years) and level of education (some college) have 20 years to retirement. [SOURCE:Tamorah Hunt, Joyce Pickersgill, and Herbert Rutemiller, "Median Years to Retirement andWorklife Expectancy for the Civilian U.S. Population" (Prepared Using 1992/93 BLS LaborForce Participation rates), Journal of Forensic Economics, 10(2), 1997, pp. 171-205,Appendix A - Table 5, by interpolation.] Applying the years to retirement results in astatistical retirement age of 61.82 years, occurring on March 24, 2022. For purposes of thisreport, we assume plaintiff would have retired at age 65, occurring on May 27, 2025. Thisis based on the normal retirement age noted in the Company Pension Plan. [SOURCE: Focuson you: Compensation, Benefits, Retirement.]

11) Expected working years: worklife expectancy tables provide statistics descriptive of theactual working life experience of the civilian population by age, employment status, andschooling. As of the date of injury, females of Mrs. Smiths age/education/labor-force-activity statistical cohort average 17.43 years of remaining labor force activity. [SOURCE:James Ciecka, Thomas Donley, and Jerry Goldman, A Markov Process Model of Work-LifeExpectancies by Educational Attainment Based on Labor Market Activity in 1997-98",Journal of Legal Economics, Volume 10, Number 3, Winter 2000-1, pp. 8-20, byinterpolation.]

12) Worklife-to-retirement ratio: the number of years from March 24, 2002, until Mrs.Smiths statistical retirement date (20 years in this case) exceeds the number of expected


remaining working years (17.43 in this case). Thus arithmetically, the number of years ofworklife for this statistical cohort comprises 87.15% of the total remaining number of yearsuntil retirement.

13) Occupation and employment: Mrs. Smith had been employed by the Company locatedin New Jersey, since 1989. At the time of her injury, plaintiff was working part-time as a dataquality analyst. [SOURCE: responses to Tinari Economics Fact-Finding Questionnaire.]

In August 2001, plaintiff changed her employment status from full-time to part-time with theintention to be more available for her daughter since Amy was attending kindergarten.Plaintiff states that she had a verbal agreement with her supervisor and it was understood thatshe should regain her full-time status in September 2002 when her daughter entered firstgrade. Plaintiff was injured in an automobile accident on March 24, 2002, six months priorto her scheduled return to a full-time capacity. [SOURCES: letter from counsel, dated April22, 2004, and letter from plaintiff, dated July 12, 2004.] For purposes of this analysis, weassume, had she not been injured, plaintiff would have returned to her full-time positionbeginning September 1, 2002.

14) Earnings history: [SOURCE: plaintiff's federal income tax returns, and W-2 Wage andTax Statements.]

Year W-2 Earnings

1999 $ 35,764

2000 36,132

2001 36,070 *

2002 ^ 23,836

* plaintiff began part-time work in August ^ injury date: March 24

Based on review of plaintiff's paystubs, her hourly rates were $22.36 and $23 for 2001 and2002, respectively. Further, her paystubs indicate that she worked about 37.5 and 28.5 hoursper week in the periods July 28, 2001 (full-time), and October 20, 2001 (part-time),respectively. [SOURCES: plaintiff's paystubs, dated July 28, 2001, October 20, 2001, andJune 29, 2002.] Given the aforementioned and plaintiffs previously noted intention to returnto full-time status, we assume that plaintiff would have worked 28.5 hours per week in a part-time capacity through August 31, 2002, returning to full-time status (37.5 hour per week)


effective September 1, 2002. Thus, we establish plaintiffs part-time earnings capacity at$34,086 ($23 x 28.5 hours x 52 weeks) in 2002 dollars and her full-time earnings capacityat $44,850 ($23 x 37.5 hours x 52 weeks) in 2002 dollars. Should other information besupplied, we could issue a supplementary report upon request.

15) Other sources of income: it is reported that plaintiff had received a total of $41,600 inloss-of-wage benefits from her automobile insurance carrier (Insurance Company) as ofAugust 24, 2004. [SOURCE: letter from Senior Claims Representative, Insurance Company,dated August 24, 2004.] We do not apply this income as a source of mitigation in this report.

Subsequent to a hearing on October 1, 2004, plaintiff was awarded Social Security Disabilitybenefits. [SOURCE: Notice of Decision from Social Security Administrative Law Judge,undated.] It has been reported that plaintiff is expected to receive $1,200 per month.[SOURCES: letter from counsel, dated October 6, 2004, and facsimile transmission fromcounsel, dated October 14, 2004.] For purposes of this report, we assume that plaintiff is toreceive this benefit retroactively effective to a date six months after her date of injury(September 1, 2002). Should more detail information be provided we could then issue asupplementary report, upon request.

16) Functionality and employment prospects: Dr. Murray opines that plaintiff would not bereturning to work due to the extent of her discogenic pain and myofascial pain. He furtherstates that plaintiff is unable to work because the patient has excessive pain with evenminimum movement and work, at this time, would not be appropriate. [SOURCE: letterfrom George Murray, M.D., dated June 2, 2003.]

In his report on plaintiffs pain management re-evaluation, Dr. Singer states: I agree withDr. Murray that I do not believe that she would be able to return to work at this time. Hefurther states: I do not believe that she would be able to hold down a job at this point, nordo I anticipate this in the future. [SOURCE: outpatient reevaluation of Smith, Maryprepared by Brian Singer, M.D., dated August 27, 2004.]

Based on the aforementioned medical opinions, and the approval for Social SecurityDisability benefits, this appraisal assumes that plaintiff will not return to the work force.Should additional information be provided indicating that plaintiff has the ability to returnto work in some capacity, we could provide a supplementary report at that time.

17) Fringe benefits: as a full-time employee of the Company, Mrs. Smith received a broadarray of fringe benefits. These included family health insurance (medical, and prescription),life insurance (three times salary), long-term disability, and a pension plan (more on this


below). Plaintiff also reports participating in the company 401(k) plan. She contributed seven(7) percent of earnings, and her employer matched $0.65 for every dollar contributed, up to7% of salary. [SOURCES: Questionnaire, op. cit., Compensation & Benefits Statement -12/31/1999, and The Company - Draft 204(h) Notice for Transition Group, dated May 10,2002.] Subsequent to her termination, plaintiff obtained coverage through her spousesemployer-provided health insurance plan. [SOURCE: letter from counsel, dated July 14,2004.] As a part-time employee, plaintiffs fringe benefits included a 401(k) plan, andpension. [SOURCES: plaintiffs Compensation & Benefits Statement - 3/31/2002, and FocusOn You, op. cit.]

Given the prospective nature of insurance, the loss of fringe benefits in past years is limitedto out-of-pocket medical costs (none reported), and the 401(k) plan match (4.5%). Fringebenefits as a full-time employee are valued at 5.5% of gross earnings based on combined lifeand long-term disability insurance (1%), and 401(k) (4.5%). Given that plaintiff is currentlycovered by her husbands employer-provided health insurance, we do not consider a loss offuture health benefits in this report. 18) Pension benefits: plaintiff participated in the Retirement Income Plan for the Company,an employer-funded pension plan. Effective on July 1, 2002, the plan has been amended andadapted a new pension benefits formula. At the time of her injury, plaintiff was fully-vested.[SOURCES: Questionnaire, ibid, and Draft 204(h) Notice, op. cit.] As the result of thisamendment, plaintiffs pension benefit is the sum of the pre-June 30, 2002 benefit and thepost-June 30, 2002 benefit. For purposes of this report, we calculate the potential pensionincome losses to plaintiff beginning on July 1, 2002, through her projected retirement age 65,based upon her projected pre-injury full-time employment.

19) Job-maintenance expenses: we assume that, as a result of this injury, plaintiff will not beemployed. Her earnings, therefore, are adjusted (downward) to account for those jobmaintenance expenses normally incurred in maintaining employment. These expensestypically include transportation expenses, clothing, meals outside the home, and other costs.For purposes of this analysis, we estimate plaintiffs job maintenance expenses at five (5)percent of after-tax earnings.

20) Household services: prior to her injury, plaintiff reportedly performed cooking, cleaning,doing laundry, shopping, painting the house, mowing the law, gardening, removing snow,washing cars, and performing other house chores in and around her single family home. Shealso paid the family bills. Post-injury, plaintiff performs limited cleaning, cooking, andlaundry. She needs help in performing shopping and washing cars. She does very little


gardening work. She is still paying bills but the process takes longer than before. [SOURCE:notes from Mary Smith, dated July 12, 2004.]

Based upon the information above, we calculate a range of loss of ability to performhousehold services of between forty (40) and sixty (60) percent. The exact degree of loss is left toa determination by the trier-of-fact upon a full hearing of all relevant facts in this matter. We reservethe right to amend this report should further information become available.

Components of Loss

The pecuniary value of loss resulting from Mrs. Smiths injury is estimated by considerationof the following components of loss:

1. net earnings in past years2. net earnings in future years3. pension income4. household services

Each of these components is analyzed separately in the following sections of this appraisalreport.

Loss of Net Earnings in Past Years

This loss component consists of the net earnings Mrs. Smith would have been able to earn,had she not been injured, from the date of the injury to the present time. As stated in theBackground Facts and Assumptions section, Mrs. Smith's pre-injury annual earnings capacityis established at $34,086 through the end of August 2002 in her part-time position and at$44,850 thereafter in a full-time position (both in 2002 dollars). To project plaintiffs annualearnings for the years 2003 and 2004, we apply an annual growth rate of 2.6 percent to herestablished earnings capacity, reflecting wage growth trends in recent years. [SOURCE:Hours and earnings in private nonagricultural industries, 1959-2003, Economic Report of theP r e s id e n t , F e b ru a ry 2 0 0 4 , T a b le B -4 7 , h t t p : / /w w w .g p o a c c e s s .g o v /usbudget/fy05/sheets/b47.xls.] Applying the aforementioned, we calculate the following:


Year

Gross EarningsCapacity[@ 2.6%]

2002 $ 34,086 ^

2002 44,850 *

2003 46,016

2004 47,213

^ part-time earnings rate* full-time earnings rate

Gross earnings are adjusted to take into account several factors that help determine netincome lost. An adjustment for worklife expectancy is necessary because the number of yearsof actual working life is generally less than the total number of years until retirement. Theestimated remaining years of worklife, given in the Background Facts and Assumptionssection above, amounts to 87.15% of the total remaining number of years until retirement forpersons of plaintiff's statistical cohort.

An adjustment to gross earnings typically made in such appraisals takes into considerationthe likelihood of periods of unemployment during a person's expected working life.Unemployment is an economy-wide phenomenon, but various statistical cohorts of the laborforce experience different rates of unemployment. This adjustment is usually necessary sinceunemployment is not taken into consideration by worklife expectancy figures. The latterindicate the number of expected years of participation in the labor force, whereasunemployment refers to periods of no work of those persons already active in the labor force.

The unemployment adjustment factor is calculated by first considering a time period in theimmediate past that is comparable to the number of years until the projected retirement date.Between 1980 and 2003, females in plaintiffs age cohort experienced an unemployment rateaverage 4.1% per annum. [SOURCE: http://data.bls.gov/cgi-bin/srgate.]

Moreover, since state unemployment compensation benefits serve to replace a portion ofmost workers' lost earnings during periods of unemployment, the percentage is adjusteddownward from 4.1% to 3%. Thus, a downward adjustment of the estimated gross earningslosses is made using that percentage to represent the probability of unemployment (and,hence, lost earnings) during the remaining years of labor force activity.


A reduction of gross earnings is made to account for the likely amounts of federal and stateincome taxes that would have been paid by the plaintiff on her projected earnings. Taxburdens vary in accordance with numerous factors that differ from taxpayer to taxpayer.Hence, it is quite difficult to ascertain the relevant liabilities in any individual instancewithout extensive knowledge of such factors. Given her projected level of earnings (full-time), and plaintiffs federal income tax returns, we estimate her effective combinedfederal-state rate at fifteen (15) percent.

Another adjustment takes into account the value of fringe benefits and out-of-pocket medicalexpenses incurred (none reported). As stated in the Background Facts and Assumptionsection, the assumed employer-matching portion (4.5%) of the 401(k) plan is applied toplaintiffs earnings in this appraisal report for the past years. The loss of fringe benefits forfuture years is estimated at 5.5%. This is based upon the loss of 401(k) plan (4.5%), andcombined long-term disability and life insurance (1%).

A final adjustment taken into account is job maintenance expenses that plaintiff would havecontinued to incur in maintaining her employment. These expenses typically includetransportation expenses, clothing, meals outside the home and other costs. We estimate theseexpenses at 5% of earnings.

Algebraically, the preceding adjustments are summarized as follows:

past years future years

Gross Earnings Base 1.0000 1.0000x Worklife adjustment 0.8715 0.8715= Worklife-Adjusted Earnings 0.8715 0.8715 x (1 - 3% unemployment probability) 0.9700 0.9700 = Adjusted Earnings Base (AEB) 0.8454 0.8454x (1 + 4.5%, 5.5% fringe benefits) AEB x 1.0450 1.0550x (1 - 15% tax liabilities (TL)) AEB x 0.8500 0.8500 = Tax/Fringe Adjusted Base 0.7566 0.7650x (1 - 5% job maintenance expenses) (AEB - TL) x 0.95 0.9500 = Net Earnings Factor 0.7207 0.7291

Applying the preceding information, net earnings losses through the end of 2004 are derivedas follows:


Time Period

Projected Gross Earnings

Capacity [@ 2.6%]

Projected Net Earnings

Capacity[(2) x 72.07%]

(1) (2) (3) 2002.80 $30,929* $22,291 2003 46,016 33,164 2004 47,213 34,026

total: $89,481

* application of part-annual earnings of $34,086 through 8/31 and $44,850 thereafter

Loss of Net Earnings in Future Years

Future losses are calculated beginning January 1, 2005, and continue until plaintiffsprojected date of retirement on May 27, 2025. Plaintiffs 2004 gross earnings capacity isestablished at $47,213. A growth rate of 4% per annum, reflecting expected wage growth,is applied through her projected retirement date. [SOURCES: Economic Assumptions andMethods, 2004 Annual Report of the Board of Trustees of the Federal Old-age and SurvivorsInsurance and Disability Insurance Trust Funds, Table V.B1, http://www.ssa.gov/OACT/TR/TR04/V_economic.html#131323, and Hours and earnings in private nonagriculturalindustries, 1959-2003, Economic Report of the President, February 2004, Table B-47,http://w3.access.gpo.gov/usbudget/fy2005/sheets/b47.xls.]

Regarding future projected losses, it is possible to set aside a lump-sum monetary amount atthe present time such that the annual flow of interest earnings from it plus a part of theprincipal would generate the equivalent amount of lost financial sums projected for eachsuccessive year under consideration. In other words, money has a time value. Individual willforgo the use of a dollar today only if they expect that they will receive a larger amount in thefuture. This implies that pecuniary losses expected to be suffered at some future point in timeare worth less in today's dollars. Thus, to calculate the present value of the required lump-sum amount, it is necessary to establish a reasonable discount rate factor.

The tax-free return on Aaa municipal bonds serves as the basis of our discount rate. Over thepast 5 years, the yield on Aaa municipal bonds of varying maturities has averaged 5.41%.


Over the past 10 years, it has averaged 5.7%, and over the past 20 years, the yield hasaveraged 7.08%. [SOURCE: Thomas Ireland, Addendum: Historical Net Discount Rates -An Update Through 2001, Table 2. Average Values for Various Interest Rates and GrowthRates in the CPI and the MCPI for the Number of Years Shown as Ending in 2001, Journalof Legal Economics, Volume 10, Number 3, Winter 2000-01, Table 2, pp. 65-66.] In light ofhistorical municipal bond returns and current financial market trends, we select 6% as theappropriate discount rate.

We note that interest earnings from any award in this case will be subject to future incometaxation in each subsequent year. This poses a problem since the award will be, in effect,taxed indirectly when no provision has been made for this tax burden. Thus, it is assumed thatany lump-sum award, will be used to purchase investment instruments that will provide aflow of nontaxable payments to plaintiff.

Application of the preceding information yields a total present value of plaintiffs future netearnings loss, calculated as follows:

(see table on following page)


Time Period

Projected Gross Earnings

Capacity[@ 4%]

Projected Net Earnings

Capacity[(2) x 72.91%]

Present Value [@ 6%]

(1) (2) (3) (4) 2005 $ 49,102 $ 35,800 $ 35,800 2006 51,066 37,232 35,125 2007 53,109 38,722 34,462 2008 55,233 40,270 33,812 2009 57,442 41,881 33,174 2010 59,740 43,557 32,548 2011 62,130 45,299 31,934 2012 64,615 47,111 31,331 2013 67,199 48,995 30,740 2014 69,887 50,955 30,160 2015 72,683 52,993 29,591 2016 75,590 55,113 29,033 2017 78,614 57,317 28,485 2018 81,758 59,610 27,948 2019 85,029 61,994 27,420 2020 88,430 64,474 26,903 2021 91,967 67,053 26,395 2022 95,646 69,735 25,897 2023 99,472 72,525 25,409 2024 103,451 75,426 24,929 2025.38 40,884 29,808 9,091

total: $ 610,181

Loss of Pension Income

As the result of her injury, we assume that plaintiff will not return to work. As stated in theBackground Fact and Assumptions, plaintiffs pension losses begin on July 1, 2002, given that thenew amended plan guidelines become effective on that date. Assuming plaintiff would have retiredat the plans normal retirement age 65 years, we project that she would have accrued an additional22.88 years of benefit service from 7/1/2002 through her projected retirement date but for her injury.This assumes that plaintiff would have met the pension eligibility rule in each of these years.


As provided in the Company Pension Plan booklet (Focus On You), the formula for themonthly pension benefits at normal retirement age 65 is as follows:

1.2% x FAP (final average pay) x Benefit Service

FAP is the average monthly earnings based on the five highest years of base salary in the last10 years prior to retirement. Benefits service is the number of service years. [SOURCE: FocusOn You, op. cit.]

Using plaintiffs projected earnings for the years 2015 through 2024, we calculate plaintiffsFAP at $7,983 at her projected retirement age of 65 years. Plaintiffs monthly pension incomeis calculated at $2,192 (1.2% x $7,983/month x 22.88 years of benefit service).This isequivalent to $26,304 annually.

Based on the preceding analysis, the following table shows our calculations of pensionincome loss (based on a single life annuity payout option) beginning on May 27, 2025,through plaintiffs statistical date of death.

Time PeriodAnnual

Pension IncomePresent Value

[@ 6%]

2025.62 $16,308 $ 5,085

2026 26,304 7,737

2027 26,304 7,299

2028 26,304 6,886

2029 26,304 6,497

2030 26,304 6,129

2031 26,304 5,782

2032 26,304 5,455

2033 26,304 5,146

2034 26,304 4,855

2035 26,304 4,580

2036 26,304 4,321

2037 26,304 4,076

2038.06 1,578 231

total: $ 74,078


Loss of Household Services

In the United States, time devoted to work is usually compensated indollars and cents. A major exception is household work. Those who dothis work include most of the women, children and men in our society. Asignificant cost of this work to the family is time, and not just a little of it! Household work is indispensable to the functioning of the family andsociety. It generally takes place outside the context of the business world,however, and therefore time spent at it is not normally given a dollarvalue. ... Household services take time to provide, if not the housewife'sthen the time of someone else. ... When the household services are turnedover to someone else to produce, they have a money value--the value ofthe time spent by the worker. The same services are just as valuable whenprovided by a family member. Consequently, a money value can be givento the services... [SOURCE: William H. Gauger and Kathryn E. Walker,The Dollar Value of Household Work. Information Bulletin 60, NewYork State College of Human Ecology, Cornell University, September1980, pages 1, 3.]

Studies have been conducted to determine the extent and value of household servicesperformed by various members of the family unit. According to a well-known study, theamount of household services provided by a married female where both husband and wifeare employed in the labor force varies with the number and age of dependent children, asshown in the table below. [SOURCE: David H. Ciscel and David C. Sharp, "HouseholdLabor in Hours by Family Type," Journal of Forensic Economics, 8(2), 1995, pages 117 &119, Tables 1 and 3.]

Moreover, with advancement in years, physical strength naturally diminishes. As people age,the probability of their being able to perform all of the household chores which were oncedone also diminishes. The elderly are more prone to slips, falls and various disablingillnesses. Statistical research provides data on the probability of such disabling occurrences.Therefore, we reduce the annual hours of household services by 11.3% between the ages ofsixty-five (65) and seventy-five (75) and by 30.7% after age seventy-five (75) to account forthe probability of plaintiff becoming disabled over her remaining statistical life expectancy.[SOURCE: U.S. Department of Commerce, Current Population Reports, Disability,Functional, Limitation, and Health Insurance Coverage: 1984/85, Household EconomicStudies, Series P-70, No. 8, Table G, p. 8.]


Application of the preceding information yields the adjusted number of hours assumed foreach time period as follows:

Number/Age of

YoungestChild

Age ofParent

AnnualNumber

ofHours

Applicable Time Period

(1) (2) (3) (4)1 / > 6 < 11 under 65 947 03/14/02 - 10/07/071 / >11 under 65 936 10/08/07 - 10/07/13n/a under 65 838 10/08/13 - 05/16/25n/a 65 to 74 743 05/17/25 - 05/16/35n/a over 75 581 05/17/35 - 01/24/38

Turning to the monetary value of these hours, average hourly earnings of nonsupervisoryworkers in the Private Service-Providing industry sector were $14.56 in 2002, and $14.96in 2003. [SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, Monthly LaborReview, May 2004, Table 25, p. 88.] To obtain a corresponding value for 2004, we apply agrowth rate of 2.7%, which is the rate exhibited by the data between 2002 and 2003. Thisyields a wage rate of $15.36 for 2004.

The pecuniary value of the household services that would have been provided through thepresent time is provided in the following table:

YearPortionof Year

AnnualNumber of

HoursAnnual Value

2002 0.80 758 $ 11,031

2003 1.00 947 14,167

2004 1.00 947 14,546

total: $ 39,744

Services in future years are calculated beginning January 1, 2005, and extend until Mrs.Smiths statistical date of death. To project future values, we apply the assumed annualgrowth rate of 4%.


To calculate the present value of the projected figures, it is necessary to establish a reasonablediscount rate factor. We utilize 6% per annum as explained in the previous section.

Application of the aforementioned information yields a total present value of futurehousehold services as calculated below:

Year

AnnualHours ofService

Annual Value[@ 4%]

Present Value[@ 6%]

2005 947 $ 15,128 $ 15,1282006 947 15,733 14,8422007 944 16,318 14,5232008 936 16,819 14,1222009 936 17,492 13,8552010 936 18,191 13,5942011 936 18,919 13,3372012 936 19,676 13,0862013 913 19,970 12,5302014 838 19,053 11,2782015 838 19,815 11,0652016 838 20,608 10,8562017 838 21,432 10,6512018 838 22,290 10,4502019 838 23,181 10,2532020 838 24,108 10,0602021 838 25,073 9,8702022 838 26,076 9,6842023 838 27,119 9,5012024 838 28,203 9,3222025 779 27,270 8,5032026 743 27,047 7,9562027 743 28,129 7,8062028 743 29,254 7,6592029 743 30,424 7,5142030 743 31,641 7,3722031 743 32,906 7,2332032 743 34,223 7,0972033 743 35,592 6,9632034 743 37,015 6,8312035 643 33,292 5,796


Year

AnnualHours ofService

Annual Value[@ 4%]

Present Value[@ 6%]

2036 581 $ 31,306 $ 5,1422037 581 32,559 5,0452038.06 38 2,187 320

total: $329,241

Correspondingly, in light of these findings, the range of losses, based on a diminution ofability to perform household services of between forty (40) and sixty (60) percent, isprovided in the following table:

Value of HouseholdServices

Assumed Range of Loss

40% 50% 60%

Past Years[$39,744] $15,898 $ 19,872 $ 23,846

Future Years[$329,241] 131,696 164,621 197,545

Total Loss $147,594 $184,493 $221,392


Social Security Income

As stated in the Background Facts and Assumptions section of this report, plaintiff isexpected to receive an award of $1,200 per month (in 2004 dollars) effective September 1,2002.

Social Security payments are subject to an annual Cost of Living Adjustment (COLA). Forpurposes of this appraisal report, 2.6%, 1.4% and 2.7% COLAs are applied to the years of2002, 2003, and 2005, respectively. [SOURCES: http://www.ssa.gov/OACT/COLA/colaseries.html, and http://www.ssa.gov/pressoffice/pr/ 2004cola-pr.htm.] To estimate futurebenefits for years 2006 and 2007, and subsequent to 2007, we apply projected COLA factorsof 1.8% and 2.8%, respectively. [SOURCE: Economic Assumptions and Methods, 2004Annual Report of the Board of Trustees of the Federal Old-age and Survivors Insurance andDisability Insurance Trust Funds, Table V.B1, http://www.ssa.gov/OACT/TR/TR04/V_economic.html#141324.]

Recent New Jersey case law has established that the court recognizes that, if Social Securitybenefits were treated as mitigating income, plaintiff would be entitled to a credit for theincome tax portion of Social Security contributions made or that could have been made bythe plaintiff for the time period for which Social Security Disability payments would havebeen deducted as offsetting payments. [SOURCE: Woodger v. Christ Hospital, 364 N.J.Super. 144, decided November 10, 2003.] The current Social Security (FICA) maximum rateis 7.65%, made up of two components:

1. Social Security benefits (OASDI) at a 6.20% tax rate2. Medicare at a 1.45% tax rate

Therefore, we credit an amount equal to 6.20% of earnings for each year that Social Securitypayments are deducted as an offset to earnings losses. These calculations are shown in aseparate exhibit attached to this report.


Summary

We now combine the previously calculated losses in this case to arrive at the following totalloss value in present dollar amounts:

Range of Value of Loss 40%* 50%* 60%* Components of Loss

$ 89,481 $ 89,481 $ 89,481 net earnings in past years 610,181 610,181 610,181 net earnings in future years 74,078 74,078 74,078 pension income

15,898 19,872 23,846 *household services in past years 131,696 164,621 197,545 *household services in future years

$921,334 $958,232 $ 995,131 total present value of loss

* degree of loss of ability to perform household services

Each loss figure presented above is an adjusted present value amount (in 2005 dollars),representing a lump-sum payment made at present needed to generate a flow of paymentssufficient to compensate for the losses in each year of loss included in this appraisal. Inaddition, please note that pre-trial or pre-judgment interest has not been calculated. Theseinterest losses are typically determined at the time of trial and would be in addition to thelosses calculated in this appraisal report.

The preceding findings are based on information provided to us as of this date. They aresubject to revision should additional information be forthcoming that would change any factsor assumptions upon which this analysis rests. We also note that damages are anapproximation and are provided by the economic expert as a guide to the trier-of-fact.Because a loss stream cannot be computed with absolute confidence, a lump-sum paymentrepresents a rough and ready attempt to put the plaintiff in the same position had the injurynot occurred. [SOURCE: Jones & Laughlin Steel Corp. v. Pfiefer, (1983), 103 S. Ct. at2555.]

Exhibit

Mary Smith

Social Security IncomePast Years

Year

SocialSecurityBenefits

[@ COLA]

SocialSecurity

Tax Credit[6.2% ofEarnings]

SocialSecurity Net

Income[(2) - (3) ]

(1) (2) (3) (4)

2002.80 $ 4,948* $ 1,534 $3,414

2003 14,604 2,853 11,751

2004 14,400 2,927 11,473

total: $26,638

* assume award begins on September 1

Mary Smith

Social Security Income Future Years

Years

SocialSecurityBenefits

[@ COLA]

SocialSecurity

Tax Credit[6.2% ofEarnings]

SocialSecurity

NetIncome

[(2) - (3)]

PresentValue

[@ 6%]

CumulativePresentValue

(1) (2) (3) (4) (5) (6)

2005 $ 14,789 $ 3,044 $ 11,745 $ 11,745 $ 11,745

2006 15,055 3,166 11,889 11,216 22,961

2007 15,326 3,292 12,034 10,710 33,671

2008 15,755 3,424 12,331 10,354 44,025

2009 16,196 3,561 12,635 10,008 54,033

2010 16,650 3,703 12,946 9,674 63,708

2011 17,116 3,852 13,265 9,351 73,059

2012 17,595 4,006 13,590 9,038 82,097

2013 18,088 4,166 13,922 8,735 90,832

2014 18,595 4,333 14,262 8,442 99,273

2015 19,115 4,506 14,609 8,158 107,431

2016 19,650 4,686 14,964 7,883 115,314

2017 20,201 4,874 15,327 7,617 122,931

2018 20,766 5,068 15,698 7,360 130,291

2019 21,348 5,271 16,077 7,111 137,402

2020 21,945 5,482 16,463 6,870 144,271

2021 22,560 5,701 16,859 6,636 150,908

2022 23,192 5,929 17,262 6,411 157,318

2023 23,841 6,167 17,674 6,192 163,510

2024 24,509 6,413 18,095 5,981 169,491

2025.38 8,112 2,952 5,160 1,609 171,100

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