Calculating Net Pecuniary Loss Under Colorado Wrongful Death Law
| Publication year | 1995 |
| Pages | 1257 |
1995, June, Pg. 1257. Calculating Net Pecuniary Loss Under Colorado Wrongful Death Law
This article focuses on net pecuniary loss as an element of economic damages available in a wrongful death action under Colorado law. Although the net pecuniary loss standard is well settled under Colorado wrongful death law, it remains for the practitioner to transform this standard into a logical formula for the calculation of damages. This article is intended to assist practitioners in presenting or defending wrongful death claims by suggesting a formula for the calculation of net pecuniary loss and parameters of evidence relevant to such a calculation.
It is important to note that certain statutory provisions not discussed herein may restrict recovery of wrongful death damages in certain situations.(fn1) For purposes of simplicity, this article analyzes net pecuniary loss assuming decedent to be an adult provider rather than a dependent minor child.(fn2)
In Colorado, a wrongful death claim may be based on either CRS § 13-21-201 or § 13-21-202.(fn3) Because of its narrow scope, § 201 rarely serves as the basis for wrongful death lawsuits; instead, most are based on § 202, which provides:
When the death of a person is caused by a wrongful act, neglect, or default of another, and the act, neglect, or default is such as would, if death had not ensued, have entitled the party injured to maintain an action and recover damages in respect thereof, then, and in every such case, the person who or the corporation which would have been liable, if death had not ensued, shall be liable in an action for damages notwithstanding the death of the party injured.(fn4)
The damages available under § 202 are set forth in § 203, which states:
Under this section, decedent's survivors(fn6) are entitled to recover both noneconomic and economic damages together with prejudgment interest.(fn7)All damages accruing under section 13-21-202 shall be sued for and recovered by the same parties and in the same manner as provided in section 13-21-201, and in every such action the jury may give such damages as they may deem fair and just, with reference to the necessary injury resulting from such death, including damages for noneconomic loss or injury....(fn5)
Noneconomic damages include survivors' grief, loss of companionship, impairment of quality of life, inconvenience, pain and suffering and emotional distress.(fn8) Under Colorado law, damages for noneconomic loss are capped at $250,000.(fn9) This cap on noneconomic damages applies to each wrongful death claim, irrespective of the number of survivors.(fn10) Economic damages include survivors' net pecuniary loss resulting from decedent's death(fn11) and reasonable funeral, burial, internment or cremation expenses.(fn12)
Net pecuniary loss is the same as the pecuniary or financial benefit the decedent's survivors might reasonably have expected to receive from decedent.(fn13) In determining net pecuniary loss, proper factors for consideration include the age, health and life expectancy of decedent and survivors, the decedent's habits of industry, ability to earn money, disposition
Before calculating net pecuniary loss, the life expectancy of both decedent and survivors must be determined.(fn16) Life expectancy may be ascertained by considering the applicable mortality table, together with other evidence relating to the health, constitution, habits and occupation of decedent and survivors.(fn17) In other jurisdictions, issues of health appropriate for consideration in determining life expectancy include AIDS and HIV,(fn18) cancer,(fn19) alcoholism(fn20) and heart disease.(fn21) Presumably, such evidence would also be appropriate for consideration in Colorado.(fn22)
Net pecuniary loss is calculated by determining the value of contributions, increased inheritance and services that survivors would have received from decedent had decedent lived to his or her natural life expectancy. Four factors must be considered to make this calculation. First, decedent's earning capacity must be computed because it typically provides the income source for survivors' loss of contributions and increased inheritance damages. Second, decedent's earning capacity may be reduced by the amount of his or her income tax liability and personal consumption expenses. Third, survivors' loss of contributions and increased inheritance damages are calculated, bearing in mind decedent's disposition to aid or assist survivors as evidenced by the nature of their relationship. Fourth, survivors' loss of services damages are computed, also keeping in mind decedent's disposition to aid or assist survivors. The combined monetary value of lost contributions, increased inheritance and services comprises survivors' net pecuniary loss. Such loss should be reduced to present value, giving consideration to the effect of inflation. A more detailed discussion of these four factors follows.
Decedent's earning capacity must be computed because it provides the income source from which survivors are compensated for loss of contributions and increased inheritance. Calculating decedent's earning capacity includes an examination of both past earnings and future earning potential.(fn23) Future earning potential should be limited to the duration of decedent's probable work life.(fn24)
Probable future promotions and pay raises may be considered to determine decedent's earning capacity.(fn25) The probability of such promotions and pay raises may be evidenced in several ways. For instance, courts in other jurisdictions have considered decedent's education, qualifications, work history, prospects for growth in the field in which decedent worked, likely advancements based on decedent's reputation, documented advancements of peers, wage-growth rates and prior earning history.(fn26)
The value of the fringe benefits received by decedent, such as health insurance, life insurance and pension benefits, also may be considered in computing decedent's earning capacity.(fn27) Where decedent owns all or a portion of a business, gain or profit derived from the use of employed labor and from the appreciation of invested capital may be considered in calculating earning capacity.(fn28)
Decedent's character traits and habits are additional considerations relevant in computing earning capacity.(fn29) For example, in Good v. A. B. Chance Co.,(fn30) the court upheld the admission of exhibits documenting decedent's civic activities and correspondence school achievements. The court determined that the exhibits illustrated decedent's ambition and desire to improve his family's station in life and supported testimony that decedent would have received future wage increases.(fn31) Conversely, evidence of faulty character and bad habits, such as prior felony convictions and alcohol or drug dependency, has also been considered by courts in calculating decedent's earning capacity.(fn32)
Survivors are entitled to receive only that amount which they would have received from decedent had he or she lived. Attorneys defending wrongful death claims can therefore argue for the reduction of decedent's earning capacity by the amount of decedent's income tax liability. Further, decedent's earning capacity should also be reduced by the amount of his or her personal consumption expenses(fn33) to reflect more accurately the earnings from which survivors may be compensated for lost contributions and lost increased inheritance.
Income tax liability(fn34) may be deducted from decedent's earning capacity so that survivors do not receive a windfall.(fn35) In Lewis v. Great W. Distrib. Co., the court recognized that an award of future earnings in a wrongful death case required a deduction for the income taxes that otherwise would have been paid from those earnings.(fn36) Similarly, in DeWeese v. United States, the federal district court held that evidence of income tax should be considered in awarding damages based on future earnings, noting that damages should be based on "take-home pay."(fn37) The court stated that an "award for lost income should be for the income the plaintiffs have lost, and what they have lost is the amount left over after the government takes its...
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