by John Darer® CLU ChFC MSSC RSP CLTC
Present value is an important measure for plaintiffs, defendants and insurers of defendants litigating personal injury cases in jurisdictions throughout New York State. Present value is an important factor in valuing a case for settlement after a jury or judge has delivered a verdict, or projecting potential outcomes.
The higher the discount rate, the lower the present value. The corollary of course is, that the lower the discount rate, the higher the present value.
When it comes to structured judgments under Article 50B of the New York CPLR, the present value of elements of future damages in excess of $250,000 is the basis for attorney fees on the remaining (and often the largest part of) future damages is the basis on which interest is charged on those future damages. In general, with a personal injury case, the discount rate is determined based on the date of liability determination. Some "tweaks" may apply (e.g. where there is a bifurcated trial).
Present value calculations under New York CPLR 50B must also take into account a 4% statutory growth rate on future damages when reducing future damages to present value using the applicable discount rate.
Discount Rates Exceed Statutory Growth Rate
For the best part of a decade the statutory growth rate has exceeded the discount rate. This means that the present value (and ultimately the cost) of a structured judgment will exceed the amount that the jury awards for EVERY element of future damages the minute the jury makes its award! Then a 9% interest rate is applied for pre-judgment and post judgment interest (where applicable).
The "culprit" is the net growth rate. As of February 3, 2016, the 10 year treasury is 2.12% less than the statutory growth rate. This phenomenon will continue until discount rates return to levels in excess of the statutory growth rates or there is a change in the law.
A sample of Treasury Rates
10 Y Treasury 1.88%
20 Y Treasury 2.30%
30 Y Treasury 2.70% Source: H15 Historical Treasury Rates February 3, 2016
There are advantages to plaintiffs, defendants and insurers in settlement negotiations if the New York litigants know the CPLR 50B exposure. Be prepared. we can help!
New York structured settlement and structured judgment expert John Darer® can perform a CPLR 50B analysis and projections for you (CPLR 50A as well). John Darer has the capability and knowledge to run these "on the fly" at mediation, whether at JAMS, NAM, Resolute Systems, The Mediation Center, or other New York mediation centers and articulate the issues to the mediator as part of your support team. For more information contact John Darer® at 888-325-8640/ 203-561-6560 mobile