A Valuation system can be treated either as a standalone or as part of an Award and Valuation package. The elements of loss can be built in a manner similar to Award development. The case data includes

• Case Caption

• Docket
• Plaintiff name, sex, age and life expectancy (the system will calculate normal based on age and sex)
• Attorney
• Date of loss event

Simple (Select one or more of the three basic elements of Pain and Suffering, Medical Expenses and Economic Loss)

• Entry of Period over which Award element is to be paid (Future Pain and Suffering is limited to 10 years under the original 50A and 8 years under the amended version.)
• Entry of a Future Damages Amount
• Entry of Past Damages and Expense Amounts
• Entry of Collateral Offsets, if any.
• If Taxes are to be applied against Lost or Impaired Earnings, entry of tax data
• Selection of Discount rate or rates, or a 10-Year Treasury rate/yield.

'Calculate' will produce the Net Valuation. To show the impact of a change in rate(s), in the valuation date and/or the application of Expenses and fees against Collateral Source offsets, make the selection(s) and use 'Calculate' again.

Detailed (Accessed through 'Components')

• Selection of Grouping (Pre-Award or Award)
• Selection of Award category
• Pain and Suffering
• Medical Expense
• Economic loss
• Discrete Medical Expense
• Discrete Economic loss
• Selection of Element (there are different lists of titles and spaces for each category selected.)
• First payment date
• If Discrete, the number of future occasions and interval between occasions.
• If Periodic, the number of years and months over which payments are to be made.
• Current cost or current dollar amount of periodic or discrete payments
• If the first payment is more than a year in the future, an annual inflation rate to produce the projected first payment
• An annual COLA rate to be applied after the first payment year (inflation and COLA rates are independently employed)

The system will convert the discrete payments streams to periodic payments by dividing the total Award amount by the years over which payments are to be made.

'Add' is then used to produce a total element Valuation. To change, merely select/enter different data and use 'Add' again. When done, 'Apply' to add it to the element list. When finished with data entry, use 'Fincal' and 'Close' for Amended 50A or just 'Close' for others, and the valuation will be summarized into the three categories of Pain and Suffering, Medical Expense and Economic Loss (In Reports, each element is listed separately)

To show the impact of a change in rate(s), the valuation date and/or the application of Expenses and fees against Collateral Source offsets, make the selection(s) and use 'Recalculate'.

An option exists to include or exclude taxes. The components may be entered through 'Taxes'.

Taxes can be calculated and applied in either of two ways.

• Up to three years of Federal, state and local tax payments can be used to calculate and sum to an overall rate.
• Rates can be calculated using statutory rates applicable to specified percentages of compensation. The resulting rate can be either simple or pooled. (Lower level taxes are normally deducted before calculating higher level taxes, when pooled is employed.)

Taxes are treated as separate adjustments to Lost or Impaired Earnings, if entered in the valuation system. If separate, an option exists to adjust Lost or Impaired Earnings for the amount of related Collateral Source Offset payments before applying the tax rate, thus reducing the impact of taxes on lost or impaired earnings.

Collateral Source Offsets are obligations to make payments on a continuing basis as offsets against claimed elements of loss. A Collateral Source cannot be one that gives rise to a statutory lien in favor of the person providing the payment. The only material condition to continued payment of the offset should be the payment of ongoing maintenance costs. The most common offset item seems to be Social Security Survivor Benefits.

There are references in the statutes to Care and Custodial Care. It would seem that if the provider has any discretion in what and how it will be provided, those would be additional material conditions. The same seems to be true for offsets that might start at some point in the future. Medical Care Collateral Source for Care/Custodial Care is on the list.

Collateral Source Offsets are accessed with 'Offset'. An item of Offset may be selected from the list or entered in the space provide. The components of the offset are

• First payment date
• First payment Amount
• The number of years and months over which payments are to be made. (The system will automatically reduce the period to that of the loss element to which it relates.)
• Ongoing maintenance costs (They will be applied against the first payment amount for a net offset payment.)
• An annual COLA rate to be applied after the first payment year
• Maintenance costs for the Offset during the two years prior to the event of loss

The period over which an offset will be applied should be the lesser of the expected period of payment for the offset or the loss element.

Original 50A

• An amount of $250,000 is allocated across the elements of future damages and that amount is paid as a lump sum. The $250,000 is spread across the elements in line with the relation the element amount (net of Taxes, if any) bears to the total future Award (Net of Taxes). The system does this on a dynamic basis as elements are totaled using 'Add' and 'Apply' or 'Calculate'

• Future Pain and Suffering is limited to 10 years. Other elements of future loss are not limited.

• Initial monthly payment amounts are determined by dividing the undiscounted future Award less lump sums by the period over which the payments are to be made. The result is then factored up by 4% for each year after the first year, and those amounts are discounted to produce initial element values.

Amended 50A provides a new scheme for calculating and applying lump sums. The valuation process is

• Future Pain and Suffering is limited to 8 years. The first $500,000 or 35% of future Pain and Suffering, whichever is greater, is applied as a lump sum, and deducted from future damages. Initial monthly payment amounts are determined by dividing the undiscounted future Award less lump sums by the period over which the payments are to be made. The result is then factored up by 4% for each year after the first year, and those amounts are discounted to produce initial element values.

• Other elements of Future damages are not limited as to payment period. Each element of future damages is discounted by the appropriate rate, and 35% of that amount is applied as a lump sum. 65% of the original element undiscounted future damages becomes the net future damages. Initial monthly payment amounts are determined by dividing this amount by the period over which the payments are to be made. The result is not factored up for each year after the first year. The net future damages amounts are discounted to produce initial element values.

• Collateral Source Offsets are calculated using the first monthly payment amount (net of ongoing monthly maintenance) and any COLA to be used after the first year of payment. This is then discounted by the rate used for the element of loss to which the offset relates.

• The valued Award is totaled, lump sums and past damages added, and the value of collateral sources deducted. That total is used to generate an expense ratio that is applied against everything except collateral source.

The selection of discount rate or rates was largely a matter of negotiation until the amendment of New York 50A.

With that amendment, the Legislature set

• The source for the rates (U.S. 10-Year Treasury rates),
• How they should be used - The selected ten year rate for elements with future payment periods of 20 years or less, and the weighted average of the 10-Year rate for the first 20 years and 2 percentages points above the 10-year rate for each year beyond.

1. 10-year Treasury X 20 years or .04 X 20 .80
2. 10 year Treas. +2% X years beyond 20 or .06 X 10 .60

   ___

   1.40

3. Divided by the total Years 1.40/30 or .04667

To some extent the rate to be used - The rate in effect at the verdict. However, what is the rate in effect?

• The last auction rate
• The last auction yield
• The last monthly yield
• The daily yield
• Some average of rates or yields

The systems provide regular quarterly auction rates and yields from the enactment of Amended 50A. They also incorporate monthly yields from the same period, the ability to select a new 10-Year rate/yield or a single rate applicable to all elements.

The purpose in selecting 10-Year Treasuries was to provide some rate stability and predictability. Recently, the 10-Year Treasury market has been highly unstable. As a result, the reports section contains a facility for calculating

• Average regular quarterly Auction rates and yields
• From enactment of Amended New York 50A
• For the past two years
• For the past year
• Average weighted regular quarterly Auction rates and yields
• From enactment of Amended New York 50A
• For the past two years
• For the past year

Weighting is applied to increase the impact of the more recent auctions by adding a factor to each auction after the first in the sample. The offered weighting options are from .25 to 1.00. If .5 were used, the weighting for the one-year would be 1.00 for the first auction rate, 1.50 for the second, 2.00 for the third and 2.5 for the last.

• Updated average regular quarterly Auction yields. Whenever the period since the last regular quarterly auction exceeds one month, an estimate of the next auction is calculated using
• Any interim auction
• Weekly yields for each week after the interim auction

That is then combined to regular auctions, and weighted, as appropriate.

Given a selected rate, the system automatically calculates the appropriate rate applicable to an element or a category. The system will produce a valuation summary and provide a side-by-side comparison of the net discounted Award.

The original 50A worksheet offers the opportunity to enter a single rate for all elements, to select a different rate for each of the three categories under 'Array' or to apply individual rates for each element. Indexed rates can be applied in the 'Reports' section.

The contingent Medical Malpractice fee is determined by applying the Net Award to a sliding rate scale. The Net Award is the total of Past Damages, Lump Sums and the value of Future Damages less Plaintiff's Litigation Expenses and the value of Collateral Source Offsets. The same total net of expenses is used to determine a fee rate to be applied.

• First $250,000 in Damages 30%
• Next $250,000 in Damages 25%
• Next $500,000 in Damages 20%
• Next $250,000 in Damages 15%
• Everything over $1,250,000 10%

The resulting amounts are totaled and divided by the Net Award to yield and overall fee rate.

• The fee rate is then applied against the amounts net of expenses, except Collateral Sources to produce fee amounts and a valued Award, net of expenses and fees.

• The initial monthly payments are then reduced by the expense and fee rates to produce the net first monthly payment for which the Defendant is liable. If there are Collateral offsets, the net first monthly payment is reduced by the related first monthly offset payment. The initial monthly offset payments are reduced by ongoing maintenance, before being applied against the element initial monthly payment.

In addition to the option to reduce the impact of taxes for Collateral Source offsets, there is an option to apply expenses and fees to the Award values prior to reduction for Collateral Source Offsets. There is little mention of how expenses and fees are to be applied, but as they represent costs of the full recovery, they should be allocated against the full recovery. This is accomplished by calculating the expense ratio without regard to offsets, and applying the rates to reduce the offsets.

All of this is done by the systems with minimal user involvement.

The worksheet provides a listing of detailed elements.

The Reports section produces

• Simple and extended valuation summaries
• Detailed Reconciliation of Award to Net Valuation, a reconstruction from the valuation to the total Award, a Cash Distribution summary (the total amounts that the defendant must pay out). If the Award section is employed and parts of the Award have been allocated to past damages, past damages by loss element will be detailed.
• Monthly payments by element and for offsets
• Annual payments by element and for offsets
• Annual Discount Value by element and for offsets

An option exists in the Reports Section to 'Alter Variables'. User can

• Select and apply different 10-Year Treasury index rates or a single rate.

Averages of the different auction rates are calculated and can be applied. The choices are reflected on a Certificate of Calculation of Average Rates and Yields. The choices are

• Average Auction Rates and Yields from the effective date of Amended 50A
• Average Auction Rates and Yields for the last two years
• Average Auction Rates and Yields for the last year

The choices can be weighted and/or updated since the last regular auction.

• Select and apply a future payment date. All valuations of future damage Awards assume that they are periodic (monthly payments), and all are discounted back to the date of the verdict.

First payments are due on the date of the Verdict or -0- days. (Amended 50A provides that annuity contracts will run from the date of the verdict unless some other date is specified in the verdict.) A settlement could specify an overall payment date different from the date settlement is reached, and that would affect the valuation.

• Change Tax rates. Calculated rates may be adjusted upward or downward in 1/4% increments.
• Exclude a Collateral Source offset or exclude application of the offset payments to reduce the tax impact on lost or impaired earnings.
• Recalculate and Apply Litigation Expense and Fee rates to reduce Collateral Source Offsets.

The statute is silent on whether expense and fee rates are calculated on a gross basis before deduction of Collateral Source offsets, with rates applied to reduce the value of the offset before deduction from the loss element. The alternative is to calculate expense and fee rates on a net basis after deduction of Collateral Source offsets, with rates applied on to the elements of future loss. The former produces a net discounted value that closely matches the sum of the net annual discounted values for the element.

Each or all of the changes can be tested without affecting the underlying valuation and/or applied to produce a new valuation. An Award summary can be generated for each change or set of changes, and side-by-side comparisons will show the net difference in impact from each set of changes. The Reconciliation and payment detail can be generated to reflect only applied changes.

Interest can be applied from the determination of liability to Verdict, from verdict to judgment and from judgment to payment. Interest is cumulative, so that interest from verdict to judgment is applied to the Award plus any interest to Verdict. Statutory interest is set at 9%, but it is not clear whether the statutory rate applies to the pre-verdict and pre-judgment periods as the interest is to be calculated by the Clerk of the Court.

The date prior to the verdict from which interest should be calculated is the date from which liability is established. This is normally the date of the verdict, but, in some cases, the date on which liability is established precedes return of the verdict. These situations are referred to as 'bifurcated'. The date of death is the date of liability in Wrongful Death Actions, and is the basic point from which interest is to be applied.

The total Award includes Past Damages, Lump Sums and the value of future damages adjusted for Collateral Source offsets. Most likely, interest should be applied to the total Award, but, in the event that a different value should be used, we have included options to calculate interest on the total Award net of Expenses, the total award net of Fee and the Total Award net of expenses and fees. Interest is to be allocated between the plaintiff and his/her attorney using the previously calculated contingent fee rate.

In cases where interest is to be calculated from a point prior to the Verdict, the Award may warrant discounting to that prior time. In wrongful death,

• The value of future damages is discounted back to the date of death,
• Lump sums are similarly discounted to the date of death
• Past Damages are to be discounted back to the point when expenditures were to be made, either on an individual basis or by employing some average date.

If the Award section was employed, wrongful death was indicated and allocations were made to past damages for the passage of time, the system will have calculated a weighted average date for the past damage payments. Initial past damages are incorporated (assumed to be incurred at death), and the payment dates and amounts for interim past damages.

The system will generate a valuation file, separate from the Award file.

It will also generate offer and acceptance files listing out the selected Grouping (Pre-Award, Award or Simple), and produce hard copy offers and acceptances for signing.