How are future damages calculated, and what is ‘present value’ ?
Many states have adopted life expectancy tables for use in calculating future losses. It is common to take the victim's earnings at the time of their death and calculate the remaining years until retirement or expected death to figure future loss of earnings. Life expectancy tables are also used to calculate loss of benefits, such as the amount of pension benefits which would have been available had the victim lived.
Since a settlement of the trial verdict is calculated at one time, the amount of damages to the plaintiffs must include not only damages until the time of settlement or verdict, but also those which reasonably would have been incurred in the future. However, to avoid overcompensating a plaintiff it is common to reduce future losses to present value. The amount of future damages will be calculated, then reduced to an amount that will equal the full amount if it is conservatively invested. As with life expectancy tables, many states have codified how future damages are reduced to present value.
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