March 18, 2014
Article by David Glusman, Advisory Services Partner, "Forensic Accounting Considerations in Med Mal Litigation," Featured in The Legal Intelligencer
Medical malpractice claims raise a variety of economic issues. In addition to fully understanding the medical and liability issues involved in the prospective matter, counsel for both the plaintiff and the defendant need to fully explore and document the economic claims. In the end, a forensic accountant or other economic damage expert addresses these economic issues without regard to causation and liability, with the ultimate result a full understanding of economic losses of the plaintiff based on the alleged medical malpractice.
There are several different categories of losses that may have occurred, or may yet occur, based on the evidentiary record. If an individual is merely an employee, and has no ownership interest or other special relationship with the employer, the determination of losses normally arises from the difference between the historical salary and the projections of what salary would have been but for the medical malpractice allegation.
As Pennsylvania is a "total offset" jurisdiction - Kaczkowski v. Bolubasz, 421 A.2d 1027 (Pa. 1980), ruled, as a matter of law, that inflationary increases to future earnings equal the impact of discounting those future earnings to present value—damages experts typically consider life expectancy and merit-based economic changes less any reduction in a plaintiff's personal expenditures arising from the alleged injury or disability.
The most complex damage assessments in a medical malpractice action involve a business or other operating entity. The value of a business is typically measured as the present value of future benefits, or cash flow, available to the owners, and, to the extent a physician's negligence impairs the business owner's participation in the business and interrupts or reduces the business' cash flow, there may be loss in the value of the business.
Consider John Doe, a hypothetical plaintiff and owner of a commercial real estate operation and an operating business, who alleges that, as a result of medical malpractice, he is no longer able to fully participate in either activity. Plaintiffs counsel needs to establish the damage amount. Defense counsel will, likewise, require all of the same information in order to determine whether there are areas of disagreement in either the underlying premise of loss, methods of calculation or historical and future information assumed.