Ep 74: Why You Should Be Truthful When Discussing Financial Losses After Injury (Part 4 with Dr. Craig Galbraith)

Welcome to the Personal Injury Lawyer Podcast. I'm Clark speaks. This is the anatomy of a personal injury case. So you have mentioned past lost income, you mentioned the loss of future income, you mentioned household services, and you've mentioned future medical care, Life Care Plan and that sort of thing. Are there other ways where people who are catastrophically injured experience financial loss?

There are certainly other losses, and this is something that a forensic economist really shouldn't get involved with. And these are the pain and suffering elements. You've got two other elements that certainly anybody who's catastrophically injured suffers. One is the pain and suffering. You know, element, you know that there is, there should be compensation for that pain and suffering. That's not an economic loss. It's certainly a loss, and there's a compensation associated with that. And the other is what in economics we call hedonic losses, which is the loss of the enjoyment of life. So when you think about household services, household services are actually kind of economic activities, you know, washing your clothes and and doing cleaning up your house and that sort of thing. But we all go out. I have five children. I enjoy going out and playing sports with them, riding bicycles, you know, just the enjoyment of sitting around and watching television with them. That's enjoyment of life, and a forensic economist doesn't put a value on that. I mean, there are some theories associated with that, but the field tends to frown upon that, and for a very clear reason, which I'll explain one of the if you go back about 30 years ago, a forensic economist did try to put values on hedonic losses. And let me give an example. One way that you could put a value on is, let's say you went out with your spouse, and you went out every single week, and you went to a movie and a dinner, and you can't do it now, well, how much did you pay for that movie and dinner? And you might argue that, well, that's the value of that particular activity, and then you could figure out all these fun things that you might have done. Now the problem with that, and it makes sense when you think about it, but the problem with that is then it gets tied to how much money you make, because, let's say you go on a Disney cruise once, once a year and pay $5,000 but you're injured and you can't do that, and you say, well, the loss of that particular hedonic pleasure of life, type of activity is $5,000 the problem with that is that if you can't afford it, you didn't go on that Disney Cruise. And so it's very unfair. And I think this is the argument, I agree with this argument, to say that the pleasure of life of somebody who doesn't have enough money to go out on weekly restaurant experiences and once a year cruises that their value of their enjoyment of life is different or more valuable than somebody that isn't. So over the last 3040, years, forensic economists have shied away from trying to value that, that pleasure of life, the enjoyment of life, or those hedonic type of components, and we push that responsibility on you guys, the attorneys, to figure that out. Yeah,

so, and we spent a great deal of time trying to quantify pain and suffering, loss of use, loss of enjoyment of life, and those types of things. And it's we've we've talked about that a couple times on this show and, and we'll talk about it some more, and it ends up being more art than science and, and a lot of times, we'll use focus groups to help us figure out what those kind of is in the our collective viewpoint of what loss and the circumstances and and those types of things are. Let me ask you this, what types when you give an opinion, what in what form is it and, and what's done with it? You

know, I do an analysis. And, you know, you try to get as much information as you can, because the more data you have, the better you can. You can try to make a, you know, a forecast about future losses and that sort of thing. Some people keep good records. I mean, quite frankly, when you look at, say, a small business person, a lot of small and I teach small business, I teach entrepreneurial finance, the vast majority of small business people probably do not keep good accounting records. They do, like, you know, a lot of people do, is that when they report things on a tax returns, they will probably do sort of things, write off personal expenses, or whatever it might be to reduce their profit that they're showing so they don't have to pay as much taxes. Then they're injured. And so you go and look at this and say, Well, you weren't making any money. Well, of course they were making money. So each kind of situation is different in terms but you try to get as much information as you can with the information that's available, documents and these sort of things. I do a lot of analysis. I've probably done 200 valuations on personal injury and wrongful death. I've testified probably 40 times in court in many different states. So forth. So I'm pretty far down the learning curve in terms of of doing this sort of things and knowing what to look for. In addition, as an academic, I look at the academic published literature so I know what's out there, and I've built some pretty good spreadsheets and models. So I'll run it through these type of things, and it takes a while to do it. And then you write a report, and the report it I write reports where I really do describe to anybody who wants to read that report exactly what I did, you know, I don't try to, you know, hide anything. You know, it's right there. I say where I got my data, what it is, how I did my analysis. I even cut and paste my spreadsheets into it. That's my personal opinion. I try to make it as obvious as possible in terms of what I do. Now, the other side always has a right to ask questions. You know, they can depose me. They can ask me what I did. You know, they have a right, certainly a right, to do that, and some people do. But I actually try to write my report where they don't have to do that. And my reports are very, very detailed and very, very clear. If it settles, and that's pretty much it. If it goes to court, then, of course, we have to defend that.

And so you said that they might challenge some of your I would imagine that the biggest challenges is not so much your methodology, but some of your assumptions. Is that fair? Yeah,

you know, I mean, certainly the other side, you know, inevitably going to be an insurance company, and the attorneys represent an insurance company, and I've actually heard it, you know, they've come in and say, well, there's no loss, you know, or something like that. So they're always going to start with a position of zero loss, because that's what insurance companies try to do. And so they're going to try to challenge about everything. They're going to challenge assumptions. They're going to challenge the data. They're going to challenge models. You know, they're, their job as attorneys is to challenge everything well.

So that brings us to another important point. I think some people, I wonder if some people, listen to these kind of kinds of, this kind of content, and they think, you know, well, insurance companies are, I mean, their job is to provide insurance to evaluate claims and to pay claims. So why do I need advocates on my Can I just trust the insurance company to pay me the amount that they owe me as a result of my loss? And in your experience? I mean, I have my thoughts on that. Of course, you know, what do you see?

Well, the insurance company's job is to minimize their loss. I mean, that's the bottom line. I'm not saying anything bad about insurance companies. The people work for insurance companies are all good people. They have families, and they can certainly appreciate everything that's going on, but their job actually is to minimize the payment that insurance company has to pay. And I think that's why it's very important to have people like yourself who can challenge that and deal with these type of issues. Because ultimately, it's two sides and two perspectives. I have to say that very, very rarely where an insurance company get an expert to come in and testify, because their expert probably will come up with the same number that I came up with, and they don't want that. So they're they spend all their time challenging me without presenting, because then they have to admit there's a loss associated with it. So you find very rarely, insurance companies, you know, bring in an expert now they'll hire experts to look at my reports to try to pick holes in it, but you know, they don't put an expert on

what are some mistakes that you see people make that negatively impact your ability to quantify the financial loss that they've experienced after a catastrophic injury? Oh,

I think the mistakes are just not being honest. I mean, a forensic economist, I won't say all forensic economists, certainly some forensic economists may be influenced by who they work for. I'm not. I it is what it is. I try to be as absolutely truthful and honest about what this loss is, whether it's household services, whether it's salary, whether it's a loss of business value. You know, I, you know, I really, really say this is what I truly, truly believe it is. So you have to ask your client to be as honest too, you know, if they really were planning on getting a job, or are they just saying that, you know. And so, you know, there a lot of it is probing. And as an economist, I probe when I ask for about household services. I do that through an interview process. And I say, well, about how many hours a week did you spend on this particular activity before the injury? And right now, I'm pretty good if they said they spend 45 hours a week on it, on, you know, cleaning the kitchen. You know, I know that they're probably not being honest. And so you have to probe this sort of thing, and you have to be knowledgeable enough and honest enough to be able to probe this in terms of a client, and again, in household services, I use too. I use that survey method, but I also use the American Time Use surveys as kind of a way of balancing. And surprisingly, they come pretty. Close, you know, once you ask that client to be honest, how many of clients are I don't, you know, I think the vast majority are honest. They're hurt. They understand the situation. I ask them to be honest, and so forth. And I'm sure you do too in these type of situations. But you know, there is a you have to be careful about that, you know, I think when you're talking to clients. So

I always think that credibility is the cornerstone of advocacy. I mean people, you know, I know that people will say, Well, you know, my lawyer is, he's a bulldog, and he's so, and he's mean, he's so, I have never found that to be effective in any context. What I find is credibility is the key to the whole operation. If you, if you lose your credibility, or if you're generally thought of to be untrustworthy, there is no way that you can help a client who's been injured at all, much less catastrophically. And that, in fact, we have a provision in our representation agreement that says that if we find somebody who is lying or exaggerating their conditions, that we can immediately withdraw from further representation. And I do feel like that's important. And so when we when we sit down with somebody, we emphasize to them how important is to be truthful. And does that something you do as

well? Oh, absolutely, you know, I when, when we, when I start off my interview, and I'll be calling several people on cases this week, my very first, I be honest, be be credible, be honest. And and then we can go from there, you know, because I really do try to make sure that what I provide you or any attorney that I work for, is as honest and credible and appropriate and correct as possible. You are correct, though, because you do get, you know, a lot of credibility has to do with what people have done in the past. And you know, I was mentioning that one of the most difficult things when you're dealing with somebody who's injured, who runs their own business, if somebody's paid a salary, and you can look at their w2 and their tax returns and see, in fact, pretty accurately, what they actually did make, there are some positions where that's probably not reported. For example, hostesses and food servers, you know, who get paid primarily on tips. Well, I'm guessing that the vast majority of that probably doesn't appear on their tax return. In that case, you've got a tax return that says one thing when, in fact, they're really making something else. You've got a lot of small businesses where the tax returns say they're not making much at all because they don't want to pay the taxes, and so you have to probe then, in fact, what they really were making. And that's kind of the advantage of my particular position, because I do not only business valuation, but also the forensic economics for personal injury. I can talk the same language as a business person. I know what they do. I can read financial statements. I can read tax returns. They tell me a story, and I know whether that story is a correct story or not. And so it's very important, I think, to to understand that in some cases, yeah, you do have to probe a little bit deeper than the documents you may be given well. So

it sounds like to me that some of the keys to this are, we talked about credibility, we talked about honesty. We talked about thorough investigation into the magnitude and the source of financial loss. But if you put all those things together, and you do a detailed, comprehensive report, and you present it using reliable data and these accepted methods and consistent with the research and your observation. Does it tend to add value to these claims? Oh,

absolutely, the more credible and detailed and correct. I mean, there is a correct us. I mean, there are people out there that don't have the training as economists, and they may do things that you know really aren't very correct in their analysis.

I imagine they're easily exposed. Yeah, I can certainly read

it and say that, you know, that, you know, there's a problem here. And I actually have been hired by insurance companies sometimes to review other people's reports, and I make a list and say, Boy, this isn't right, and whatever. And you know, that's, of course, and what they're going to use if it goes to court. So, you know, you but it does vary. I mean, there's no doubt about it that you try to be as correct as possible. And I think coming in with and being able, as an expert, if it does go to court, to to really explain what was done, where the information came from. You know, that adds a lot of value to that particular situation.

Dr Galbraith, thank you so much for being here. I really appreciate you being here and answering these questions for us, and I think what you've said will help a lot of people. So thank you very much. Great.

Well, I certainly do appreciate it. Thank you. Applause.

Welcome to the Personal Injury Lawyer Podcast. I'm Clark speaks. This is the anatomy of a personal injury case. So you have mentioned past lost income, you mentioned the loss of future income, you mentioned household services, and you've mentioned future medical care, Life Care Plan and that sort of thing. Are there other ways where people who are catastrophically injured experience financial loss?

There are certainly other losses, and this is something that a forensic economist really shouldn't get involved with. And these are the pain and suffering elements. You've got two other elements that certainly anybody who's catastrophically injured suffers. One is the pain and suffering. You know, element, you know that there is, there should be compensation for that pain and suffering. That's not an economic loss. It's certainly a loss, and there's a compensation associated with that. And the other is what in economics we call hedonic losses, which is the loss of the enjoyment of life. So when you think about household services, household services are actually kind of economic activities, you know, washing your clothes and and doing cleaning up your house and that sort of thing. But we all go out. I have five children. I enjoy going out and playing sports with them, riding bicycles, you know, just the enjoyment of sitting around and watching television with them. That's enjoyment of life, and a forensic economist doesn't put a value on that. I mean, there are some theories associated with that, but the field tends to frown upon that, and for a very clear reason, which I'll explain one of the if you go back about 30 years ago, a forensic economist did try to put values on hedonic losses. And let me give an example. One way that you could put a value on is, let's say you went out with your spouse, and you went out every single week, and you went to a movie and a dinner, and you can't do it now, well, how much did you pay for that movie and dinner? And you might argue that, well, that's the value of that particular activity, and then you could figure out all these fun things that you might have done. Now the problem with that, and it makes sense when you think about it, but the problem with that is then it gets tied to how much money you make, because, let's say you go on a Disney cruise once, once a year and pay $5,000 but you're injured and you can't do that, and you say, well, the loss of that particular hedonic pleasure of life, type of activity is $5,000 the problem with that is that if you can't afford it, you didn't go on that Disney Cruise. And so it's very unfair. And I think this is the argument, I agree with this argument, to say that the pleasure of life of somebody who doesn't have enough money to go out on weekly restaurant experiences and once a year cruises that their value of their enjoyment of life is different or more valuable than somebody that isn't. So over the last 3040, years, forensic economists have shied away from trying to value that, that pleasure of life, the enjoyment of life, or those hedonic type of components, and we push that responsibility on you guys, the attorneys, to figure that out. Yeah,

so, and we spent a great deal of time trying to quantify pain and suffering, loss of use, loss of enjoyment of life, and those types of things. And it's we've we've talked about that a couple times on this show and, and we'll talk about it some more, and it ends up being more art than science and, and a lot of times, we'll use focus groups to help us figure out what those kind of is in the our collective viewpoint of what loss and the circumstances and and those types of things are. Let me ask you this, what types when you give an opinion, what in what form is it and, and what's done with it? You

know, I do an analysis. And, you know, you try to get as much information as you can, because the more data you have, the better you can. You can try to make a, you know, a forecast about future losses and that sort of thing. Some people keep good records. I mean, quite frankly, when you look at, say, a small business person, a lot of small and I teach small business, I teach entrepreneurial finance, the vast majority of small business people probably do not keep good accounting records. They do, like, you know, a lot of people do, is that when they report things on a tax returns, they will probably do sort of things, write off personal expenses, or whatever it might be to reduce their profit that they're showing so they don't have to pay as much taxes. Then they're injured. And so you go and look at this and say, Well, you weren't making any money. Well, of course they were making money. So each kind of situation is different in terms but you try to get as much information as you can with the information that's available, documents and these sort of things. I do a lot of analysis. I've probably done 200 valuations on personal injury and wrongful death. I've testified probably 40 times in court in many different states. So forth. So I'm pretty far down the learning curve in terms of of doing this sort of things and knowing what to look for. In addition, as an academic, I look at the academic published literature so I know what's out there, and I've built some pretty good spreadsheets and models. So I'll run it through these type of things, and it takes a while to do it. And then you write a report, and the report it I write reports where I really do describe to anybody who wants to read that report exactly what I did, you know, I don't try to, you know, hide anything. You know, it's right there. I say where I got my data, what it is, how I did my analysis. I even cut and paste my spreadsheets into it. That's my personal opinion. I try to make it as obvious as possible in terms of what I do. Now, the other side always has a right to ask questions. You know, they can depose me. They can ask me what I did. You know, they have a right, certainly a right, to do that, and some people do. But I actually try to write my report where they don't have to do that. And my reports are very, very detailed and very, very clear. If it settles, and that's pretty much it. If it goes to court, then, of course, we have to defend that.

And so you said that they might challenge some of your I would imagine that the biggest challenges is not so much your methodology, but some of your assumptions. Is that fair? Yeah,

you know, I mean, certainly the other side, you know, inevitably going to be an insurance company, and the attorneys represent an insurance company, and I've actually heard it, you know, they've come in and say, well, there's no loss, you know, or something like that. So they're always going to start with a position of zero loss, because that's what insurance companies try to do. And so they're going to try to challenge about everything. They're going to challenge assumptions. They're going to challenge the data. They're going to challenge models. You know, they're, their job as attorneys is to challenge everything well.

So that brings us to another important point. I think some people, I wonder if some people, listen to these kind of kinds of, this kind of content, and they think, you know, well, insurance companies are, I mean, their job is to provide insurance to evaluate claims and to pay claims. So why do I need advocates on my Can I just trust the insurance company to pay me the amount that they owe me as a result of my loss? And in your experience? I mean, I have my thoughts on that. Of course, you know, what do you see?

Well, the insurance company's job is to minimize their loss. I mean, that's the bottom line. I'm not saying anything bad about insurance companies. The people work for insurance companies are all good people. They have families, and they can certainly appreciate everything that's going on, but their job actually is to minimize the payment that insurance company has to pay. And I think that's why it's very important to have people like yourself who can challenge that and deal with these type of issues. Because ultimately, it's two sides and two perspectives. I have to say that very, very rarely where an insurance company get an expert to come in and testify, because their expert probably will come up with the same number that I came up with, and they don't want that. So they're they spend all their time challenging me without presenting, because then they have to admit there's a loss associated with it. So you find very rarely, insurance companies, you know, bring in an expert now they'll hire experts to look at my reports to try to pick holes in it, but you know, they don't put an expert on

what are some mistakes that you see people make that negatively impact your ability to quantify the financial loss that they've experienced after a catastrophic injury? Oh,

I think the mistakes are just not being honest. I mean, a forensic economist, I won't say all forensic economists, certainly some forensic economists may be influenced by who they work for. I'm not. I it is what it is. I try to be as absolutely truthful and honest about what this loss is, whether it's household services, whether it's salary, whether it's a loss of business value. You know, I, you know, I really, really say this is what I truly, truly believe it is. So you have to ask your client to be as honest too, you know, if they really were planning on getting a job, or are they just saying that, you know. And so, you know, there a lot of it is probing. And as an economist, I probe when I ask for about household services. I do that through an interview process. And I say, well, about how many hours a week did you spend on this particular activity before the injury? And right now, I'm pretty good if they said they spend 45 hours a week on it, on, you know, cleaning the kitchen. You know, I know that they're probably not being honest. And so you have to probe this sort of thing, and you have to be knowledgeable enough and honest enough to be able to probe this in terms of a client, and again, in household services, I use too. I use that survey method, but I also use the American Time Use surveys as kind of a way of balancing. And surprisingly, they come pretty. Close, you know, once you ask that client to be honest, how many of clients are I don't, you know, I think the vast majority are honest. They're hurt. They understand the situation. I ask them to be honest, and so forth. And I'm sure you do too in these type of situations. But you know, there is a you have to be careful about that, you know, I think when you're talking to clients. So

I always think that credibility is the cornerstone of advocacy. I mean people, you know, I know that people will say, Well, you know, my lawyer is, he's a bulldog, and he's so, and he's mean, he's so, I have never found that to be effective in any context. What I find is credibility is the key to the whole operation. If you, if you lose your credibility, or if you're generally thought of to be untrustworthy, there is no way that you can help a client who's been injured at all, much less catastrophically. And that, in fact, we have a provision in our representation agreement that says that if we find somebody who is lying or exaggerating their conditions, that we can immediately withdraw from further representation. And I do feel like that's important. And so when we when we sit down with somebody, we emphasize to them how important is to be truthful. And does that something you do as

well? Oh, absolutely, you know, I when, when we, when I start off my interview, and I'll be calling several people on cases this week, my very first, I be honest, be be credible, be honest. And and then we can go from there, you know, because I really do try to make sure that what I provide you or any attorney that I work for, is as honest and credible and appropriate and correct as possible. You are correct, though, because you do get, you know, a lot of credibility has to do with what people have done in the past. And you know, I was mentioning that one of the most difficult things when you're dealing with somebody who's injured, who runs their own business, if somebody's paid a salary, and you can look at their w2 and their tax returns and see, in fact, pretty accurately, what they actually did make, there are some positions where that's probably not reported. For example, hostesses and food servers, you know, who get paid primarily on tips. Well, I'm guessing that the vast majority of that probably doesn't appear on their tax return. In that case, you've got a tax return that says one thing when, in fact, they're really making something else. You've got a lot of small businesses where the tax returns say they're not making much at all because they don't want to pay the taxes, and so you have to probe then, in fact, what they really were making. And that's kind of the advantage of my particular position, because I do not only business valuation, but also the forensic economics for personal injury. I can talk the same language as a business person. I know what they do. I can read financial statements. I can read tax returns. They tell me a story, and I know whether that story is a correct story or not. And so it's very important, I think, to to understand that in some cases, yeah, you do have to probe a little bit deeper than the documents you may be given well. So

it sounds like to me that some of the keys to this are, we talked about credibility, we talked about honesty. We talked about thorough investigation into the magnitude and the source of financial loss. But if you put all those things together, and you do a detailed, comprehensive report, and you present it using reliable data and these accepted methods and consistent with the research and your observation. Does it tend to add value to these claims? Oh,

absolutely, the more credible and detailed and correct. I mean, there is a correct us. I mean, there are people out there that don't have the training as economists, and they may do things that you know really aren't very correct in their analysis.

I imagine they're easily exposed. Yeah, I can certainly read

it and say that, you know, that, you know, there's a problem here. And I actually have been hired by insurance companies sometimes to review other people's reports, and I make a list and say, Boy, this isn't right, and whatever. And you know, that's, of course, and what they're going to use if it goes to court. So, you know, you but it does vary. I mean, there's no doubt about it that you try to be as correct as possible. And I think coming in with and being able, as an expert, if it does go to court, to to really explain what was done, where the information came from. You know, that adds a lot of value to that particular situation.

Dr Galbraith, thank you so much for being here. I really appreciate you being here and answering these questions for us, and I think what you've said will help a lot of people. So thank you very much. Great.

Well, I certainly do appreciate it. Thank you. Applause.