When is a discount rate a growth rate in a present value calculation?
When a plaintiff has a personal injury lawsuit in the New York City counties of Bronx, Brooklyn, Staten Island, Queens, the suburbs of Westchester, Orange , Nassau,Suffolk, or any county in New York State having sustained future damages in excess of $250,000.
A New York jury awards a quantum of damages to a woman rendered paraplegic from injuries sustained in an auto accident, unreduced to present value. The elements of damages are set forth in an itemized verdict sheet that states the amount and duration of the damages. Setting aside any reductions for collateral sources, additurs or remittiturs for the purpose of this post, the "reduction" to present value occurs post verdict when the rules of CPLR Article 50-B are applied.
A statutory growth rate of 4% to the annual amounts must first be applied. Then a discount rate is applied that corresponds to the time period awarded by the jury. The "discount rate equals a growth rate" phenomenon can be best illustrated by taking the element of damages for pain and suffering. Pain and Suffering is paid out over 10 years. At the time of writing the 10 Year United States Treasury Note is hovering around 1.9%. This means that there is a negative net discount rate of 2.1%. A negative discount rate is a growth rate. So that $2,000,000 award for future pain and suffering may very well be worth alot more, more or less instantly . The "discount rate equals growth rate" phemomenon will continue until discount rates get back to and over 4%, or there is a change in the law.
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