NY Structured Judgment CPLR Article 50B | Narrowing Discount Advantage For NY Personal Injury Plaintiffs

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

Bond yields are increasing across the spectrum, reducing plaintiffs' CPLR Article 50B net discount rate advantage on structured judgments in New York. A discount rate inversion has served to inflate present values in excess of the actual numbers awarded by the trier of fact, for over a decade.

What is CPLR Article 50B?

CPLR Article 50B is a New York Civil Procedure that became effective August 1, 1986, part of a Periodic Payment of Judgments Act, that mandates that future damages in excess of $250,000 are paid in installments.  These are called Structured Judgments or Periodic Judgments.  Central to the process is the calculation of present value.

Present Value Has Exceeded Verdict For More Than a Decade |  Here's Why

As part of the calculation to determine the present value of future damages, each element of future damages, in excess of the first $250,000 payments are increased by a 4% for the time frame in the verdict and then discounted to present value.  The present value is used to calculate the attorney fees on future damages and the application of interest.

When the growth rate exceeds the discount rate, the result is a net growth rate.   Without getting too much into the weeds, to illustrate this phenomenon,  please refer to the following example:

Historical Yield on 10 Year United States Treasury

LESS THAN TWO YEARS AGO:

On July 16, 2016                      1.358%

Net Growth Rate                     2.642%  (4%-1.358%)

Present Value of $2 million over 10 Years      $2,221,500.35    

NOW:

On February 16, 2018               2.874%

Net Growth Rate                     1.126%    (4%-2.874%)

Present Value of $2 million over 10 Years       $2,042,731.81         

The Difference                                                $   178,768.54   LESS

Plus the lost interest!

If you bucket interest rates as a strategy to get a higher present value

5 Year UST     Then  1.12%    Now  2.6727%  

2 Year UST    Then   0.682%  Now  2.194%

1 Year UST    Then   0.498%  Now  1.979%

6 Mo.  UST    Then   0.422%  Now  1.831%

Negotiating and Obtaining Better Settlements At Mediation

• For plaintiffs a structured judgment expert can let them know what a liability case is really worth.
• For defendants a structured judgment expert can let them know what the bottom line cost is for any set of assumptions, whether pre trial, post trial, or post entry of judgment while the case in on appeal.