New York Structured Judgments | The Interest Rate Lever on Present Value

by John Darer CLU ChFC MSSC RSP CLTC

The low interest rate environment continues to favor New York plaintiffs willing to try strong liability cases due to a 30 year old statutory growth rate juxtaposed against today's low interest rates.

1. The 4% statutory growth rate under New York's Article 50-B statute, set in 1986, now exceeds the 10 year bond by 2.63%.
2.  Long term damage awards which used to afford a significant discount no longer do so, with the net discount rate closing in on -2%. A negative 2% discount rate is a growth rate of 2%.

What does this mean?

• Assume $1,000,000 net future pain & suffering (after accounting for the first $250,000 in future damages under Article 50-B)
• Instead of a discount, with a net growth rate of 2.63% for 10 years the present value adds $26,000 plus per year for 10 years to the verdict number.
• When calculating the present value of other elements of damages like future medicals and future lost earnings, you could be adding close to $20,000 annually per $1,000,000 to the verdict, for the number of years awarded by the jury
• Then interest gets added onto that at 9% (less if state or city government)
• Do the math.