Valuation of Individual and Class Action Damages
Claims for damages in mass torts and product liability cases can be quite varied. Some examples include medical costs, lost wages, pain and suffering; fear of injury; loss of use or loss of consortium; replacement cost; incidental costs of recall; diminution in value; and medical monitoring. In some cases, damage claims are associated entirely with historical losses, in others future losses may also arise. Forecasting techniques (see Claim Forecasting) must be used to estimate the timing and extent of future losses. However, these techniques may also be needed to estimate the size of a representative class or to predict how many more individual claims will be filed before the statute of limitations has run.
NERA employs empirical analysis to estimate damages for large groups of claims whether filed individually or as a class. The empirical basis for such valuation depends on the nature of the claim. However, valuation often depends on developing data on the salient attributes of the claims that are likely to affect losses. These attributes will include characteristics of the claimants and exposure to or use of the products or hazards involved.
For some elements of damage, historical claims experience provides a basis to estimate expected future costs. For example, pain and suffering awards can be estimated from historical verdicts and medical monitoring costs can be estimated with reference to medical monitoring programs established in other cases.
In cases where losses are associated with marketable assets such as real estate (e.g., drywall litigation) or automobiles (e.g., major product recall litigation), it may be possible to quantify damage claims to estimate diminution in value claims. For example, diminution in value of recalled vehicles can be analyzed using data on vehicle demand. Event study and time series analyses are also useful to measure changes in historical blue book prices coincident with a recall. While the immediate impact of a recall may be evident from contemporaneous data, the historical experience of other recalls may provide evidence of a subsequent expected recovery in resale value. Econometric techniques can be used to measure the value to consumers of vehicle attributes, which may be useful to distinguish an effect of a correctable defect from the impact of a recall on corporate reputation or brand value.
