Academic journal article Journal of Legal Economics

Making Operational the Concept of Maintenance Consumption

Academic journal article Journal of Legal Economics

Making Operational the Concept of Maintenance Consumption

Article excerpt

Making Operational the

Concept of Maintenance

Consumption 1

Introduction

A universal element of damages in death cases in the United States is the financial loss to survivors. In many states, this loss to survivors is described in controlling court decisions and/or in statutes as being equal to the contributions that the decedent might reasonably have been expected to make to them. Economists typically estimate these contributions residually by calculating the earnings of the decedent and deducting from those earnings the decedent's personal consumption. The rationale for such a deduction is straightforward. If the person had not died, he would have spent a certain amount of income exclusively on himself, and this amount would not have been available to his estate or to his surviving relatives.2 The deduction of personal consumption therefore serves to ensure that the estate and/or survivors are not overcompensated (Brookshire and Smith 1990).

However, considerable ambiguity exists regarding what courts mean by personal consumption. In Brookshire and Smith's survey of legal guidelines on damage calculations from wrongful death statutes and court decisions (Brookshire and Smith 1992), this ambiguity is palpable. In Kentucky, no deduction for the decedent's personal consumption is permitted. At the Federal level (Federal Tort Claims Act actions and Federal Employer's Liability Act actions) and in 16 states,3 the consumption deduction in death cases is supposed to be the decedent's likely or expected consumption expenditures. In 14 states,4 Brookshire and Smith found no statutory or case law guidelines for the consumption deduction. On the other hand, they classify two states, New Hampshire and Tennessee, as maintenance consumption states. In the Tennessee case, Wallace v. Couch (1982), maintenance consumption is defined to "include those costs which, under the standard of living followed by the decedent, would have been reasonably necessary to keep himself in such condition of health and well-being that he could maintain his capacity to earn money" (Brookshire and Smith 1992). Similarly, in New Hampshire, in Pitman v. Merriman (1922) and Lees v. Nolan (1981), reference is made to a deduction for "necessary living expenses." In the former case, the following statement (at 297-98) appears: "While his earning capacity for himself would be the gross amount he could obtain as the fruit of his efforts or service in any capacity, the amount which he could earn for his estate or the benefit of others would be what remained after deducting the necessary expense of his own living. His earning capacity which tends to augment his estate or to permit him to aid those naturally dependent upon his bounty is necessarily his net earning capacity: his capacity to acquire money less the necessary expense of its acquisition."

For 18 other states,5 Brookshire and Smith are unable to classify the type of consumption deduction as likely consumption or maintenance consumption because (a) the language in some court decisions implies a likely consumption interpretation of the consumption deduction, while in other court decisions the language implies a maintenance consumption interpretation; (b) the language in the controlling case is itself ambiguous or contradictory as to which of the two interpretations should be followed; or (c) the language could be construed to imply that something in between maintenance consumption and likely consumption should be deducted.

In summary, there appear to be a large number of states in which court decisions and/or statutes suggest a maintenance consumption interpretation due to the use of such phrases as "the probable cost of the decedent's own maintenance" and "expenses which would have been reasonably necessary for the decedent to incur to keep himself in such a condition of health and well-being that he could maintain his capacity to earn money." Because the terms maintenance consumption and personal maintenance appear frequently in the court opinions in a substantial number of states, the meaning and possible methods of measuring "maintenance consumption" deserve further scrutiny than has been provided hitherto in the forensic economics literature. …

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