Friday, December 18, 2015

Excluding Annuitist Testimony With RFTM Law

Daniel B. Pleasant, CLA, CAS

Rouda Feder Tietjen & McGuinn


The parents of a baby boy who was brain damaged at birth retained you to be their son’s lawyer. It’s been four years of long hours, hard work, and sleepless nights. Finally, after overcoming the multitude of obstacles facing a medical malpractice plaintiff, the day of reckoning is near. Your life care planner has evaluated the financial needs to care for the child for the rest of his life: $85 million. Your economist has reduced that figure to present cash value: $17 million. On the eve of trial, expert disclosures are exchanged. In reviewing the defendant doctor’s disclosure, you see that she has disclosed an “annuitist” who will testify concerning the cost of an annuity to fund the plaintiff’s lifetime care. A few calls to colleagues and a review of this “expert’s” prior testimony lead you to believe that the annuist will opine that an annuity can be purchased for $4 million to fund the life care plan. Suddenly, the potential value of your case has suffered a fourfold decline. Now what do you do?

“Annuitists” are often disclosed as expert witnesses by defendants in personal injury cases. These experts, who are often no more than salespeople for a particular insurance company, attempt to offer testimony concerning the cost of an annuity to provide injured plaintiffs with an income stream to compensate them for lost earnings or support or to provide a source of income to fund future medical care. The admissibility of this type of expert testimony has not been directly ruled on by California courts1, but it would appear unlikely that the appellate courts would find such testimony admissible for the reasons discussed below. This article reviews cases, from California as well as other jurisdictions, which have addressed the issue, and suggests a strategy for crafting a motion in limine to preclude the expert testimony of annuitists.

Attack Annuitist Testimony as Irrelevant to the Issue Before the Trier of Fact

All future damages must be reduced to “present cash value” by the trier of fact.2 “The present value of a gross award of future damages is that sum of money prudently invested at the time of judgment which will return, over the period the future damages are incurred, the gross amount of the award.”3 One potential argument for the exclusion of annuitist testimony is that the cost of an annuity is not relevant to a determination of the operative issue―the present cash value of the gross amount of future damages.

The only California case that even touches on this subject is Emery v. Southern Cal. Gas Co. (1946) 72 Cal.App.2d 821, 826. In Emery, the trial court had excluded plaintiff’s proffer of an actuary to present annuity tables in evidence as indicia of the present value of the heirs’ future loss of support in a wrongful death case. The Court of Appeal reversed, stating that the tables should have been admitted subject to an instruction that such evidence was “not conclusive as to the amount to be awarded as damages, but is only one of several elements to be considered in determining the amount to be awarded.”

Plaintiff’s counsel should point out Emery involves annuity tables, which are admissible as some evidence of present cash value, but says nothing concerning the admissibility of an annuitist’s testimony as to the cost of an annuity to fund a particular plaintiff’s future damages. Later California decisions which discuss annuity evidence in other contexts reinforce this distinction.

These cases suggest that the presentation of annuity evidence would serve no purpose other than to confuse the jury concerning its role in personal injury cases. The jury is to determine the amount of money that if paid immediately to plaintiff would compensate him for his future losses. The California Supreme Court has stated in connection with future noneconomic damages:

To avoid confusion regarding the jury’s task in future cases, we conclude that when future noneconomic damages are sought, the jury should be instructed expressly that they are to assume that an award of future damages is a present value sum, i.e., they are to determine the amount in current dollars paid at the time of judgment that will compensate a plaintiff for future pain and suffering.4

Similarly, future economic damages are reduced to present cash value by the jury. (CACI No. 3904.) The Comment to former BAJI No. 16.01 is also instructive:

[T]he Salgado court concluded that when an award for future economic damages is made by the jury is a present value sum, the plaintiff is entitled (if the payments are made over time) to a schedule based upon the present value determined by the jury. In other words, even if defendant can obtain an annuity that over time matches the total economic damages determined by the jury, at a lesser cost, the plaintiff is entitled to the benefit of the jury’s determination of the present value, and what that amount will produce as an annuity.5

Thus, the California Supreme Court has recognized that present cash value, and the cost to fund an award, are two separate and distinct concepts. California juries are only required to make findings with regard to the former.

Language in some California cases which suggests that the cost of an annuity is evidence of the “total value” of periodic payments is inapposite. Those case are referencing separate determinations concerning certain Civil Code provisions which are made by the trial court only after the jury has made a present cash value determination.6 Further, California courts have repeatedly endorsed the “investment” approach for the jury’s determination of present cash value.7

Holt v. Regents of the Univ. of California (1999) 73 Cal.App.4th 871 is instructive. In Holt, the First District Court of Appeal specifically warned of the danger of confusing the cost of an annuity to fund payment of a judgment with the underlying present value of the judgment itself:

In their concern over the use of an annuity, the parties tend to confuse two separate concepts:

(1) the manner in which the defendant complies with a judgment for periodic payments, and

(2) the present value of the gross award. As a rule, the manner in which the defendant complies with a judgment ordering periodic payments of economic damages in a MICRA case is the defendant’s decision, regardless of any finding of present value. For example, the defendant can fund the judgment itself simply by writing a check to the plaintiff each payment period, or it can purchase an annuity to fund the stream of payments ordered by the court.

Of course, both these alternatives leave the defendant liable for the balance of the judgment until it is fully satisfied. Assuming the plaintiff has not exercised his or her statutory right to periodic payments, the defendant can also pay the present cash value of the gross award in a lump sum and obtain a satisfaction of judgment...

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