Annuity Testimony and the Risk of Double Discounting
Posted: 7 Sep 2000
Attorneys are sometimes permitted to introduce testimony at trial regarding the cost of an annuity as a measure of present value of future damages in tort cases. There is a serious problem when the annuitist testifies?a problem of double discounting. We have encountered this problem no fewer than five times in the past two years in our (separate) forensic economics practices. The defense attorney retains an annuitist to determine the cost of an annuity that will replace the plaintiff economist's assessment of future loss. The problem occurs when the annuitist testifies as to the cost of annuities that will pay, in the future, the dollar amounts found in the Present Value of Loss column in the economist's future loss table. The result is that future losses have been reduced to present value twice, introducing downward bias. The role that the economist can play when this occurs is discussed.
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