This article first appeared in the summer 2001 issue of the Expert Witness.

In its October 17, 2000 rulings in the *Duncan v. Baddeley* and *Brooks v. Stefura* cases, the Court of Appeal was concerned about overlapping claims between the *Fatal Accidents Act* (FAA) and the *Survival of Actions Act* (SAA).

Although the Court set out explicit instructions for avoiding double *recovery* under these Acts – that is, awarding one plaintiff the “same” dollar of the deceased’s income twice – it also expressed concern about the possibility of double *payment* – that is, paying the “same” dollar to two different claimants.

The purpose of this article is to describe the Court’s method for avoiding double recovery, to discuss some of the circumstances in which claimants might obtain double payment, and to suggest a methodology for avoiding double payment.

## Avoiding Double Recovery

At paragraph [14] of *Brooks*, the Court set out the following methodology for avoiding double recovery:

*Calculate the dependency (FAA) award to each person.*For example, a widow would receive a dependency claim for the length of her, or her husband’s, life expectancy and a dependent child would receive such a claim until he or she would have ceased to be dependent.*Calculate the lost years (SAA) award.*For example, a widow and the deceased’s children (not just those who were dependent) would share in the deceased’s expected lifetime income, after deduction of taxes and the “personal consumption deduction.”*Allocate the lost years award using the will or the*Intestate Succession Act*(ISA).*Under the ISA, the widow or widower would receive the first $40,000 of the lost year award and the remainder would be divided equally among the eligible family members.*Compare the dependency and lost years awards for each claimant and reduce the dependency awards by the amount of the lost years award (if the former exceeds the latter).*For example, if the widow was eligible for $150,000 under the FAA and $80,000 under the SAA, this step would calculate a differential of $70,000. Whereas if the child’s dependency (FAA) claim was $30,000 and lost years (SAA) claim was $50,000, no differential would be calculated*If the lost years award is greater than the dependency claim for any plaintiff, that plaintiff receives only the lost years award.*In the example developed here, the child would receive only his or her lost years award, $50,000.*If the dependency award is greater than the lost years award, the plaintiff receives the full lost years award plus the difference between the two as the dependency award.*In the example developed here, the widow would receive her lost years award, of $80,000 plus the differential calculated in step 4, $70,000. That is, she would receive her full dependency award of $150,000.

Neither party has received the “same” dollar twice. The widow’s award has come strictly from the dependency claim and the child’s award has come strictly from the lost year’s claim.

## Avoiding Double Payment

Note that in the example developed above, the maximum FAA claim (alone) would have been $180,000 (the widow’s $150,000 plus the child’s $30,000) and the maximum SAA claim would have been $130,000 (the widow’s $80,000 plus the child’s $50,000). Yet, applying the Court’s method, the claimants would receive $200,000 (the widow’s $150,000 FAA claim plus the child’s $50,000 SAA claim). That is, they would receive more than would have been allowed under either of the Acts alone.

This is one form of what the Court of Appeal called “double payment.” Most of the dollars in the $130,000 lost years claim come from the same source as the $180,000 dependency claim – that is, from the deceased’s income after-taxes and after-personal consumption. In that sense, the child’s lost years claim represents a second claim on the “same” dollars as the dependency claim.

It is even possible to imagine situations in which the sum of the plaintiffs’ awards would exceed the deceased’s total (after-tax) income. For example, assume that the present value of the deceased’s lifetime (after-tax) income was $500,000 and that the widow’s dependency on that amount was 70 percent, or $350,000.

Assume also that the deceased’s personal consumption deduction was 40 percent, leaving 60 percent, or $300,000, for the lost years claims. If the will divided the estate equally among the widow and her two (non-dependent) children, each of them would be entitled to $100,000. In this case, the Court of Appeal’s method would allocate $350,000 (the FAA claim) to the widow and $200,000 (the two SAA claims) to the children. The total, $550,000, would exceed the deceased’s entire income.

The Court, in its paragraph [19] appears to have recognised this problem; for there it notes that:

If the dependants and the heirs are not the same people, the lost years’ award would be paid to the beneficiaries of the deceased’s estate, rather than to the dependants…. [A] defendant could potentially pay double damages by having to pay full dependency and lost years’ awards, with no accounting.

The Court, however, offers no method for dealing with this problem. I suggest the use of a method that is based on a concept that I call the *overall limit.* The value of this limit is calculated in the following way. First, determine the total dependency claim of all dependent members of the family. In the first example developed above, for example, this value was $180,000 ($150,000 for the widow and $30,000 for the dependent child). Second, determine the total lost years claim of all beneficiaries of the deceased’s estate ($130,000 in the example developed above – $80,000 for the widow and $50,000 for the child). The overall limit is the larger of these two numbers – here, $180,000.

I assume that the total award granted under both the FAA and the SAA cannot exceed the largest award that would be granted by one Act – that is, it cannot be larger than the “overall limit.” Therefore, I propose that the following method be used to determine the parties’ awards. First, estimate the total FAA and SAA awards and define the overall limit as the greater of the two total awards. Second, award the surviving spouse his or her FAA or SAA entitlement, whichever is greater. Finally, award any children their FAA amount, plus their share of any greater SAA, up to the limit imposed by the overall limit. For one child this is simple, as I show in the examples below. For two or more I assume the extra SAA dollars would be allocated equally, in proportion to each child’s FAA award, or using some other formula.

## Numerical Examples

In this section, I provide four examples of the application of my suggested method. For the purpose of these examples I will assume a personal consumption deduction of 35 percent. This was endorsed by the Court of Appeal in *Duncan*, and the approach used in *Duncan* was endorsed in *Brooks,* though a particular percentage was not specified. [I note with all due respect that, following these decisions, there remains a conflict between the idea that the estate’s award should not depend on the victim’s future spending decisions (*Brooks* at paragraph [29]) and the statement that the deduction does depend on the number of children in the victim’s hypothetical future family (*Brooks* at paragraph [28]). This conflict has been present since the original Court of Appeal decision in *Duncan*, and we have covered the issue in earlier newsletters.]

I also assume in my examples that the FAA awards are calculated using a 78 percent dependency rate for a surviving parent and two children, a 74 percent rate for a parent and one child and 70 percent for the parent only. The problem of double payment will be present at any conventionally used rates. Finally, note that the FAA award is calculated using joint mortality while the estate calculation uses only the mortality contingency of the deceased.

### Example #1 – Without Divorce and Remarriage

The first example assumes that a man has died, leaving his wife and one child. For simplicity I consider only future losses, though the analysis is the same in the pre-trial period. The deceased would have been 50 years old at the date of settlement, the surviving spouse will be the same age, and the child will be 15. The child is assumed to be dependent until the age of 22, which is the parents’ age 57. The deceased would have earned a before-tax income of $40,000 and an after-tax income of $30,000, with no changes until retirement at 62. Contingencies are balanced and are therefore ignored, and I apply Economica’s usual 4.00 percent discount rate and 1 percent rate of productivity increase. Following the steps listed in *Brooks*, we would calculate the figures provided below:

- The dependency awards are $171,897 to the parent and $33,818 to the child, for a total of $205,715. The present value of all after-tax income is $283,433, so the total FAA loss to the family is 72.58 percent of the deceased’s after-tax income.
- The estate award is valued at $188,613, which is 66.55 percent of the joint mortality value of after-tax income.
- Using the ISA, $114,306.50 is allocated to the surviving spouse and $74,306.50 is allocated to the child. (The parent receives $40,000 more than the child.)
- For the parent, the dependency award is reduced to $57,590.50 (= $171,897 less $114,306.50). In the child’s case the SAA award is larger and no reduced FAA is calculated.
- The child receives their lost years award of
**$74,306.50**. - The parent receives $114,306.50 under the SAA and $57,590.50 under the FAA, implying a total equal to the original FAA award of
**$171,897**.

Notice that the overall award to the family would be **$246,203.50**, which is 86.86 percent of the present value of joint mortality after-tax income. I would set an overall limit of **$205,715** (since the combined FAA award is larger than the combined SAA award of $188,613). The difference between the given total and the overall limit is **$40,488.50**, and that is the amount of the double-payment in this example. That amount is deducted from the $74,306.50 awarded to the child at step 5, such that the child’s final joint award is simply their original dependency award of $33,818.

### Example #2 – As in Example #1 but With Divorce and Remarriage

I now alter the above example to apply standard divorce and remarriage contingencies to the spouse’s FAA claim. All other assumptions remain unchanged. The revised figures are provided below:

- The dependency awards are now $151,775 to the parent and $33,818 to the child, for a total of $185,593. Note that the total FAA loss to the family has been reduced to 65.48 percent of the deceased’s after-tax income.
- The estate award is still valued at $188,613 (66.55% of after-tax income).
- Using the ISA, $114,306.50 is allocated to the surviving spouse and $74,306.50 is allocated to the child.
- For the parent, the dependency award is reduced to $37,468.50 (= $151,775 less $114,306.50). In the child’s case the SAA award is larger and no reduced FAA is calculated.
- The child receives their lost years award of
**$74,306.50**. - The parent receives $114,306.50 under the SAA and $37,468.50 under the FAA, implying a total equal to the “divorce and remarriage” FAA award of
**$151,775**.

Notice that the overall award to the family would be **$226,081.50**, which is 79.75 percent of the present value of joint mortality after-tax income. I would set an overall limit of **$188,613** (since the combined SAA award is now larger than the combined FAA award of $185,593). The difference between the given total and the overall limit is **$37,468.50**, and that is the amount of the double-payment in this example. It is not a coincidence that that is the amount of the spouse’s FAA award – by definition a double payment is that part of a combined award to one party in excess of the amount they would receive under the Act which sets the overall limit. (To go back to the no-divorce version, note that the double payment of $40,488.50 can also be calculated as the child’s FAA award of $74,306.50 less their SAA award of $33,818.) Of course, the double payment can be eliminated on either side – if the spouse’s FAA award is deemed to take precedence then the double payment is deducted from the child’s combined award, while the reverse should be done if the courts decide that the SAA amount takes precedence.

### Example #3 – Without Divorce and Remarriage

The third example assumes that the deceased would have been 30 years old at the date of settlement, the surviving spouse will be the same age, and the child will be 5. The child is assumed to be dependent until the age of 22, which is the parents’ age 47. The deceased would again have earned a before-tax income of $40,000 and an after-tax income of $30,000, with no changes until retirement at 62. The resulting calculation is:

- The dependency awards are $355,957 to the parent and $72,682 to the child, for a total of $428,639. The present value of all after-tax income is $589,892, so the total FAA loss to the family is 72.66 percent of the deceased’s after-tax income.
- The estate award is valued at $390,215, which is 66.15 percent of the joint mortality (FAA) value of after-tax income.
- Using the ISA, $215,107.50 is allocated to the surviving spouse and $175,107.50 is allocated to the child.
- For the parent, the dependency award is reduced to $140,849.50 (= $355,957 less $215,107.50). In the child’s case the SAA award is larger and no reduced FAA is calculated.
- The child receives their lost years award of
**$175,107.50**. - The parent receives $215,107.50 under the SAA and $140,849.50 under the FAA, implying a total equal to the original FAA award of
**$355,957**.

Notice that the overall award to the family would be **$531,064.50**, which is 90.03 percent of the present value of joint mortality after-tax income. I would set an overall limit of **$428,639** (since the combined FAA award is larger than the combined SAA award of $390,215). The difference between the given total and the overall limit is **$102,425.50**, and that is the amount of the double-payment in this example.

Note that as in the first example, when one Act (here, the FAA) determines the limit then the double payment is the difference between what one person (the child, in this case) receives using the *Brooks* formula ($175,107.50 under the SAA) and what they would receive under just the Act which sets the limit ($72,682).

### Example #4 – With Divorce and Remarriage

The fourth example assumes that the deceased would have been 40 years old at the date of settlement, the surviving spouse will be the same age, and that there are two children aged 8 and 12. The children are each assumed to be dependent until their age 18, which is the parents’ ages 46 and 50. The deceased would have earned a before-tax income of $60,000 and an after-tax income of $44,000, with no changes until retirement at 62. Divorce and remarriage apply. The resulting *Brooks-Stefura* calculation is:

- The dependency awards are $274,407 to the wife, $37,217 to the older child and $62,027 to the younger child, for a total of $373,651.
- The estate award is valued at $444,776.
- Using the ISA, $174,926 is allocated to the surviving spouse and $134,925 is allocated to each child.
- For the parent, the dependency award is reduced to $99,481 (= $274,407 less $174,926). In the children’s cases the SAA awards are much larger and no reduced FAA is calculated.
- The children each receive their lost years award of
**$134,925**. - The parent receives $174,926 under the SAA and $99,481 under the FAA, implying a total equal to the original FAA award of
**$274,407**.

Notice that the overall award to the family would be **$544,257**. I would set an overall limit of **$444,776** (since the combined SAA award is larger than the combined FAA award of $373,651). The difference between the given total and the overall limit is **$99,481**, and that is the amount of the double-payment.

Note that again, when one Act (here, the SAA) determines the limit then the double payment is the difference between what one person (the spouse, in this case) receives using the *Brooks* formula ($274,407 under the FAA) and what they would receive under just the Act which sets the limit ($174,926 under the SAA).

The correction for the given double-payment can again be made in either of two ways. If the SAA award is deemed to take primacy, then the spouse is simply awarded $174,926 while the children receive their estate amount. If the FAA is primary then the spouse receives the full $274,407 and the children’s SAA total of $269,850 (= $134,925 x 2) must be reduced by the overpayment amount. The children’s combined award would therefore be $170,369 (= $269,850 – $99,481). This could be divided between them equally or in proportion to the shares they would receive under the FAA (which I would argue is sensible, since the FAA is being deemed primary in this case). In that event the younger child would receive $106,481 and the 12-year-old would receive $63,888.

In considering the four examples presented, it is apparent that for younger surviving spouses, the amount available under the *Survival of Actions Act* will often be significantly larger than a “divorce and remarriage adjusted” *Fatal Accidents Act* claim. If we assume (as I would expect) that the courts will consider the FAA awards paramount, then in example #1 and the first part of example #2 the double payment will be deducted from the child’s SAA amount. For the children of a younger couple, the award available to them under the SAA can become very significant when their estate claim “recaptures” dollars lost to divorce and remarriage contingencies under the FAA.

The examples above suggest that when joint FAA/SAA claims are made, one way to proceed is as follows: First, estimate each person’s FAA and SAA award and define the overall limit as the greater of the two total awards. Second, award the surviving spouse their FAA or SAA entitlement, whichever is greater. Finally, award any children their FAA amount, plus their share of any greater SAA, up to the limit imposed by the overall limit.

Of course, when all of the family members involved receive higher awards under one act or the other, then there is no need for any further calculation. For example, when there are no children, and absent divorce and remarriage, the spouse’s 70 percent dependency under the FAA will generally be greater than their 65 percent entitlement under the SAA (though they are closer than the rates would seem to indicate because the SAA uses sole mortality while the FAA adds the survivor’s mortality as well).