SHUE v. RED CREEK CENTRAL SCHOOL DISTRICT (1998)

Facts

On September 2, 1992 while working as an employee of Shue Roofing, Inc., Joseph Shue was killed when he fell through a roof on a building owned by the Red Creek Central School District.   His wife sued the Red Creek Central School District and Dominick P. Massa and Sons, Inc. alleging violations of Section 200, 240(1) and 241(6) of the Labor Law of the State of New York. Liability was established on July 2, 1996 on a motion for summary judgment.

A trial on the issue of damages resulted in a verdict for the plaintiff in the amount of $950,000.   Each of her three children received a verdict of $200,000 for his pecuniary loss.   Also, the decedent's estate was awarded $50,000 for the pain and suffering of Joseph Shue.

Collateral Source Deductions

 On July 21, 1997 a post-verdict hearing was held regarding the collateral source offsets and the application of preverdict interest on future damages.   At the postverdict hearing the two experts, Professor Kenneth Joyce and Donald J. Judge, Esq., agreed on most of the calculations, but they disagreed as to what may be collateral source assets provided for in CPLR 4545 and preverdict interest on future damages.   The defendants have the burden of proof by a preponderance of the evidence on the issue of collateral source reductions.

 It is the plaintiff's position that since the verdict sheet did not require that damages suffered prior to the verdict and after the verdict be separately itemized pursuant to CPLR 4111(f), it is impossible to arrive at the calculations required by CPLR 5041 and EPTL 5-4.3. On that issue the court had many discussions with all counsel.   In fact, the court suggested the jury be asked to return one amount for economic loss and that the Surrogate of the County of Cayuga determine the amount to be distributed between the widow and the children.   The plaintiff objected to this and requested that the jury answer the questions as reflected by the verdict sheet.   Therefore, I reject the argument that the verdict as taken is now incapable of applying the necessary CPLR 4545 reductions.   Also, since the jury determined the number of years over which future damages would be paid, it is reasonable to divide the number of years by the total award for each recipient, and then multiply the number of years from the date of death to the date of verdict, to compute past damages.

The date of death was September 2, 1992 and the date of the verdict was March 13, 1997, resulting in a period of 4 years 192 days or 4.526 years between the date of death and the verdict.   Therefore, by multiplying the fraction 4.526 over the number of years found by the jury, the court is able to find the amount of past damages.   Interest is due on past economic loss at 9%. Both experts took the halfway point of the past damages so that by multiplying 4.526 x 9% x 1/2=20.367%.   That figure multiplied by the past damages amount results in the total damages to the recipients up to the date of the verdict.

The resulting damages are as follows:

 The next step is to apply CPLR 4545.   The question before the court is whether there are any “collateral sources” that should offset the pre-verdict damages awarded by the jury.   The plaintiff does not dispute that the Social Security payments received by Mrs. Shue are collateral source payments pursuant to CPLR Section 4545.   The plaintiff again argues that the jury's verdict is not consistent with CPLR Section 4111(f), therefore no allocation can be made as the defendants cannot prove specifically which item of pecuniary loss the social security payments replace.   This argument overlooks the fact that social security benefits replace lost wages which is the basis for the award to the plaintiff.   Therefore, the court finds that social security payments are to be deducted from the jury award.   The purpose of CPLR Section 4545 is to insure against a double recovery.   The statute states:

“(c.) Actions for personal injury, injury to property or wrongful death.

In any action brought to recover damages for personal injury, injury to property or wrongful death, where the plaintiff seeks to recover for the cost of medical care, dental care, custodial care or rehabilitation services, loss of earnings or other economic loss, evidence shall be admissible for consideration by the court to establish that any such past or future cost or expense was or will, with reasonable certainty, be replaced or indemnified, in whole or in part, from any collateral source such as insurance (except for life insurance), social security (except those benefits provided under title XVII of the social security act), workers' compensation or employee benefit programs (except such collateral sources entitled by law to liens against any recovery of the plaintiff).   If the court finds that any such cost or expense was or will, with reasonable certainty, be replaced or indemnified from any collateral source, it shall reduce the amount of the award by such finding, minus an amount equal to the premiums paid by the plaintiff for such benefits for the two-year period immediately preceding the accrual of such action and minus an amount equal to the projected future cost to the plaintiff of maintaining such benefits.   In order to find that any future cost or expense will, with reasonable certainty, be replaced or indemnified by the collateral source, the court must find that the plaintiff is legally entitled to the continued receipt of such collateral source, pursuant to a contract or otherwise enforceable agreement, subject only to the continued payment of a premium and such other financial obligations as may be required by such agreement.”

 It is clear that life insurance is not to be deducted from a plaintiff's award.   The defendants allege that since the decedent's employer paid the premiums, the proceeds result from an employee benefit program which would then qualify the proceeds as a collateral source.   The statute does not say exempt life insurance except that which is paid for by an employer, it states that life insurance is exempt.   In Adamy v. Ziriakus, 231 A.D.2d 80, 659 N.Y.S.2d 623 (4th Dept., 1997), the Appellate Division upheld the trial court that found that death benefits paid pursuant to a collective bargaining agreement between the Town of Amherst and the Amherst Police Club were in the nature of life insurance.   The defendants argue that this situation is somehow different because there was no collective bargaining agreement between the decedent and Shue Roofing, Inc.

Clearly how the life insurance was available can not be a factor in deciding if it was life insurance or an employee benefit.   In Adamy supra the death benefit was an employee benefit, but that did not prevent it from being life insurance proceeds that are exempted as a collateral source.   Also, there is no proof that life insurance proceeds are to replace lost wages.   The payment of the proceeds are made based on the death of the contract holder not on lost wages, unlike most disability policies or workers' compensation awards.   Therefore, neither the $133,000.00 that Mrs. Shue received from Prudential nor the $100,000.00 that she received from the Guardian policy will be deducted.

The collateral source offsets are as follows:

Interest on Future Damages

As noted, the experts disagree on the payment of interest on future damages.   There are two statutes that address wrongful death actions.   The Estates, Powers and Trusts Law, section 5-4.3 provides for the whole amount of the future damages, the “principal sum”, to be discounted to the date of death and interest added from that date, in this case, September 2, 1992 to the date of the verdict, March 13, 1997.   The plaintiff's expert, Professor Joyce, relies upon this process as it is required by the Court of Appeals in Milbrandt v. A.P. Green Refractories Co., 79 N.Y.2d 26, 580 N.Y.S.2d 147, 588 N.E.2d 45 (1992).

Both Professor Joyce and the defendants' expert, Mr. Judge, acknowledge that there is a conflict between the EPTL and Article 50-B of the CPLR when attempting to determine pre-verdict interest on future damages in a wrongful death action.

 CPLR section 5041 requires that the first $250,000.00 of the award for future damages be part of the judgment together with the past damages.   It further provides that the balance of the award (total less $250,000.00) be discounted in order to determine the amount of the annuity to be purchased for the payment of those damages over the number of years as the jury determined.

The attorney fees are calculated as a percentage of the past damages, the future damages up to $250,000.00 and the present value of the balance of the future damages.

Both experts agreed that the pre-verdict interest on the past damages would be calculated from a midpoint between the date of death and the date of verdict as discussed above.

As noted, it is the calculation of the interest on the future damages that has been problematic because the EPTL and the CPLR cannot be reconciled in this regard.   In Millbrandt, the Court of Appeals applied section 5-4.3 of the EPTL. However, that case was litigated prior to the enactment of section 5041 of the CPLR and therefore does not address the conflict.

In drafting Article 50-B, it is apparent that the legislature did not consider that when applied to a wrongful death action, it requires a process that is not contemplated by the EPTL. The EPTL separates past and future damages in order to determine interest.   However, unlike the provisions of the CPLR, the EPTL does not require that the first $250,000.00 of the future damages be paid at the time of the judgment and the balance paid as an annuity.   Further, the EPTL does not specify how the attorney fees are to be determined.

Article 50-B of the CPLR cannot be reconciled with EPTL section 5-4.3 and Milbrandt, supra.   As the statute was enacted after the Milbrandt case was litigated, this court must apply the applicable sections of the CPLR.

The Court of Appeals has addressed the issue of discounting an award for damages in a bifurcated trial in Pay v. State of New York, 87 N.Y.2d 1011, 643 N.Y.S.2d 467, 666 N.E.2d 172 (1996).   In that case the court, quoting its decision in Rohring v. Niagara Falls, 84 N.Y.2d 60, 614 N.Y.S.2d 714, 638 N.E.2d 62 (1994) held that “the future damages here were properly treated as a debt owed entirely as of the date of the liability verdict, and interest was properly charged against the present value of future damages from that date.”   Pay at 1013-1014, 643 N.Y.S.2d 467, 666 N.E.2d 172.

The balance of the future damages will be discounted to the date of the determination of liability, July 2, 1996, as required by Pay v. State of New York, 87 N.Y.2d 1011, 643 N.Y.S.2d 467, 666 N.E.2d 172, supra.   Attorney's fees must be calculated on the present value necessary to purchase the annuity contract to provide for the plaintiff's future damages.   Therefore:

-----

-----

Using a weighted discount rate of 6.90% adjusted to calculate interest from the date of the determination of liability, to the date of the verdict, see the following:

-----

-----

-----

HENRY J. SCUDDER, Justice.