Research & Publications

Damages: Estimating Pecuniary Loss (Chapter 8)

by Cara L. Brown

Chapter 8 - Discounting Lump Sum Awards

Regardless of the pecuniary head of damage under which an award is made, each award must typically be discounted by the expert. In other words, the award must be expressed as a lump sum in current dollars or dollars at the time of trial, accounting for the rate at which the lost income stream is expected to grow and the rate at which the lump sum is expected to accrue interest. Chapter 8 is more technical than some of the other chapters. However, it showcases the utility of economic expertise in the legal process, discussing how to forecast discount rates and choose investment instruments to apply to the discounting procedure in both the Canadian and American context. It also explores the history of discount rates, reviews economic forecasts of interest rates, and provides a recommended discount rate for litigation purposes.