and because the dangers of operating the machine without a guard were obvious. Hobart also filed a third-party complaint against Super, contending that if Hobart was liable, then Super's removal of the guard constituted an intervening event which caused the accident.
A jury trial was held from January 29 to February 8, 1996. The jury found for Liriano and awarded him $ 650,000. Pursuant to this Court's Opinion and Order of July 23, 1996,
a retrial was held to determine the existence and extent of Liriano's comparative negligence. On September 9, 1996, the retrial jury found in a special verdict that plaintiff was 33.3% comparatively negligent, and awarded damages in the total amount of $ 1,352,500.
A hearing was held on December 23, 1996 in which the parties provided expert testimony regarding the applicable discount rates. The parties also submitted post-hearing materials and arguments regarding the discount rate issue.
Applicable Legal Standard
Article 50-B creates a "structured judgment" for personal injury awards whereby future damages above $ 250,000 are paid out in periodic installments rather than in one lump sum. The complex statutory guidelines of Article 50-B were thoroughly reviewed in Alvarez-Icaza v. Cartier Inc., 920 F. Supp. 449 (S.D.N.Y. 1996). Under Article 50-B, Liriano's judgment must be awarded in the following way:
(1) First, all attorney's fees and litigation expenses (including those related to future damages) are paid in a lump sum. N.Y.C.P.L.R. § 5041(c).
(2) Next, the entire amount of any past damages award, and the first $ 250,000 of any future damages award is also paid as a lump sum. Id. § 5041(b).
(3) The remaining future damages payments (i.e., total future damages award less the $ 250,000 lump sum payment and less attorney's fees and expenses) (the "Remainder") are reduced to the present value of an annuity contract that will provide for payment of the remaining amounts of future damages in periodic installments, but for no more than 10 years for a future pain and suffering award. Id. § 5041(e). The first year's annual payment is the Remainder divided by the number of years over which the payments will be made. Each succeeding year's payment is increased by 4% per year. Id.
(4) The present value of the annuity contract is to be determined "in accordance with generally accepted actuarial practices by applying the discount rate in effect at the time of the award" to the remaining future damages payments. Id.
Therein lies the rub. Article 50-B provides no guidance as to how a court should determine the discount rate "in effect at the time of the award", and the parties to this lawsuit have failed to agree on an applicable rate.
Thus, the Court must determine the proper discount rate. See In re New York Asbestos Litig., 847 F. Supp. 1086, 1112 (S.D.N.Y. 1994), aff'd in part, vacated in part sub nom. Consorti v. Armstrong World Indus., Inc., 72 F.3d 1003 (2d Cir. 1995), vacated on other grounds, 116 S. Ct. 2576 (1996).
Generally speaking, a "discount rate" is a way of estimating the time value of money, an important factor that is used in the process of determining the present value of a future cash flow.
The simplest formula for approximating the present value of a cash flow one year from now may be expressed:
PV = C/1 r