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June 24, 2020 • njlawpages

By:  Mr. Hegarty

Q:        When were you born sir?

A:         July 8, 1939.

Q:        How old are you?

A:         46.

Q:        What’s your occupation?

A:         I am an actuary and manager of the Chicago office of Whiteacre Company.  (The name is changed)  (3 pages of qualifications omitted)

Q:        Now, what does an actuarial clerk do?

A:         Performs actuarial calculations.

Q:        What are actuarial calculations?

A:         Primarily calculations of present values of annuities, the insurance premiums required to provide life insurance, cash surrender values, dividends.

Q:        Did you major in mathematics in the last two years of your undergraduate training?

A          The school I went to, Honors Mathematics, I took practically nothing but mathematics.

Q:        Now, that in itself had nothing to do with actuarial science, did it?

A:         It had quite a bit to do with actuarial science because actuarial science is primarily mathematics.

Q:        Yes, but it’s not actuarial science, is it?  It’s pure mathematics, it could be used for anything, couldn’t it?

A:         Some of it could, but some of the courses I took were actuarial mathematics courses.

Q:        How many of those did you take?

A:         Two specifically that were actuarial mathematics courses.

Q:        Two courses?  What were they called?

A:         Theory of Interest and Finite Difference and Life contingencies.

Q:        Okay.  And where did you go to work after the Standard Life Company?

A:         The Chicago office of the Whiteacre Company.

Q:        Have you been employed there from ’66 until today?

A:         From January ’67 until today, yes sir.

Q:        And what kind of company is the Whiteacre Company?

A:         Consulting actuaries and employee benefit consultants.

Q:        Consulting actuaries.  What else?

A:         And employee benefit consultants.

Q:        Employee benefit consultants.  Okay.  Are you an economist, sir?

A:         No, sir.

Q:        Do you have any education of any kind in economy, economic theories or the science of economics?

A:         I took an undergraduate course at the University of Western Ontario.  I took a commercial course at the University of Chicago.  There were some economics involved in my study of the actuarial exams.

Q:        So we have two courses in economics, more or less, and a third course partially involved in math, is that right?

A:         The Society of Actuaries course, it’s a course of reading, not a formal-taught course, but that’s approximately correct.

Q:        You consider yourself to be an expert in the science of economics?

A:         No, sir.

            (three pages are skipped)

Q:        What background expertise in school do you have to predict future economic events, if any?

A:         The only economic events that I would consider myself to have any expertise are in the area of rates of return on funds invested.  I did take in school one course in investment.

Q:        Are you through?

A:         Yes.

Q:        And how many courses does an economist need to take to become a Ph.D. economist, if you know?

A:         I have no idea.

            (skipped one page)

Q:        In your work at the Whiteacre Company, have you had occasion to determine the present value of a wage earner’s future income, sir?

A:         Yes, sir.

Q:        And when would be the first time you did that?

A:         Probably January 1967,

Q:        And what would be the occasion for that, sir?

A:         I routinely calculate to the present value of future wages of employees for my clients.

Q:        Why would you do that?

A:         To determine the costs of my client’s pension plans.

Q:        What would pension plans have to do with wages, sir?

A:         We routinely compute the cost of pension plan as a percentage of wages.

Q:        You mean to tell me that in determining a pension plan benefit, you have to take into account a future wage growth rate and an inflationary rate, sir?

A:         Yes, sir?

Q:        Do you do that every time you determine pension benefits?

A:         Any pension benefit that is related to pay or related to an inflation-driven component.

Q:        Do you have any pension clients, sir, that you do that for now?

A:         Yes, sir.

Q:        Who are they?

A:         Blackacre Retirement System.

            (The client name is changed)

Q:        Now, before you go any further, what’s your assumption in that pension plan of future money growth, do you know?

A:         I’m quite sure I recall the number exactly.

Q:        What is it?

A:         It’s 8 percent.

Q:        And what is your assumption, if you can recall, in that particular pension plan of the consumer price index?

A:         I don’t believe there is a specific assumption for the consumer price index in that plan.

Q:        Well, how could you determine what I have just asked you about, present value of future earnings of a wage earner, without that component, sir?

A:         You need not assume a rate of inflation.  You could assume a rate of increase in pay directly. (Future wage growth rate)

Q:        Well, what do you assume, then, for that?

A:         To the best of my recollection, it’s 8 percent.

Q:        So there is no differential between the two?

A:         In that case, that’s correct.

Q:        And you do that for your clients where you assume the interest rate (Money Growth Rate) to be 8 percent and the real growth pay (Wage Growth Rate) to be 8 percent, but in this case, you have assumed the interest rate to be 9.5 or 9.15 and the Wage Growth Rate to be only 5.5, is that right?

A:         No, that is not right.

Q:        What is right?

A:         The assumptions I use for the Blackacre retirement system are for a specific purpose.

Q:        What’s the purpose?

A:         The purpose is to determine a level of contributions from the Blackacre entity which will support the benefits provided by that system.

Q:        I thought you just told me that in a pension plan, you take into account your job, and you have in the past, and you do now, determine the present value of the future wages of an earner.  I think I asked you that.  You said you did in pension plans?

A:         I did that, yes sir.

Q:        Just a minute ago you said you are doing a pension plan now.  You identified it.  You indicated you did all that, and now you are telling me you don’t do that.

A:         No.  I said I did that, I do do that, and what I said so far is correct.

Q:        Do you have documents back at your office indicating the assumption you made about interest rate and real growth rate showing 8 percent for each one?

A:         For this particular pension plan we are talking about, the documents exist in the office, yes sir.

            (These documents were subsequently produced)

Q:        Okay.  And how many documents would they be, numbers?

A:         For this particular plan?

Q:        Yes.

A:         There is one per year.

Q:        You have one for 1985?

A:         Not yet.

Q:        ’84?

A:         Yes, sir.

Q:        Can you produce that to your attorney?

Later on

Cross Examination of an Actuary

June 24, 2020 • njlawpages

An actuary is not an economist.  Actuaries are not experts in predicting future economic events based on past economic facts.  An actuary is a mathematician who performs actuarial calculations usually in connection with insurance companies and pension plans.  They determine the present value of annuities and the cash surrender value and the cost of premiums for insurance policies.  When an actuary is called to testify for the defense in a Wrongful Death case his job is to prepare a report which minimizes the present cash value of the deceased wage earner’s lifetime earnings.

To effectively cross examine an actuary the plaintiff attorney must emphasize that the actuary has no economic expertise.  The attorney must be able to establish that the assumptions that the actuary made in his report regarding future wage growth rate and the future money growth rate were arbitrary assumptions taken only for the purpose of decreasing the present value of the wage earners lifetime earnings.

When an actuary prepares his report on the plaintiff’s decedent, he is not economically analyzing the historic wage and money growth rates and then predicting fairly how these two trends will affect the wage earners gross future earnings.  He cannot do this.  He is not an economist.  The actuary simply performs a series of calculations using the highest possible money growth rate (this is also called the inflation rate or interest rate) and the lowest possible wage growth rate (this is also called “earnings growth rate”).  It is imperative that the attorney understands that to choose a specific figure for the future “money growth rate” and for the future “wage growth rate” requires an economic theory and an economic analysis.  An actuary cannot arbitrarily choose these rates to effect a desired result.

Car accident attorneys must be clear that in calculating the present value of lifetime earnings we have these two opposing factors, the wage growth rate and the money growth rate.  If we assume that the wage growth rate is eight percent and that the money growth rate or the inflation rate is eight percent then there is no discount and no reduction of a worker’s gross future earnings.  To obtain the present cash value of a worker’s lifetime earnings one simply multiplies an individuals salary with fringe benefits times the number of years the worker was expected to continue to work.  This is what a plaintiff normally wants to achieve.  Defendants would like to have a higher money growth rate or inflation rate and a lower wage growth rate and then they can reduce the worker’s gross future earnings by this discount rate (money growth rate less wage growth rate).  Defendants would like to look at the late 1970’s and the high inflation rate we experienced at that time.

The actuary must make reasonable assumptions of the wage growth rate and the money growth rate when he prepares a pension plan for a client.  These “reasonable” assumptions are usually far different from the assumptions he makes in the analysis of a deceased wage earner’s future earnings.  If you wish to establish this inconsistency, subpoena the Actuarial Valuation Reports prepared by the actuary or his firm for their largest clients’ pension plans.

The cross examination which follows was conducted after the defense actuary sent the plaintiff attorney a very adverse report styled, “The pecuniary loss of the survivors of the deceased worker” where he found the present value of the pecuniary loss to be only fifty (50) percent of what the plaintiff economist found. (Approximately $340,000 as opposed to $680,000)

Child support drama continues 34 years after divorce

June 27, 2017 • njlawpages

When a couple with young children divorces, one parent will most likely be required to pay child support in order to ensure that the financial needs of the children will continue to be met after the divorce is finalized with their fl divorce lawyer.

In Illinois, child support is important for many custodial parents because it contributes toward paying the expenses that go along with raising a child such as food, housing and clothing. If a parent who has been ordered by the court to pay child support fails to do so, the custodial parent does have a right to legally pursue the payments they are entitled to.

One battle regarding unpaid child support has been brought to the court once again after 34 years. The case involves a couple who divorced in the 1970s. They were married for 17 years and now have three grown children. However, the woman never received a child support judgment she was owed by her ex and she is determined to collect the child support she needed over 30 years ago when raising her children.

When the couple divorced in 1977, the woman’s ex-husband agreed pay $14,393.57 for child support in their divorce settlement. However, the judgment was never paid and the couple has been fighting over the legal issue since. The woman claims that she was forced to go on welfare because she never received the money. With interest, the judgment now totals nearly $100,000.

The 75-year-old woman recently called her ex-husband, a retired carpenter, in an attempt to resolve their dispute over the unpaid child support. She said that she “begged him to settle” but he hung up the phone on her.

Explaining that all she wanted was justice, the woman gave testimony before a Supreme Court justice. Her lawyer said that under normal circumstances, a judgment dating back so many years would not be enforceable. However, in the case of an unpaid child support judgment, the payment may still be enforced.

Most teenage car accidents caused by inexperience, distraction

June 27, 2017 • njlawpages

Last week one of our Florida personal injury attorneys wrote about how the number one cause of death for teenagers is car accidents and that nearly 40 percent of fatal teenage car accidents involve drinking and driving. Recently, a new study has found that the vast majority of teenage car accidents both fatal and non-fatal are caused by inexperience and distraction. The new finding may also show just how dangerous the combination of alcohol and driving is for young drivers. In this post we will discuss some of the other findings of the new study on teenage car accidents.

According to the director of the epidemiology and biostatistics at the Center for Injury Research and Prevention at Children’s Hospital of Philadelphia the importance of the new study is that it shows the majority of teenage car accidents occur because teenage drivers do not have the required skill set to be behind the wheel and not because they are engaging in bad behavior or reckless driving.

The new study conducted by the Center for Injury Research and State Farm Insurance reviewed around 800 teenage car crashes from around the country and found that over 75 percent of teen crashes are caused by a critical teen driving error. A critical teen driving error is one that occurs immediately before the crash, and the study found three common errors that accounted for half of the accidents. shares info like this all the time.

Those three common errors are driving too fast for conditions and not only driving over the speed limit, lacking the skills to scan or observe the road environment and being distracted by someone or something inside or outside of the vehicle. The study suggests that parents should work with their teenage drivers to improve driving skills.

Parents can help teens learn how to look ahead of the car in front them and to look right and left of the vehicle in order to be more aware of their environment. Parents should also help teens learn to control their speed in different weather and traffic conditions. Finally, parents should encourage teens to reduce distractions in the car by eliminating the use of electronic devices except in emergency and ensure passengers are not disruptive.