Economic Damage Assessment

Personal damages arise most commonly in litigation involving wrongful death, personal injury, employment discrimination, or wrongful termination from employment. Business losses are associated with such actions as antitrust, breach of contract, environmental concerns, intellectual property infringement, or securities fraud. Regardless of the particular nature of the incident, the assessment of economic damages proceeds from an understanding of the legal theory of the case and the associated remedy. Statistical science is used frequently in assessing economic damages associated with product liability, class actions, business litigation, and various other types of disputes involving alleged losses to individuals or businesses. In such projects, Exponent’s statisticians collect and analyze sample data to make defensible extrapolations to larger populations of interest, or we may evaluate the validity of extrapolations performed by others.

A typical economic damage assessment involves the following steps:

  1. Sampling from a population of damaged or allegedly damaged units 
  2. Evaluation of sampled items 
  3. Assessment of potential factors that may affect the extent of damage 
  4. Use of statistical methods to estimate total damages for the entire population.

The units of the population may be individual people, products, financial accounts or transactions, or other quantities, depending on the particular circumstances of the project. Efforts to collect information from a sample of population units should be designed in accordance with statistical principles and best practices. Our statisticians develop sampling plans to ensure that the population is adequately represented by the selected units, that potential biases in selection and measurement are avoided or minimized, and that the number of units sampled is adequate to address the key research questions credibly. In some cases, units not included in the affected population may also be sampled for purposes of comparison and control.

Projects in which data on economic damages are collected from surveys of involved parties merit special attention in several respects. Questions should be constructed precisely, using any relevant definitions from prior agreements, judicial decisions, or applicable statutes. When responses cannot be obtained from every sampled individual, the level and determinants of non-response should be evaluated in assessing the reliability of conclusions to be drawn from the survey.

If individual attributes affect the extent of damage, Exponent statisticians can estimate these effects and adjust for them using regression models and related methods. For example, in a construction defect case, the extent of damages may vary across building phases. In a dispute involving alleged salary discrimination because of race or gender, observed differences in salary may be attributable, at least in part, to differences in education and experience. The decision to use multiple regression or an alternative method of adjustment, such as logistic regression or time series analysis, will depend on the specific characteristics of the problem. Regardless of the statistical methods used, proper accounting for the influence of relevant attributes will improve the accuracy and precision of the estimate of total damages.

Our statisticians and data analysis professionals have the expertise to choose the best approach for any specific damage assessment project. We will evaluate the data sources and statistical assumptions underlying the assessment, and provide an analysis of the confidence in the conclusions, including the robustness (i.e., sensitivity) of damage estimates to methodology assumptions.