LAW 512-001 – Torts II

Reduce to Present Value


An award for future damages must be awarded as a definite lump sum amount set at the time of the judgment.

There are three ways of reducing to present value:

  1. Inflation-discount method
    • Accounts for interest and inflation separately.
  2. Real interest method
    • Sets a flat interest rate approximating the practical rate.
    • Based on the principal that overpaying the plaintiff is better than underpaying him.
  3. Total offset method
    • Says that interest and inflation will cancel each other out and just pays the actual awarded amount.