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The Effect of Inflation on Damages for Future Losses

Under the modern view expressed by a majority of jurisdictions, including California, the effect of anticipated inflation is a proper factor to be considered by the jury in arriving at an award for damages for future losses. As early as 1948, California law approved consideration of inflation as a matter of economic reality. In Kircher v. Atchison, T. & S. F. Ry. Co. (1948) 32 Cal.2d 176, 187, the Court stated: It is a matter of common knowledge, and of which judicial notice may be taken, that the purchasing power of the dollar has decreased to approximately one-half what it was prior to the present inflationary spiral [citations omitted], and the trier of facts should take this factor into consideration in determining the amount of damages necessary to compensate an injured person for the loss sustained as a result of the injuries suffered. See also Burke v. City and County of San Francisco (1952) 111 Cal.App.2d 314, 321-322.

In Miles v. City of San Rafael (1974) 42 Cal.App.3d 230, 243, the court upheld a verdict of $4,025,000 for an 11-year old disabled boy and rejected the defendant's argument that the inflation rates were too high. The court stated that anticipated future increases in medical expenses may be considered by the jury and that expert testimony may be used with regard to a "subject that is sufficiently beyond common experience that the opinion of an expert would assist the trier of fact," citing Evidence Code section 801.

Also, in Rodriguez v. McDonnell Douglas Corp. (1978) 87 Cal. App.3d 626, 662, the Court rejected the defendant's argument that in making the award it was improper for the jury to take into account inflationary trends. The court noted that California law has long approved consideration of the factor of inflation as a matter of economic reality. In United States v. English 521 F.2d 63 (9th Cir. 1975), the court, applying California law, recognized the propriety of considering future inflation in awarding damages, stating: "We hold that a trier of fact may take into account future estimates of changes in the purchasing power of money in arriving at a damage award under California law." The Court cautioned that the estimate of future inflation must be supported by sound and substantial economic evidence. Id., at pp. 74-76. The correctness of this decision was recognized by the Unit

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