Correction Concerning the Treatment of Federal Income Taxes in Personal Injury and Wrongful Death Litigation in the State Courts

Guest and Schap (2014a and 2014b) cite case law for West Virginia that is not controlling in that state. In private correspondence, Michael Brookshire indicated that the controlling case of Hicks ex rel. Saus v. Jones (2005) should have been cited instead. The consequence of the error was misclassification of West Virginia as a state that adjusts awards to account for their tax-advantaged treatment in cases involving personal physical injury/sickness under the federal income tax code, when in fact West Virginia should have been listed among the states that make no adjustment for taxes in such proceedings. Reclassification reduces the total number of ‘‘Adjust the Damage Award to Account for the Income Tax Exclusion’’ type jurisdictions to 12 (including D.C., but also counting New York, which adjusts for taxes only in medical/dental malpractice type cases, and Washington, which has case law that seems to suggest an adjustment may be warranted in cases involving annual income loss at the high end of the income spectrum), whereas the revised number for ‘‘Do Not Adjust’’ type states rises to a total of 31 (including New York, except in medical/dental malpractice type cases, and Washington in all but high income situations). Not all states have definitive pronouncements on the issue.