On certification to the Superior Court, Appellate Division, whose opinion is reported at 204 N.J. Super. 288 (1985).
For reversal -- Chief Justice Wilentz and Justices Clifford, Handler, O'Hern, Garibaldi and Stein. Pollock, J., concurring in part and dissenting in part. The opinion of the Court was delivered by Stein, J. Pollock, J., concurring in part and dissenting in part.
[105 NJ Page 224] This case and Ruff v. Weintraub, 105 N.J. 233 (1986), which we also decide today, require the Court to determine whether the effect of federal and state income taxes on personal-injury damage awards may be addressed by expert witnesses or
included in the jury charge. The specific issue in this case is whether the trial court must instruct the jury, upon request, that personal-injury damage awards are not subject to federal or state income tax. We agree with the Appellate Division that such an instruction is proper and should be given when requested. 204 N.J. Super. 288 (1985). However, we conclude that the failure to give an instruction on the taxability of the award in this case was not reversible error. Accordingly, we reverse the judgment of the Appellate Division and reinstate the judgment in favor of plaintiff.
On June 27, 1980, plaintiff, Guy Bussell, an employee of the Suburban Fence Company, was operating a radial saw made by defendant, DeWalt Products Corporation. Plaintiff held the wood he was cutting with his left hand. As he drew the saw inward with his right hand, a co-worker bumped his left elbow, pushing his left hand into the saw and severing his thumb and first three fingers.
Bussell filed suit alleging that DeWalt was strictly liable for his injuries. At trial, plaintiff called a number of experts to testify as to damages. An employability expert testified that due to his disability, limited education, and work experience, Bussell was not likely to find employment. He also projected what plaintiff's probable work-life would have been had he not been disabled. Based on this testimony, an economics expert testified about calculations that could be made to determine the lifetime earnings lost to plaintiff as a result of his injuries.
On direct examination, plaintiff's attorney asked the economist if he had adjusted his calculations to take into account the effect of income taxes. The expert testified that he had not, explaining that the computation of future income tax liability would be extremely difficult. He conceded, however, that the gross-wage calculation should be reduced to reflect the likely
impact of income taxes, and estimated that a 15 to 20 percent reduction would be appropriate.
Defendant's attorney did not specifically object to the testimony regarding gross wages and did not explore this point further on cross-examination. He did, however, move to have the entire testimony of the economist stricken as speculative. That motion was denied.
Before the trial court instructed the jury, defense counsel requested that the following charge be given:
If you arrive at a verdict under the court's charge in favor of plaintiffs, you will not add any sum of money to the amount of the verdict on account of federal or state income taxes, since the amount awarded to a plaintiff by your verdict is not ...