A damages model that only counts what was lost, and never what was saved, earned or avoided, is half a model. The other half is where defendants live.
Start a conversation with Cournot, the Institute’s damages concierge, already scoped to mitigation, offsets & tax. Pick a starting point, or describe the dispute directly.
The gross loss is rarely the recoverable loss. Between them sits a deduction layer with three parts, and rigor here is what separates a damages analysis from an advocacy document. Mitigation is what the plaintiff did, or reasonably could have done, to stem the loss: the replacement contract, the substitute job, the cover purchase, the redeployed capacity. The legal doctrine, who bears the burden, what reasonableness requires, belongs to counsel; the economics is a counterfactual like any other, and it deserves the same discipline as the but-for world itself, because the claim is the difference between two paths and both paths need evidence. Offsets are what the injury incidentally produced or avoided: costs not incurred on sales not made, the salvage value of what remained, benefits that flowed from the same conduct that caused the harm, and the contested territory of collateral payments from insurers and other sources, where what may be deducted is sharply governed by legal rules that vary. Tax completes the layer, in two distinct roles. Inside the model, consistency: pre-tax streams with pre-tax rates or after-tax with after-tax, one frame throughout. At the award, asymmetry: where a recovery is taxed differently from the income it replaces, the nominal award and the actual make-whole amount diverge, and where the rules permit, a gross-up adjustment quantifies the difference. Each of these adjustments has a side that benefits from ignoring it, which is exactly why the credible expert models all of them, visibly, before being asked.
Every piece has a party that would prefer it forgotten.
What the substitute activity actually produced: the replacement job, the cover transaction, the redeployed assets.
What the plaintiff could have done but did not. The counterfactual inside the counterfactual, argued on evidence.
Expenses never incurred because the sales never happened. The cost side of every lost-revenue claim, done properly or done to it.
Gains the conduct incidentally produced for the plaintiff. Deductibility is legally bounded; quantification is economic.
Insurance and other third-party payments. Whether they reduce the award is a legal rule that varies; the model must know which applies.
Frame consistency inside the model, and gross-up questions where the award’s tax treatment differs from the income it replaces.
How the Institute approaches the deduction layer.
Usually the gap between the two sides’ numbers.
A plaintiff’s model showing zero mitigation, in a case where the plaintiff visibly kept operating, invites the defense to build the mitigation analysis itself, on its own assumptions, with the plaintiff’s expert positioned as having hidden the ball. Candor here is not a concession. It is control of the frame.
By modeling what actually happened, period by period, rather than choosing between all-or-nothing stories. Partial mitigation is the normal case: the replacement contract at a lower margin, the new job at lower pay found after a gap, the capacity redeployed to less profitable work. The model nets each period's mitigation earnings against that period's but-for earnings, which captures both the recovery and its incompleteness, and it should also account for the costs of mitigating, the search, the retooling, the discounts offered to win replacement work, which are properly part of the loss. The contested edge is the effort never made: whether a reasonable plaintiff would have found the alternative the defense points to. That reasonableness standard is legal; the economics can establish what the alternative would actually have yielded, which often turns out to be less than the defense assumes.
Causal connection and legal rule, in that order. The economic screen asks whether the claimed benefit actually flowed from the same conduct that caused the loss: costs avoided on the very sales that were lost qualify; benefits the plaintiff would have obtained anyway do not, and pointing to the plaintiff's general good fortune after the injury is not an offset argument. The legal screen then governs categories the economics alone cannot resolve, most prominently collateral sources: payments from the plaintiff's own insurance or from third parties may or may not reduce the award depending on rules that vary by jurisdiction and claim type, and the model must be built to the rule counsel identifies, ideally with the collateral items carried separately so the model survives a ruling either way. An offset analysis with those two screens applied visibly is difficult to attack from either side.
In two recurring situations. The first is frame inconsistency inside the model, which changes the number silently: after-tax cash flows discounted at pre-tax rates, or the reverse, produce a bias that grows with the horizon, and the fix is consistency rather than any particular frame. The second is asymmetry at the award: when a recovery is taxed differently from the income it replaces, the nominal award misses the make-whole target. A lump sum of several years' lost earnings can push the recipient into higher brackets than the earnings would have faced year by year; some recoveries are taxable where the underlying loss was not, or the reverse. Where the governing rules permit an adjustment, the gross-up computation quantifies the gap. Whether they permit it is counsel's question, and the answer differs by claim type and forum, which is exactly why the tax conversation between counsel and expert should happen before the model is built, not after the award arrives.
Because it is where the tribunal learns whether the expert is an analyst or an advocate. The gross loss is the plaintiff's story; the deduction layer is where the model demonstrates it has engaged with the defendant's story, and a model that visibly deducted the avoided costs, netted the mitigation, inventoried the offsets and kept its tax frame straight has pre-answered the cross-examination's favorite questions. The asymmetry of the failure modes makes the point: an expert caught overlooking a deduction has not merely lost that dollar amount, but has handed the other side a demonstration of bias that discounts every other number in the report. The deduction layer is cheap to do well relative to the damage of doing it badly, which is why the Institute treats it as a first-class subject rather than a footnote.
Describe the claim and what happened after the injury. The Institute will help you see what the deduction layer requires.