Calculating Loss of Future Income in Personal Injury Cases

The job of a personal injury lawyer is to ensure that their client is fairly compensated for the damages they have incurred. Damages can refer to specific monetary losses such as medical and rehabilitation expenses; more nebulous losses such as pain and suffering and loss of enjoyment of life; and complex, tangible losses like loss of future earning capacity. Depending on the profession and title of the plaintiff, accurately calculating loss of future earning capacity can have a big impact on the value of the settlement.

How is Loss of Future Earning Capacity Calculated?

Calculating loss of future earning capacity can be a complex process that often relies on input from multiple experts. Financial experts from both sides of the case will analyze the plaintiff’s earning, the industry they work in, their career trajectory, and other factors to calculate their future earning potential. Medical experts will be asked to assess how long the plaintiff will be unable to work. If their injuries caused permanent disability, the compensation for lost future earnings will be larger than if they suffered a temporary impairment.

Once these calculations have been made, it’s up to the plaintiff’s personal injury lawyer and the defendant’s lawyer to negotiate a settlement. If no settlement is reached, the dispute may go to trial. At trial, the personal injury lawyer must explain to the judge and/or jury why the plaintiff is entitled to the proposed compensation for future lost earnings.

What are Some Potential Complications?

There is a litany of potential x-factors that financial experts must consider when calculating future earning capacity. For example: how should potential earnings be calculated if the plaintiff is a minor? If the plaintiff is receiving benefits through work, should those benefits be baked into the equation?

 A recent personal injury case out of British Columbia presented another interesting question: should a plaintiff’s earning potential be calculated based on their top income or their most recent?

In Rab v. Prescott, the plaintiff was injured in a motor vehicle accident and awarded $150,000 in loss of future earning capacity, among other damages. The trial judge used the plaintiff’s maximum annual earnings during her prime employment years to calculate this loss. However, that maximum salary of $300,000 was earned just once, years earlier. The plaintiff had since resigned from her previous occupation and was focused on other entrepreneurial ventures.

The defendant in the case appealed to the British Columbia Court of Appeal. The higher court determined that the trial judge erred by calculating the lost earning capacity based on the plaintiff’s highest annual income.

“[This] case was a difficult one … but the evidence here simply did not support the approach taken,” the court wrote, according to Canadian Lawyer.

In re-calculating the plaintiff’s lost future income, the Court of Appeal looked at the most recent years for which the plaintiff had earning records. They found an average annual income of $25,000, far below her peak salary. The court then valued her potential loss at $100,000 before lowering the amount to $40,000 due to an absence of recent income history, a lack of evidence of the profitability of the plaintiff’s latest ventures, the probability that the venture might fail, and the plaintiff’s pre-existing limitations.

Contact a Personal Injury Lawyer

If you’ve been injured in an accident, it is essential to hire an experienced personal injury lawyer who can help you access the full amount of compensation to which you are entitled. Doing this may require them to have established connections with financial and medical experts who can provide a fair and accurate view of your lost earning capacity.

Contact Will Davidson LLP today to schedule a free, no-obligation consultation. Our team has represented seriously injured Ontarians for decades; we have the expertise and experience to ensure that you receive the benefits you’re entitled to.

Image: Scott Graham/Unsplash

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