In personal injury cases, the term loss of income refers to wages or employment benefits that are lost as a result of the injury that has caused the personal injury claim. Specifically, loss of income refers to the loss of monetary income because of the injuries inflicted upon the plaintiff by the defendant. An example of lost income would be if a person was unable to work for one month due to a car accident; in such a case, they will have lost income for the period of that month. Loss of income can cover wages from work, commissions from sales, bonuses, and benefits.
Income does not need to be lost all at once in order to be recovered. This means that if the injury resulted in the plaintiff missing a total of thirty days of work spread out over the course of one year, the plaintiff could still recover for those days. However, the plaintiff would need to prove that the injury was responsible for those absences from work. For example, a plaintiff may show that they had to miss various work-days due to medical appointments, physical therapy, a doctor’s order, or even surgery.
Lost earnings capacity refers to a material decrease in a person’s ability to earn income. It is important to note that lost earnings capacity is different from loss of income. Loss of income refers to past earnings that have already been lost because of the injury, whereas lost earnings capacity covers future missed income that the plaintiff has not yet earned. Lost earnings capacity is sometimes referred to as future loss of earnings. An example of lost earnings capacity would be if the plaintiff’s arm was permanently injured due to the defendant’s actions. This could impair their ability to work in the future, especially if their job is dependent upon the use of their arms, such as heavy lifting. Such an injury could qualify for lost earnings capacity and may entitle the plaintiff to additional damages.
The key difference between lost income and lost earnings capacity is when they occur. The loss of income covers the time period before a lawsuit is filed, meanwhile, the lost earnings capacity covers the time after the lawsuit was filed. Speculation is also an important distinction. Income that has been lost in the past can be easy to prove. However, income that was likely to be earned in the future is less certain, and sometimes speculative. This can trigger the need for expert testimony. Proving the amount of back wages that have been lost can be done with little more than personnel documents. Proving what someone was likely to earn in the future can require vocational experts and forensic accountants. It will also likely require medical testimony. That testimony would show that the victim has become disabled. They can no longer earn what they could have made before the accident. Another difference is who can recover future lost earnings. Individuals who do not have a job at the time of the accident will have no loss of income. The same individual can still recover compensation for their loss of earning capacity.
Lastly, there are numerous factors that determine lost earning capacity. They include:
- The plaintiff’s educational background
- The plaintiff’s age and pre-accident life expectancy
- The plaintiff’s health, before the injury
- Terms of the plaintiff’s employment and work-life expectancy
- Company policies regarding raises and other benefits
- The field or industry the plaintiff is employed in
- The plaintiff’s long-term goals, talents, and interests
In addition to calculating lost income, the experts at FAZ can assist in the analysis of lost earnings capacity and future loss of income. If you need help on a personal injury case, please contact Charles Amodio at camodio@fazcpas.com or 518-288-2142.
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