Damaged Goods: The Intricacies of Lost Earning Capacity


This article builds off of Tuesday's on Lost Wages.  If you haven't read it yet, get on it!

In the example from Tuesday, you were run off the road and ended up with a broken leg and severe concussion.  Let's expand that a bit and say that you are a professional museum curator, and that your injuries resulted in permanent nerve damage to your legs.  You can still walk, but doing so is difficult and you get tired much more quickly than you did before.  When you got hurt, you were earning $85,000 per year working at a well-known museum where your job duties required you to do a lot of walking.  Because you can't move around as easily anymore, you were forced to resign from your job and take a more sedentary position making $60,000 per year.  You've got another ten years before you hit retirement age, and it's not likely that you'll ever be able to take another job like that one you had when you got hurt.

So what does this mean for your personal injury claim?  Can you recover for the income that you can no longer earn?  If so, how much can you recover, and how do you prove what your damages are?

Having covered the law of damages a few weeks ago, we know that a person harmed by the negligence of another is entitled to the measure of damages necessary to place that person in the same position he would be in if the negligence had never occurred.  Remember that lost wages themselves are going to be considered "special damages" (or "economic damages," if you prefer), meaning that they're objective.  Calculating this amount is a matter of figuring out what your wages are and how much time you had to miss from work; not typically a very tall order.  Lost earning capacity is tougher to calculate because it falls under a "general damages" theory; it's a subjective calculation of what a jury might believe that you would have earned in the future had the defendant's negligence not injured you.

Remember that because adjusters are going to sharply disagree with you as to what this final calculation will look like, there are several things you'll need in order to prove what your lost earning capacity is.  First, you need to be able to show that your injury is (i) permanent and (ii) debilitating.  For credibility's sake, this is probably going to best be shown in medical records. Second, you need to be able to show, through tax records, pay stubs, and possibly even expert testimony, what your income discrepancy is.  If your tax returns from 2005 through 2014 bear out your $85,000 annual income during that time, and your tax returns from 2015 support that you're now making $60,000, then you probably have a good case for showing that you are losing $25,000 per year in lost earning capacity.  Finally, where applicable, you'll need to have sufficient documentation of any raises or promotions you would have received, as well as any contracts or invoices that would tend to prove lost opportunities.

Returning to our example, you're looking at $25,000 for the next ten years before you retire.  Let's say that in those ten years, at your old job you would have received $40,000 in raises and promotions, while your new job has the potential for $50,000 over ten years.  You have a baseline figure here of $250,000, and you'll probably have to argue with the adjuster over the value of your raises and promotions.  Keep in mind that since $250,000 is substantially more than what most liability policies carry, you may be looking at a situation where you have to get a judgment in court and then try to enforce it on the individual defendant.  It's also worth noting that in the example, you were hit by a tractor-trailer, meaning that coverage is probably in a much greater amount than it normally might be.

I know that this is complicated stuff.  There are a lot of moving parts and your calculation is going to highly fact-specific, relying on everything from the weather to the adjuster's demeanor.  If you get in over your head or need clarification on anything, don't hesitate to give us a call.  We love talking about this stuff!

Oh yeah, and Merry Christmas and Happy Holidays from Felton Banks!