Recovering Damages for Lost Wages and Diminished Earning Capacity

Two different types of economic or “special” damages have to do with the injured party being unable to earn money that he or she would have been able to absent the injury. The first type of these damages is referred to as “wage loss.” Lost wages is a very specific number. It is quite easy to calculate. One only has to take the amount of time that the victim was forced to miss work because of the negligence of another, and multiple that time by the rate of pay that the worker normally earns. For example, if the victim is an hourly employee and he or she earns a rate of $15.00, if the victim is forced to miss three weeks for a total of 120 hours, the total wage loss claim would be $1,800.00. If the victim is an independent contractor, and he or she is forced to cancel on one or two contracted jobs, the wage loss claim would simply be for the amount of those jobs. That part is pretty simple.

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Calculating diminished earning capacity can be far more complex. This type of damage is to account for a projected amount of lost money that the injured party will suffer because of the injury. There are examples where this can be fairly simple. If a person was making $40,000 per year and that person was going to retire in ten years, then the diminished earning capacity could be a simple $400,000. The reason why it is typically much more complex than that is because the future is unknown. Perhaps the victim was due for a sizable promotion but lost that promotion because of the injury? Perhaps the company would have gone bankrupt and the victim would have been forced to switch jobs. Perhaps the victim had plans to go back to school to become a heart surgeon and would have therefore earned much more. It is also pivotal to remember that all of these equations must account for inflation. Any sum that a party could have earned in a lifetime should surely be given at a large discount in order to receive it all now. There can even be an issue if time spent helping out around the house should also be compensated as a part of someone’s diminished capacity. These variables leave this subject as one that can be very interesting to litigate.

It is important to remember that the plaintiff always carries the burden of proof, for that reason, the more difficult the damages are to prove, the worse off the plaintiff is. The more uncertainty surrounding the claim, the more the insurance company will low ball you because they are not responsible to settle for what you want, they only settle for an amount less than what they are afraid you can prove in court. If you are attempting to prove diminished earning capacity, consult a doctor so that you may obtain a written document regarding the effects of the injury on your ability to earn your ordinary income. You may also wish to consult with a vocational rehabilitation expert. They will be able to testify as to the victim’s background, current position, and future earning capacity. An economist could be another helpful expert, he or she could testify as to the need for your line of work going forward, and they can be useful in determining the deduction based on the rate of inflation.

If you or a loved one has been injured, and it has affected your ability to earn your normal income, calling a good injury attorney is a must.

This article is offered only for general information and educational purposes. It is not offered as and does not constitute legal advice or legal opinion. You should not act or rely on any information contained in this article without first seeking the advice of an attorney.