Loss of Income vs. Lost Earning Capacity

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In a Personal Injury Claim, What Is Loss of Income?

When dealing with a personal injury, the term “Loss of Income” refers to wages or benefits that are lost due to the injury. For example, if a person was unable to work for one week due to a car accident, they will have “lost income” for the period of that week. 

In most cases, personal injury victims are able to recover lost income from the person who caused the injury. They can obtain a monetary damages award by filing a lawsuit in court against the other person or party. However, they will have to prove that the other person was at fault, and that their actions caused them an injury which resulted in lost income. 

Income does not need to be lost all at once in order to be recovered. For example, if the injury caused you two miss a total of 40 days spread out over the course of one year, you could still recover for those days. However, you would need to prove that the injury caused your absence from work. 

What Is Lost Earning Capacity? 

On the other hand, “Lost Earning Capacity” refers to a decrease in a person’s ability to earn income. It is sometimes called “Future Loss of Earnings” or “Impairment of Earning Power”. 

For example, if a person’s shoulder was permanently injured in a car accident, it may impair their ability to work in the future, especially if their job requires lifting or other use of the arms. 

This type of injury may qualify for lost earning capacity, and might entitle the person to damages in addition to those from lost income. Lost earning capacity is determined through a complex calculation, which might involve:

Thus, the calculation may vary according to region, as different areas are associated with different standards of living.

How Is Lost Earning Capacity Different from Lost Income?

In general, lost earning capacity is much more difficult to prove than lost income. Calculating lost earning capacity involves making intelligent predictions about the person’s work ability at a later date in the future. Of course, this is difficult to determine exactly. 

In addition, the court may have to make room for other factors such as future promotions, raises, and improvements in talent or skill. In other words, the court is almost required to make a projection of how the injured person’s entire career would have unfolded if they hadn’t been injured.

On the other hand, lost income is relatively easy to prove. It simply involves examining the person’s work attendance record and their pay stubs.  With lost income, the court is dealing with events in the past that are accurately reflected in employment records.  This is a relatively straight-forward procedure.   

How Can a Lawyer Help with Personal Injury Damages?

Personal injuries can often lead to major changes in life, especially with regards to a person’s ability to work.  If you have suffered a personal injury that has affected your work status in any way, you may wish to consult with a personal injury lawyer. An attorney can help you file your claim. They can help determine whether you are eligible for compensation such as lost wages or for costs associated with lost earning capacity. 

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Last Modified: 10-06-2014 10:45 AM PDT

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