Jun 10, 2024 | Damages, Personal Injury

What is Lost Earning Capacity in Personal Injury Cases

When someone suffers a personal injury, the physical and emotional impact can be devastating. But beyond the immediate pain and suffering, an injury can also have significant financial repercussions, particularly if it affects the victim’s ability to earn a living. This is where the concept of lost earning capacity comes into play, and it can serve as a substantial source of compensation in any personal injury case.

What is Lost Earning Capacity?

Lost earning capacity refers to the reduction in your ability to earn income due to injuries sustained in an accident. Unlike lost wages, which account for the actual income lost from the time of the injury until the settlement or trial, lost earning capacity looks forward. It estimates the future income you would have been able to earn if your injury had not occurred.

For example, consider a construction worker who sustains a severe back injury and can no longer perform the physical tasks required by their job. Even if they find alternative employment, the new job might pay significantly less than their previous position. The difference in income over the course of their working life is considered lost earning capacity.

Factors Influencing Lost Earning Capacity

Several factors are taken into account when determining lost earning capacity. These include:

  1. Severity and permanence of the injury: The extent of the injury and whether it leads to a permanent disability or long-term impairment significantly influence earning capacity.
  2. Age and life expectancy: Younger individuals or those with a longer life expectancy may have higher claims for lost earning capacity due to the longer period they are expected to work.
  3. Profession and skills: The injured person’s profession and skill level play a crucial role. Highly specialized or physically demanding jobs might see a greater reduction in earning capacity if the individual can no longer perform their duties.
  4. Education and training: The potential for future earnings also considers the injured person’s education and ability to retrain or pursue alternative career paths.
  5. Employment history: Past employment and earnings history provide a baseline to project future earning potential.

Calculating Lost Earning Capacity

Calculating lost earning capacity is complex and typically requires expert testimony from vocational experts and economists. The process generally involves:

  1. Assessment of pre-injury earnings: This involves reviewing the injured party’s employment history, salary, and benefits before the injury.
  2. Evaluation of post-injury earnings potential: This involves estimating the injured party’s ability to earn income post-injury, considering potential job changes or reduced work hours.
  3. Projection of future earnings: Here, you project future earnings based on the pre-injury and post-injury assessments, taking into account factors like inflation, promotions, and career advancements.
  4. Discounting to present value: Finally, future losses are discounted to present value to account for the fact that a lump sum payment today is worth more than the same amount paid over time.

Importance of Proving Lost Earning Capacity

Successfully proving lost earning capacity is crucial in personal injury cases because it ensures that victims receive compensation that accurately reflects their financial losses over their lifetime. This compensation helps cover:

  • Loss of future wages
  • Reduced pension or retirement benefits
  • Diminished ability to save for the future
  • Decreased quality of life due to financial strain

Contact Justice Through Compensation for Help

Please know that calculating lost earning capacity is complicated. It’s crucial to contact a skilled personal injury attorney for help. Your injury lawyer can calculate lost earning capacity on your behalf so that you maximize your compensation.

If you or a loved one was injured in an accident, please know that the law firm of Justice Through Compensation is here to help. Our legal team is skilled, experienced, and passionate in their representation. Let us shoulder the burden of an injury claim or lawsuit while you focus on healing from your injuries. Contact us today for the quality legal help you deserve.

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