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Loss of Earnings/Diminished Earning Capacity



Table Of Contents

Sustaining a personal injury because of an accident or other incident can result in various economic and non-economic damages. The economic damages can cause a severe financial strain on the injured victim and their family. For example, the loss of earnings and diminished earning capacity could total hundreds of millions of dollars, depending on the person and the facts of the case.

While you recover from an accident or personal injury, you might be unable to work. If so, you experience a loss of earnings. Further, you would have earned the income if you had not been injured. Therefore, the loss of earnings is included in a demand letter when negotiating a settlement.

However, if you sustain permanent injuries or disabilities, you might be unable to return to work. Therefore, your damages also include future lost wages. If you can work, but your impairment prevents you from earning as much as you did before the accident, your damages include diminished earning capacity.

Each of the above financial losses relates to a loss of income. Ultimately, the way you prove the damages can vary based on the case. Continue reading for further insight into these two types of losses.

Loss of Earnings/Diminished Earning Capacity

Proving the Other Party Is Liable for Your Loss of Income After an Accident or Personal Injury

You cannot recover compensation for damages until you prove that the other party caused your injury. So, you must have evidence that proves the legal elements of a personal injury claim.

Most injury claims are based on negligence. The legal elements of a negligence claim are:

  • Duty of Care
  • Breach of Duty
  • Causation
  • Damages

Intentional torts, vicarious liability, and strict liability apply in some cases, but the legal elements are similar to negligence.

When you hire a Bronx accident lawyer, your attorney investigates the cause of your injury. They gather evidence to prove how your injury occurred and who is responsible. Once your lawyer can prove causation and fault, they can demand compensation for your damages.

Proving the Other Party Is Liable for Your Loss of Income After an Accident or Personal Injury

Loss of Earnings – Past and Future Lost Wages

Loss of earnings includes your loss of income, wages, and benefits from the date of your injury through the date you returned to work. The value equals the amount you would have earned had the other party not caused your injury.

Evidence proving loss of income includes:

  • Medical records proving your injury prevented you from working
  • Documents proving your income before the injury, including tax returns, W2s, 1099s, income statements, etc.
  • A statement from your employer verifies your wages or salary, the average number of hours you work, and how much you would have earned had you worked

Future lost wages are more challenging to prove. First, you must have evidence estimating how much you would have earned had you not become disabled. You also need medical evidence explaining how your condition or injury prevents you from working.

The insurance company will likely dispute your evidence. It does not want to pay you for the wages you would have earned from now until your expected retirement or death. The company might request that you undergo an independent medical examination to verify your doctor’s assessment.

Loss of Earnings – Diminished Earning Capacity

A decrease in earning capacity also relates to future income. You allege that you cannot earn as much money as you did before the injury because of your impairment. Therefore, you are entitled to compensation for the difference between what you would have earned and what you can earn.

Calculating the Value of Future Lost Wages and Diminished Earning Capacity

There is no standard formula to calculate the value of these damages. So instead, we use expert opinions and analysis to determine the value of lost earnings.

For example, a medical specialist provides medical records and opinions supporting the allegations that your impairment prevents you from returning to work. In addition, financial professionals provide an analysis of how much you would have earned had it not been for the other party’s negligent actions causing your injury.

Factors experts use to estimate a future loss of earnings and earning capacity include:

  • Your education, experience, and skills
  • Your overall health and age
  • The age when you would have retired
  • Your life expectancy
  • Your career or job
  • The outlook for your career
  • Expected rates of inflation
  • Missed opportunities for career development and pay increases

Loss of earnings claims often depend on testimony from expert witnesses. Insurance companies fight these claims because the damages can be massive.

Imagine a 25-year-old young professional sustaining a spinal cord injury. The loss of income over the next 45 to 50 years will be substantial. The at-fault party owes the injured victim that money.

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What Is the Deadline for Filing a Loss of Earnings/Diminished Capacity Claim?

The New York statute of limitations for filing a claim for lost income is the same as the deadline for filing a personal injury lawsuit. For example, if you were injured in a car accident, the deadline is three years from the accident date. However, the deadline for filing medical malpractice claims is two years and six months.

Several exceptions to the general rules for deadlines exist. The exceptions could shorten or lengthen the deadline. It is always best to speak with a Bronx personal injury lawyer as soon as possible after an accident or injury.