Lost Income and Earning Capacity

The terms "lost income" and "lost earnings," which are used synonymously, refer to a pacific amount of money that the claimant either has not received or will not receive as a result of injuries sustained in the incident in question. These can be past lost earnings or future lost earnings. "Past lost earnings" includes money lost up to the time of trial, while "future lost earnings" means the amount that will be lost after the trial.

The term "loss of earning capacity" refers to the reduced ability to make money, or the diminished earning power, which may result from injuries sustained in the incident in question. This loss invariably refers to future consequences as opposed to past results of the incident. In some jurisdictions, this is categorized as "general damages" while in others it is its own category, a distinction that is important when the jurisdiction has a statutory limit on the amount of damages that can be recovered.

Such injuries can be bodily, emotional, psychological, temporarily disabling or permanently disabling.

All such losses must be proved as required by the standards imposed by the applicable jurisdiction (for example, "more likely than not" or 51% likely is the standard in many jurisdictions).

Who can recover lost income

Am adult or child who is disabled or disfigured may have any or all of the losses above described.

What "lost income" includes

"Lost income" includes the various forms of compensation that a person was entitled to receive:

  • Salary
  • Vacation time
  • Sick pay
  • Health insurance (if the victim lost the job entirely and health insurance was one of the benefits)
  • Other benefits, such as the use of a company car
  • Profits from performance of a contract, if the victim could not perform the contract as a sole result of the dog attack

How to prove the amount of the loss

It is fairly easy for a wage earner to prove the amount of the loss. The victim's work supervisor writes a letter that includes the following:

  • Identification of the writer as the supervisor of the victim
  • The victim's job title and job description
  • The approximate date that the victim started the job
  • Whether the job was full-time or part-time (if part-time, then the average number of hours expected to be worked during the days taken off because of the attack)
  • The rate of pay (i.e., the salary or the hourly rate)
  • A list of the dates taken off, and whether each day was taken off entirely or partially (in the latter case, the number of hours taken off)
  • Confirmation that the reason why those dates were taken off was because of the attack, and not for any other reason. Here are examples:
    • "He told us that he could not work because he could not see, as a result of the bandages over his eyes."
    • "She had to take her injured daughter to the doctor each of those days."
    • "We told her not to report to work because she is required to deal with the public, and the wounds on her face were inappropriate in our opinion."
  • The date that the victim returned to working his or her regular schedule
  • Whether or not the victim's job performance is the same after the injury. If it is not the same, a list of the things that the victim used to do before the attack, but cannot do any more.
  • Whether or not the victim's job title or job duties, or hours worked, changed after the attack. If they changed, the new rate of pay (if it is different) and the new hours. Also, if the new job is inferior to the old one, a statement as to whether the victim will ever be able to be promoted to the job he or she had prior to the attack.
  • A copy of the official records of the business, confirming all of the foregoing facts (i.e., records showing the dates the victim did not work, and the rate of pay, etc.)

It is difficult for a non-wage earner to prove the amount of loss. Such people include real estate brokers, doctors, store owners, actresses and many other good people who work for a living, but whose income fluctuates and generally is less certain than that of a wage earner. Because there are so many different kinds of non-wage earners, here are some examples of how to prove their loss of income:

  • A real estate broker would have to produce a signed listing, a letter agreement with another broker splitting the commission because of the broker's inability to show the property as a result of the attack, and proof of payment to the other broker.
  • A doctor would have to produce at least two years of records establishing the average amount that she made per month or week, the amount that she made when off because of the attack, and the amount made after the attack. She could possibly recover the dip in income during the period she was off because of the attack.
  • A store owner would have to show how much it cost to replace him at the store, when he was unable to work as a result of the attack -- assuming of course that this was his only loss of income. If he also suffered lost profits, he probably would not be able to recover them unless, like the doctor in the example given above, he can produce records showing steady profits for at least two years.
  • An actress would have to produce a written deal memo or contract establishing a specific acting job that was lost as a result of the attack.

The proof of loss of earning capacity can be difficult, especially if the victim is a child. It can take several witnesses to testify as to the present cash value of earning capacity reasonably certain to be lost in the future by a disfigured child as a result of disfiguring injuries which she sustained in a dog attack.

The nature and extent of the injury, including its permanence, can be specified by the testimony of the victim's physicians and surgeons. Then the nature, degree and psychological and sociological effects of her disfigurement can be based upon the testimony of her psychologist.

The method of estimating what an injured child would have earned over the course of her lifetime had there been no injury can be based on her demographic and familial characteristics, including her race, sex, age, religion, type of schooling, student characteristics, probable educational attainment, environmental factors, family structure, parental characteristics such as educational attainment, income and occupation, and family background and demographic variables.

From these and other data, the probability distribution over alternative levels of of her expected educational attainment can be estimated, and her expected lifetime earnings stream can be generated using a number of methods, including the estimated probit equation, the age-earnings cycle, the average earnings of relevant statistical cohort groups, Current Population Survey census data, National Longitudinal Survey of Youth, the New Worklife Expectancy Tables and other commonly accepted methods. At that point, the present cash value of the loss can be determined.