Posted On February 14, 2023

What Is Lost Earning Capacity?

Lost earning capacity is a type of financial recovery available in an injury claim. An injury may prevent you from returning to your previous job, or to work altogether – altering what you would have earned over the course of your working lifetime. Personal injuries caused by car accidents, severe falls, fires and explosions, and physical trauma often lead to life-threatening injuries, disfigurement, and permanent disabilities. As a result, victims may lose their jobs and their ability to acquire future employment, a common scenario that raises questions about what lost earning capacity is.

The Consequences of Severe Injuries

In 2020, accidents and unintentional injuries were the fourth leading cause of death in the United States, accounting for an estimated 200,955 deaths. The most common types of unintentional injuries leading to death were motor vehicle accidents, falls, poisonings by toxic substances, fire, and physical assaults.

While serious physical injuries commonly occur in the home, in public places, and in the workplace, they all have one thing in common – severe consequences or death for the injury victims. While some victims are fortunate enough to end up with lacerations, broken bones, and minor concussions, other victims sustain severe injuries that lead to permanent disabilities, physical disfigurement, and traumatic head and brain injuries that alter their lives forever.

Many types of severe injuries have a permanent impact on the victim’s lifestyle, including the ability to hold down a job and provide a steady income for his or her family. If a victim’s injuries make it impossible to work or find gainful employment, he or she may suffer the consequences of loss of current wages, as well as loss of earning capacity in the future.

What Is Lost Earning Capacity?

If you suffer a severe injury that impacts your job or ability to work, it’s important to understand the difference between two questions: 1- what is lost income? And 2- what is lost earning capacity? Lost income and lost earning capacity may sound like the same thing, but in fact, they are very different.

Lost Income

Lost income, lost wages, or loss of wages are terms used in personal injury cases handled by Indiana personal injury lawyers. Lost income refers to a loss of current wages or unemployment benefits due to the injuries sustained by a victim. The term lost income includes monetary wages that the worker receives on a weekly, bi-weekly, or monthly basis. For example, if an individual is rendered unable to work for one week as a result of a car accident or workplace accident, that individual will sustain lost income for one week. 

Loss of income may include wages, sales commissions, bonuses, and other benefits. Lost income does not have to be lost at one time to be recovered. For example, if the injury results in the individual missing a total of 50 days of work spread out over the course of one year, he or she can still recover lost income for those 50 days.

Lost Earning Capacity

While lost income or wages refers to the loss of current or past income, lost earning capacity refers to lost future wages that have not yet been earned. This is the difference between your current wages and what you would have earned over the course of your career if you continued to work. 

When personal injuries occur from accidents, especially from another party’s negligent actions, lost earning capacity is often included in injury claims. Loss of earning capacity may also be referred to as loss of future earnings, loss of future earnings capacity, or impairment of earning power.

If you are injured in a car accident, fall, or work-related injury caused by negligent actions of another person, talk to a lawyer about your case. Questions you should ask a personal injury lawyer include questions about the lawyer’s legal experience with personal injury cases, expenses and fees associated with taking your case, and whether you have a credible injury case. If you are seeking damages, you need a lawyer who has trial experience and knowledge of state laws regarding personal injury cases.

Calculating Loss of Earning Capacity

While calculating damages for lost wages is rather simple, calculating damages for loss of earning capacity is much more complex. It requires making a calculated prediction about the injury victim’s future ability to work and future earning capacity, which could include job promotions, salary increases, and bonuses.

To prove the loss of earning capacity, the injured party (plaintiff) must prove the amount of money that he or she would have been able to make had the injury not occurred. According to the law, this amount must be proven with reasonable certainty. Since any calculation for the loss of earning capacity is speculative, it is often difficult to prove the amount of damages. 

To calculate loss of earning capacity, a number of factors related to the injury victim are taken into consideration:

  • Job position
  • Work history
  • Education
  • Transferable job skills
  • Ability to perform a different job
  • Trends in the specific industry

Work history is a helpful tool to calculate damages for loss of earning capacity. It is not necessary, however, and there is no need to secure another job to verify calculations. In addition to the factors shown above, the court may look at the injured party’s age and life expectancy, his or her occupation or profession, and any professional qualifications and skills.

When calculating loss of earning capacity, injury lawyers commonly work together with experts to establish a dollar amount for damages sustained and calculate how much income the plaintiff will lose throughout his or her lifetime. Many courts hold that testimony from vocational and medical experts is a sufficient basis for awarding damages for loss of earning capacity. For example, a medical expert may be used to determine the amount of earning capacity lost because of an accident or a slip and fall by testifying about the extent of the injury, how the injury affects the victim’s ability to work, and how long the disability caused by the injury will remain. 

To recover damages for loss of earning capacity, the plaintiff does not have to completely lose his or her ability to work. The plaintiff can also recover damages for a reduced earning capacity. In such cases, the court usually makes a finding regarding the amount by which the plaintiff’s work capacity has been reduced.

Special Damages

In some personal injury cases, special damages may be awarded. Special damages typically include the plaintiff’s medical expenses for injuries, lost income for necessary time away from work, and any property damages caused by the accident. Special damages are calculated by adding up all the plaintiff’s quantifiable financial losses. A dollar amount based on losses is then awarded to help the plaintiff return to his or her financial status prior to the accident.

Filing a Personal Injury Claim in Indiana

Each state sets a limit on the amount of time a person has to file a lawsuit in civil court following an injury. In Indiana, this time limit, known as the statute of limitations, is two years. Typically, this two-year time limit starts running on the date that the accident occurs. 

If the lawsuit is not filed before the two-year statute of limitations expires, the injured party will almost certainly lose his or her right to have the court hear the case. Therefore, it is important to talk to an Indiana injury lawyer who can file the lawsuit within the statute of limitations and follow up with the court on trial requirements and necessary paperwork. Courts have strict guidelines and regulations related to filing procedures. If those are not met, your case may never proceed to court.

Personal injury cases vary significantly from victim to victim, depending on the severity of the victim’s injuries. When injury cases result in severe or catastrophic injuries, the result is often permanent or long-term disabilities that prohibit the injury victim from returning to work or pursuing future work. Examples of catastrophic injuries include:

  • Amputation of limbs
  • Body and facial disfigurement
  • Hearing and vision loss
  • Severe burns
  • Spinal cord damage
  • Traumatic brain injuries

Catastrophic injuries are a common cause of personal injury claims for lost earning capacity. When injuries are catastrophic, victims often require numerous surgical procedures, assistive medical devices, in-home help and supervision, daily pain medications, and regular physical therapy sessions and mental health visits. 

People who suffer catastrophic injuries may never be able to return to work and earn a regular income. Lost earning capacity has special meaning for these injury victims because damage awards must make up for a lifetime of lost earnings, future medical bills, medication costs, ongoing treatment and therapy expenses, and years of emotional and physical pain and suffering.