Loss of earnings and diminished earning capacity are two components of the economic damages that might arise in a personal injury claim.
It’s important that you calculate them accurately to avoid financial hardship in the future.
What Are Personal Injury Damages?
Personal injury damages can include economic and non-economic losses.
Economic damages are financial injury-related losses, including medical bills, lost wages, reduced earning potential, property damage, and out-of-pocket expenses.
Non-economic damages are the non-monetary impacts a victim experiences, such as pain and suffering, disability, loss of companionship, and emotional distress.
The Role of Maximum Medical Improvement in Loss of Income Claims
Maximum medical improvement (MMI) is the point at which your doctor believes your condition will not improve from further treatment. You probably shouldn’t file a specific dollar claim for loss of income or diminished earning capacity until you reach MMI.
Until you reach MMI, it’s difficult to accurately estimate the long-term impact of your injury on your ability to work. Factors such as the severity of your injuries, your occupation, and the potential for permanent limitations can influence your future earning potential.
How Do You Calculate Lost Earnings in a Personal Injury Case?
The way to calculate lost earnings differs depending on how you earn them.
Lost Wages
If you earn an hourly wage, calculating lost wages is fairly straightforward. Simply multiply your hourly wage by the number of hours you missed. Complications might arise, of course, if you missed overtime or holiday hours.
Lost Salary
If you earn a monthly salary, calculate the number of hours you work in an average month and divide your salary by your average number of hours. This should give you the equivalent of an hourly salary. Treat this amount the same way you would treat lost wages.
Lost Commissions
You might earn a sales commission on every unit you sell. In that case, you might calculate your average monthly commissions over a period of several months or even a year. Once you have an average hourly commission, multiply it by the number of hours you missed to arrive at your lost earnings.
Lost Freelance Income
You need to calculate how much money you earn in an average month. You might need to refer to your tax returns for this information. Use this figure to arrive at an average daily or hourly income and calculate your losses from there.
Lost Entrepreneurial Opportunities
Lost entrepreneurial activities are the hardest of all amounts to calculate. How do you calculate the value of a presentation to a potential client, for example? You will probably need a lawyer and an expert witness to help you.
Sick Leave and Personal Leave
If you had to use any of your paid sick leave or personal leave due to your injuries, you can count them as a full day’s work. The reason for this rule is that leave time is a resource that you sacrificed due to your injuries.
Lost Benefits
Does your job provide you with health insurance? Stock options? Retirement contributions? You will need to calculate a value for these items.
How To Calculate Diminished Earning Capacity
Diminished earning capacity losses are speculative damages that you expect to accumulate in the future. They occur when you suffer permanent or long-term injuries.
Suppose, for example, that you earn $75,000 per year at the time of your accident. Further, suppose that your injuries force you to retire at age 44. Assuming you otherwise would have retired at 65, you should claim 21 years of lost future earnings. However, this should be a lot more than $75,000 X 21 because your salary would probably have increased during that time.
You May Need Expert Witnesses
You might not need an expert witness to determine the amount of your lost earnings. However, because of their speculative nature, you probably will require experts to prove diminished earning capacity.
The most commonly used expert witnesses in diminished earning potential claims are medical specialists, vocational experts, and economics experts. Factors such as age, education, work history, the severity of injuries, and the availability of alternative employment are relevant to their analysis.
The Consequences of Underestimating Your Losses
It is absolutely essential that you claim every dime in diminished earning capacity losses that you deserve. Imagine, for example, that the true value of your claim is $500,000, but you ask for only $300,000. If you run out of money 25 years later, you cannot seek additional compensation.
A Texas Personal Injury Lawyer Can Help You Calculate Your Lost Earnings and Other Damages
If you suffered an injury severe enough to cause you to miss a significant amount of work, you need a lawyer. Our Texas personal injury attorneys represent clients on a contingency fee basis, which means you pay no attorney’s fees unless we win your case.
A lawyer can handle the complexities of your case, including the calculation of damages, while you focus on healing.
Contact our law office today at (409) 207-9299 to schedule a free consultation and discuss your case and what we can do to help you.
