25 Quick Points about the Loss of Future Earning Capacity because of an Injury.

By Matt Lalande in Hamilton Personal Injury Lawyer, Income Loss on November 02, 2023

What is the “Loss of Future Earning Capacity” in a Personal Injury Case?

Often times after an accident victims lose the capability or the ability to work because of their physical or psychological injuries. Then worry sets in very quickly for individuals and families – How will I pay the bills? How will we pay the mortgage? The car payments? The insurance? The kid’s sports costs? Groceries are getting expensive. Rates are going up. How will we manage now?

These are all very common questions after an accident. Questions that are understandably fueled with worry and panic.

In a personal injury case in Ontario, “loss of future earning capacity” refers to the pecuniary or financial loss that a person may suffer as a result of their inability to work or earn income in the future due to injuries sustained in a car accident, motorcycle accident, pedestrian accident, bicycle or trucking accident to name a few. This is a type of damage that can be claimed by the injured party as part of their compensation.

The calculation of loss of future earning capacity can be complex and may take into account various factors, including the injured person’s age, occupation, income at the time of the accident, and the severity and long-term impact of their injuries. The goal is to estimate how much income the person would have been able to earn in the future if they had not been injured, and to compensate them for that lost earning potential.

It is important to consult with a Hamilton personal injury lawyer to understand how loss of future earning capacity may apply to your specific case and to ensure that you are adequately compensated for your injuries.

Loss of Future Earning Capacity: The Law

The legal principle that governs the assessment of loss of earning capacity is that, insofar as possible, the victim should be put in the position she would have been in but for the injuries caused by the defendants’ negligence. This involves a comparison of the likely future of the plaintiff if the accident had not occurred to her likely future working life in light of this occurrence. The task is to assess damages, not to calculate them according to some mathematical formula.

Madam Justice Dardi, in a case called Hunt v. Ugre summarized the onus on the plaintiff to prove a future loss of earning capacity: The recent jurisprudence of the Court of Appeal has affirmed that the plaintiff must demonstrate both an impairment to his or her earning capacity, and that there is a real and substantial possibility that the diminishment in earning capacity will result in a pecuniary loss. If the plaintiff discharges that requirement, he or she may prove the quantification of that loss of earning capacity either on an earnings approach or a “capital asset” approach. Regardless of the approach, the Court must endeavor to quantify the financial harm accruing to the plaintiff over the course of his or her working career.

25 Points on the Loss of Future Earning Capacity

The following are 25 points on the Loss of Future Earning Capacity taken from Canadian caselaw over the past several decades. The points are not to be construed as legal advice, but rather situations and recommendations made in cases across Canada on the loss of earning capacity by Judges to assist in understanding and formulating income loss theories:

• A loss of earning capacity should be assessed as a separate head of damages;
• In a claim for loss of earning capacity, the jury must address whether the plaintiff’s earning capacity has been impaired to any degree by the injuries and, if so, what amount, in light of all the evidence, should be awarded for that impairment;
• The legal principle that governs the assessment for loss of earning capacity is that, insofar as is possible, the plaintiff should be put in the position he or she would have been in but for the injuries caused by the defendant’s negligence;
• Loss of earning capacity may be calculated by conventional assessment or by the use of actuarial information. An assessment of damages is normally based on the number of working years until age 65 multiplied by the plaintiff’s estimated annual lost income. The plaintiff’s annual income in the year prior to the accident or that of a comparable employee are helpful in estimating the annual lost income;
• In terms of the standard of proof – it is not necessary for a plaintiff to establish on a balance of probabilities that a loss of earning capacity will occur, but only that there is a reasonable, as distinct from speculative, possibility of such a loss;
• The assessment is based on the evidence, taking into account all positive and negative contingencies. In sum, the overall fairness and reasonableness of the award must be considered;
• Loss of future earning capacity need not correspond with pre-trial loss of earnings. The two heads of damages measure different kinds of loss and are based on different considerations. The assessment of future loss of earning capacity relies on predictions of the future which might or might not bear any relation to those disabilities that led to past loss of earnings;
• A judge may assess future loss of earning capacity in a variety of ways. The means by which the value of the lost or impaired asset is to be assessed varies from case to case. Some of the considerations to take into account in making that assessment include whether:
  • (i) the plaintiff has been rendered less capable overall from earning income from all types of employment;
  • (ii) the plaintiff is less marketable or attractive as an employee to potential employers;
  • (iii) the plaintiff has lost the ability to take advantage of all job opportunities which might otherwise have been open to him or her, had he or she not been injured; and lastly,
  • (iv) the plaintiff is less valuable to him or herself as a person capable of earning income in a competitive labour market.
• Contingencies must be reasonable possibilities, and the court should therefore not reduce an award for unknown or unlikely contingencies;
• In a proper case, future contingencies, which are less than probable, are factors to be considered. They may tend to increase or reduce the quantum of the award;
• In proving the loss the plaintiff is not required to cover every possible occupation that might be available. The plaintiff need only present occupations for which he or she is reasonably suited by background, age and experience and for which he or she might reasonably be retrained;
• The plaintiff is entitled to damages for loss of earning capacity whether that capacity involves wages or unconventional earnings;
• A plaintiff is also entitled to damages for a related loss of opportunity, such as a delay in graduating from university;
• If a plaintiff, as a result of the injuries suffered, is denied the opportunity of embarking upon a particular career or of continuing in an occupation for which he or she has a particular aptitude, that factor should be taken into account in assessing the damages to be awarded;
• If an operator of a one-person business who is prevented from devoting his or her usual amount of time to that business as a result of personal injuries caused by the defendant’s negligence may maintain a claim for the loss to the company as a result of the loss of his or her services; this is so even where the owner’s salary has continued and there is no claim in that respect;
• Where the plaintiff has been working at less than his or her capacity, even by choice, the court will consider his or her potential earning capacity in assessing damages for loss of future earnings;
• A plaintiff may be compensated for loss of earning capacity even if he or she was not working at the time of the accident if able to prove, based on his or her employment history and industrious nature, that employment would have been obtained;
• Where a plaintiff undertakes retraining because he or she is unfit for the job he or she used to perform, damages for future loss of income will be computed for a period after the probable starting date of a new job;
• What if the plaintiff was working in an illegal career? The Courts have said that an injured person’s earnings from an illegal occupation may be considered as a measure of his or her earning power but generally no damages should be awarded for loss of income from an illegal business;
• What if a plaintiff had not declared income? Where the plaintiff has not declared income in past tax returns, there is a strong inference against damages for future income;
• What if you work on a farm? Loss of capacity to perform housework and farm work is also compensable. Housekeeping duties are divisible into the categories of direct labour and management, with damages for each being assessed separately;
• What about the loss of a pension? Where the plaintiff loses the opportunity to continue his or her employment and thus to make and to require his or her employer to make pension contributions, the loss of pension rights is relevant to the assessment of damages for future pecuniary loss;
• Is future income taxed? In calculating damages for loss of earning capacity, there should be no deductions for income tax that the plaintiff would have had to pay on either pre-trial or post-trial earnings;
• What about sick bank time? The loss of sick bank time should be characterized as potential future loss. Treating it as past wage loss could cause employees to be undercompensated as deductions could be taken twice. Employees have the right to the gross amount of damages in respect to loss of sick bank entitlement.
• If there is proof that life expectancy may be affected – the loss of earning capacity may be reduced accordingly. In once case it was determined that HIV-infection would reduce life expectancy to age 60; the loss of future income was reduced accordingly.

Have you suffered a Loss of Earning Capacity because of an Injury?

If you or a loved one has suffered an income loss as a result of an accident in Ontario, it is important to get the advice that you need as soon as you can. Feel free to schedule a free consultation with our accident lawyers in order learn more about how we can help recover your economic losses and obtain the compensation you deserve. We are located in downtown Hamilton and have served the community for over two decades. Call us today, no matter where you are in Ontario at  1-844-LALANDE or local in the Southern Ontario region at 905-333-8888. Alternatively, you can send us a confidential email through our website – and we would be happy to explain your legal options to you, at no cost.