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Loss of Earnings/Diminished Earning Capacity

When you suffer an injury after an accident, the at-fault party typically owes you more than simple reimbursement for your medical bills.

If you have lost work on account of your injury, you can claim loss of earnings as a component of your damages.

If you suffer a permanent disability that prevents you from returning to your old job, you might have a claim for diminished earning capacity

Table of Contents

Recoverable Lost Earnings

You may be able to recover the following types of lost earnings in a personal injury case: 

  • Earnings that you lost because you missed work due to the effects of your injury;
  • Earnings that you lost because you were undergoing treatment, even if you were able to work during that time; and
  • An amount that represents used-up vacation time and sick leave. You are entitled to reimbursement for this amount even though you didn’t directly lose any income. You used up vacation time and sick leave that would have remained available to you if the accident hadn’t happened. 

You can also recover out-of-pocket expenses such as gasoline expenses and parking fees for trips to the doctor.

Proving Loss of Earnings

Proving loss of earnings is at its simplest when you are employed full-time for a single employer.

All you might need in this case is a letter from your employer detailing how much work you missed, how much you would have earned if you hadn’t missed work, and certain other information such as the value of any vacation time and sick leave you used.

If you have a written employment contract, it might serve as useful evidence.

It gets more difficult if you work as a freelancer or an entrepreneur and your income is unstable. One way of proving your losses is to calculate your income for the entire year and then break it down into a weekly or monthly average. 

Some of the evidence you might need includes:

  • Last year’s income tax return (sometimes more than one year is necessary)
  • Invoices
  • Payments received
  • Printouts of emails, correspondence, etc. that can prove how many appointments or conferences you had to cancel due to your injuries

In some cases, you might be able to successfully demand reimbursement for lost financial opportunities.

What is Diminished Earning Capacity?

“Diminished earning capacity” refers to a permanent rather than temporary loss of income. While loss of earnings looks to the past to determine how much you lost, diminished earning capacity looks to the future. A claim for diminished earning capacity is likely to be far higher than a claim for loss of earnings.

You might have a claim for diminished earning capacity if:

  • Your injuries force you to cut down on your work hours over the long term
  • Your injuries force you to take a lower-paying job
  • You cannot perform the same tasks that you could perform prior to your injury
  • You cannot work at all due to your injury

You can also recover for the loss of capacity to perform work for which you were training. Suppose, for example, that you were a graduate student in dentistry and a dog bite robbed you of the use of your hands, making it impossible for you to ever work as a dentist. You may be able to claim diminished earning capacity even though you have never worked as a dentist.

Proving Your Claim for Diminished Earning Capacity 

Claims for diminished earning capacity rely heavily on expert testimony to establish the value of the claim.

After all, you’re trying to prove what you would have been earning and compare it to what you actually will be earning, perhaps decades into the future. 

The following is a list of some of the types of experts that you might need to use to prove diminished earning capacity:

  • Doctors: A doctor can testify to whether you have reached Maximum Medical Improvement (MMI), the point where you have already recovered as much as you are ever going to. They can also testify on how long your disability will last.
  • Vocational experts: A vocational expert can testify about the job opportunities you will have based on your skills, training, and degree of disability.
  • Economic experts: An economic expert can estimate the value of the future earnings you will lose based on conclusions provided by a vocational expert.

The younger you were when the accident occurred, the higher compensation you are likely to win because the younger you were, the more years of productivity you will lose. However, you must claim everything at once because you won’t get a second chance to request additional compensation.

Contact a Personal Injury Lawyer Today to Help Value Your Loss of Earnings/Diminished Earning Capacity 

Insurance companies and at-fault parties love claimants who represent themselves. Accurately calculating and proving your past and future lost earnings is critical because you could lose significant compensation if you undervalue your claim. 

An experienced personal injury lawyer will have done this many times before. You don’t need to worry that you can’t afford a lawyer because most personal injury lawyers charge on a contingency fee basis. Your legal fees will be calculated as a percentage of whatever amount your lawyer wins for you.

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