Understanding "loss of income"
Updated: Jun 24, 2020
By: Jordan Thompson, Associate Lawyer
A common question clients have when pursuing a personal injury action is, “What is my claim worth?” A claim is comprised of four “heads of damages”:
General Damages for Pain and Suffering a Loss of Amenities of Life
Damages for Care Costs (future medication, treatment, etc)
Damages of Loss of Valuable Services (hiring a house cleaner, lawn care, etc)
Damages of Loss of Income
This post addresses loss of income. Loss of income is made up of past loss of income – which is income loss before the Trial or Settlement of the Claim - and future loss of income – which is income loss after the Trial or Settlement of the Claim.
For past loss of income, we take your employment income in the years before the accident, subtract taxes, subtract weekly indemnity payments received from your own automobile insurer (Section B benefits), subtract any EI Sickness benefits received, and subtract any short-term or long-term disability income received.
Please note that this is a general overview for illustration purposes – there are many circumstances that can change this calculation. For example, a stay-at-home parent that is planning on re-entering the workforce once the kids enter school, a young person with no work history, a person in school or training where past earnings are not a true reflection of loss of income, etc.
As an example: Tim has a job that he has been at for fifteen years. He earns $40,000.00 a year and has for the past couple of years. He is hurt in a car accident and is disabled from work for two years. He receives the maximum weekly indemnity from Section B - $250.00 per week – for a total of $26,000.00 over two years. He has no short term or long term disability plan and he received $5,000.00 from Employment Insurance Sickness benefits in the 15 weeks post-accident.
His two year loss of income would be $80,000.00 (two years salary at $40,000.00 per year) less $26,000.00 in Section B weekly indemnity, less $5,000.00 from EI, and less $15,000.00 in taxes (estimate). Therefore his total loss of income is:
$80,000.00 - $26,000.00 - $5,000.00 - $15,000.00 = $34,000.00
For future loss of income, there is no deduction of taxes or short-term or long-term disability (however the insurer for short term or long term disability likely has a subrogation interest, which is a subject for another day). Section B is not deducted, but the defendant’s insurance company has a right to a Cox v. Carter Order (which is also a subject for another day).
Basically, if you are disabled for a time period in the future (after settlement or Trial), your loss of income is calculated for the future as what you would have earned if the accident did not happen, less contingencies (you may have been in an accident or have non-accident injuries that may have prevented you from working long term) and this is discounted to the present value. Most cases with a substantial loss of future income component, we retain an Actuarial Scientist for the calculation.
This is a general overview of a claim for loss of income. Unique circumstances in each case may change the calculation.
The Mike Murphy Accident Team is happy to set up an appointment or consultation to review your case. If retained, we will hire the best experts to ensure you receive fair compensation from the defendant’s insurance company. We will answer all questions and advise you the whole length of the claim.
If you believe you have a claim and would like to set up a free consultation, please give us a call.
DISCLAIMER: The publications on this website are intended to provide information of a general nature and not legal advice. The information contained in this publication is current to the date of the publication and may be subject to change following the publication date.