Injured? You may be able to claim loss of income. Read on to find out more about how you can recoup some of those losses through a personal injury claim. Keep reading to learn more about what you need to do in order to get started.
Table of Contents
- What is considered loss of income?
- Can I claim loss of wages?
- How do I claim loss of income?
- How do you calculate loss of income?
- How is future loss income calculated?
- How do you show loss of earnings?
- How do I claim a loss of income from a car accident?
- How do I calculate past & future economic loss in an injury compensation claim?
- Self-Employed Loss of Earnings Claim
- Time Limits in Personal Injury Claims
- Foyle Legal Advice in a motor vehicle accident and personal injury claims
What is considered loss of income in a Personal Injury Claim?
Loss of income occurs in a personal injury claim where a person suffers injury due to the negligence of another person, and as a result, suffers a loss of ability to work or a loss of earning capacity. When claiming a loss, some common claims are:
- Lost Wages: Probably the most common type of loss of income. An employee is injured, and as a result, they are unable to work or they have a reduction in their work capacity. An example is as follows – Shirley works for a school as a Physical Education Teacher. She was eating lunch at a table when the table collapses and she suffers a broken leg. Shirley is unable to work for two months, she is then able to do partial hours for a month before returning to full duties. Shirley sues the restaurant for negligence and claims 2 months’ wages and the difference between the amount earned in the third month, and the amount she would have earned but for the accident.
- Loss of opportunity: This kind of claim can be more difficult. Often it occurs in a situation where the injured person is unemployed, and is searching for work, but has not found work or alternatively in the context of a broader claim where the injured person is close to receiving a promotion at work. An example is as follows – Jacob was made redundant in 2022 – his employer could not continue with business due to COVID 19 restrictions. Jacob applies for several jobs, and is offered a job in the mines subject to a pre-employment health check. Jacob has no pre-existing health problems. Jacob is injured in a motor vehicle accident and he is unable to pass the pre-employment medical. Jacob would claim the amount he would have earned but for the car accident as a loss of opportunity. The claim regarding the driver’s negligence would usually be a claim with the Insurance Commission of Western Australia.
- Loss of business profits: In some circumstances, a claim can be made for lost business profits. These claims tend to be complicated due to the fact other people may be involved in the business.
Can I claim loss of wages?
Loss of wages can be claimed in a compensation claim arising from negligence. Before compensation can be claimed, personal injury law requires the person bringing the claim to prove that their injury occurred due to someone else’s negligence.
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How do I claim loss of income?
Documentary evidence is required to prove that income has been lost. Depending on the circumstances, this can be quite complicated. Generally speaking the Plaintiff, or the person bringing the claim needs to show that they have suffered a loss of earning capacity as a result of the accident, and also that income has in fact been lost. Some evidence that is used in loss of income claims may be:
- Taxation Returns: Taxation returns can be used to show how much a person was capable of earning in the past. The situation is usually clearest where the injured person is an employee. Sometimes, interpretation of taxation returns can be complicated as people generally try to minimise their taxable income so as to pay less tax.
- Payslips: Generally pay slips are easy to understand, but in some scenarios such as casual employment or fly in fly out employment further explanation may be needed.
- Contract of Employment: Contracts of employment are helpful tools to show a person’s earnings, especially where a person receives allowances (e.g. housing allowance and time and a half pay).
Loss of income is generally proved through a combination of employment records and medical treatment records. For example, a person may have leave records from their employer, proving that they were in fact off work, and also a medical certificate from their treating doctor showing that they were actually unfit for work during a certain period. Sometimes medical notes will also be helpful to show that a compensable injury was the cause of the time off work.
How do you calculate loss of income?
Loss of income is generally calculated based on:
- Records of earnings prior to an injury, for example, pay slips or a contract of employment. Example: Prior to an accident Julia works as a nurse, and earns an average of $1,500.00 gross per week. She has worked for a hospital for two years. Julia uses her pay slips to show that prior to the accident she was earning $1,500.00 gross each week – she also uses the payslips to show that sometimes she earned higher amounts due to overtime and shift allowances.
- Period of Total Incapacity – Usually periods of total incapacity are claimed based on earnings prior to an injury. Example: Julia is injured in a car accident. She suffered an injury to her neck and the pain travelled down her arms. Julia is unable to work as a nurse because it requires frequent lifting. Julia proves that she has suffered loss by obtaining the leave records from the hospital, and by providing a medical report from her doctor saying she was unfit for work due to the motor vehicle accident.
- Periods of Partial Incapacity – The person would usually claim for the difference between the amount they had the capacity to earn prior to the accident and the amount they are able to earn in some suitable employment, having regard to their educational training and experience. Example: After the period of total incapacity, Julia is only able to work 4-hour shifts for one month. She is only able to earn $750 gross per week. Julia proves her loss by reference to her pay slips and a medical report from her doctor saying she was partially unfit for work due to the motor vehicle accident.
In Julia’s situation, the calculation of compensation is relatively straightforward in a claim for total incapacity. It would say:
- Claim for Loss of Income: 9 weeks x $1,165 (net weekly rate of pay) = $10,485; and
- Claim for Loss of Superannuation: 9 weeks x $1500 (gross earnings) x 10% (superannuation rate) = $1,350.
In Julia’s situation the calculation of compensation is relatively straight forward in a claim for partial incapacity. It would be say:
- Claim for Loss of Income: 4 weeks x ($1,165 (net weekly rate of pay) – ($661 (net pay actually earned) = $2,016; and
- Claim for Loss of Superannuation: 4 weeks x ($1500 (gross earnings) – ($750 (gross amount actually earned) x 10% (superannuation rate) = $300.
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How is future loss income calculated in personal injury claims?
Claims for future economic loss or future loss of income are generally based on loss of earning capacity. Consideration should be given to probable increases in income and increases in the level of earning capacity in the future.
A claim for earnings compensation may be calculated as follows:
- Establish the earning capacity of the person before and after their injuries – E.g.: John worked as a boilermaker prior to his injury. John’s employer gives pay increases of 2.5% a year which are reflected in John’s payslip records. John’s current payslips show he is earning $2,000.00 a week. John currently works in the mines, he is 55 years of age. John sustains injuries when another employee drops a large pot onto his head resulting in neck and back injuries.
- Consider other factors that may alter earning capacity. E.g. John has worked in heavy labour for his whole life. Two years prior to the accident John went to his doctor complaining of problems in his shoulders. John is diagnosed with a rotator cuff tear and his treating surgeon says he should not do heavy manual work. John feels he has no choice and continues working a boilermaker up to the date of the accident.
- Consider medical evidence. E.g. The medical treatment reports in John’s case are of the view that John had a pre-existing condition that would make John’s work difficult. They would however acknowledge that John managed to continue with the work. The reports indicate John will be unable to return to any work for which he has education training and experience. The medical reports would either conclude that despite John’s efforts, and his accident injuries he would have to retire early, or for the accident injuries John would have been able to continue working to retirement age.
In the above case, John would pursue a negligence claim for the work injury against his employer (there are special requirements for this – see Foyle Legal’s workers’ compensation claim page). His employer would most likely be liable for the acts of the other employee.
John would claim from the date of the accident to retirement age (usually age 67). An example of the math calculation used would be:
- What are the Earnings at the time of the accident: In John’s case this would be $2,000.00 a week;
- What would John be earning as his present earnings at the time of claiming but for the accident: John may be claiming 2 years after the injury. Year 1: $2000.00 x 1.025 = $2,050. Year 2: $2,050 x 1.025 = $2,101.25;
- Consider any other potential upsides such as promotion: In this situation, we do not know that John has any such opportunities so no consideration is given;
- Use the above assumptions to Calculate a reasonable rate for the claim: John will earn different amounts of money at different points in time. A reasonable amount may be $2,300.00;
- Assess potential downsides including contingencies: John has a pre-existing condition. There is likely to be a mix of medical evidence as to how this will effect John’s life and work capacity in the future.
- Figure out multiplier for economic loss: The court and personal injury lawyers use ‘multipliers’. In personal injury litigation, discount tables (containing multipliers) are used to determine the lump sum value of a future loss of earnings. John is 55 years of age. The 6% multipliers are used in Western Australia as at 18 June 2022 (date of writing). There is 12 years to retirement. The 12 year multiplier is 450.5.
In John’s case, he is claiming loss of income regarding future earnings. He may choose to claim at $2300.00 per week gross or $1,689 net per week. In this case the calculation should be $1,689 x 450.5 = $760,894.50. It would probably be reasonable for John to make a reduction for contingencies including not being able to work as a boilermaker in the future, the possibility of needing to retire early and his earning capacity being reduced in any event due to his pre-accident conditions.
How do you show a loss of earnings?
Historical earning capacity can usually be established by reference to taxation returns, payslips or a contract of employment. In some circumstances, the injured person will not have access to these documents to support their personal injury claim. Sometimes other documents such as bank records can be used to show a history of net payments into a person’s bank account.
In some situations, the circumstances of life make it difficult to show earnings. This often happens when a person receives payment in cash for work they perform. In these circumstances, there are limited options available. In some circumstances, the person paying for the work may be willing to provide a witness statement, but often they are worried about the taxation consequences of doing so.
How do I claim a loss of income from a car accident?
In Western Australia, car accident compensation can usually only be claimed in circumstances where your injury occurs due to someone else’s negligence. The Insurance Commission of Western Australia is the CTP insurer of the other party (negligent party) and if a person wishes to seek compensation then the Insurance Commission will usually consider negligence and whether the injured person is entitled to claim compensation.
The circumstances surrounding claims for loss of income in a car accident claim can be many and varied. If you notify the Insurance Commission that you wish to claim economic loss, and you are an employee, then they are likely to ask your employer to complete an employer’s Confirmation of Loss of Salary form.
In a road accident claim, interim payments of compensation are not usually made, but the Insurance Commission of Western Australia is usually prepared to consider an advance payment of weekly wages when a claimant completes a Request for Advance Payment.
Claimants should consider that compensation is usually paid by the Insurance Commission as one lump sum. This means that in order to get the best possible outcome documentary evidence should be produced and provided to the Insurance Commission before any offers of settlement are made. In the absence of this information, the Insurance Commission may be unwilling to allow any amounts for loss of income.
How do I calculate past & future economic loss in an injury compensation claim?
Claims for past loss are usually linked to claims for future loss. For instance, if a person suffered serious injuries in a work injury or road accident, and their work was physically demanding then the claim for past economic loss is likely to be a claim for total incapacity (no retained earning capacity) from the date of the accident to the date of settlement or trial.
It would then follow that the claim for future economic loss would be for total incapacity until retirement age.
In personal injury, there is usually more contention in a claim for the future economic loss rather than a claim for past economic loss. This is because putting aside issues such as whether the injury caused the loss or whether the person is in fact incapacitated, past economic loss is a matter of fact. Future economic loss is based on earning capacity and there is usually seen as being a range of different possibilities based on past behaviour and medical evidence.
The best way to support a larger claim for economic loss is to have evidence about a person’s past work (such as pay slips and tax returns). Evidence about aptitude and willingness for work can be introduced by lay witnesses such as co-workers. Evidence about capacity for work and linking capacity to work to the accident is usually the domain of medical evidence, so supportive medical reports should be obtained.
Self-Employed Loss of Earnings Claim
Claims by self-employed people regarding economic loss are usually more difficult than claims by employees. The income and expenses associated with the business are often highly variable. Taxation returns often do not present the whole picture. It is often the case that expert advice from an expert witness (such as an accountant) may assist the parties in assessing the extent of the compensation claim for loss of income.
If you have a self-employed loss of income claim, it is best to consult an experienced workers compensation lawyer with vast personal injury claim experience for advice.
Time Limits in Personal Injury Claims
Injured people should be aware that there are time limits for commencing legal proceedings in personal injury claims. Personal injury lawyers and law firms can help to provide you with advice specific to your situation.
Section 14 of the Limitation Act 2005 relevantly states:
An action for damages relating to a personal injury to a person cannot be commenced if 3 years have elapsed since the cause of action accrued.
The effect of this provision is that you will be statute barred from commencing legal proceedings in the event that you do not commence legal proceedings in a court of law before the limitation date.
Foyle Legal Advice in motor vehicle accident and personal injury claims
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At Foyle Legal your first attendance is obligation free, and a personal injury lawyer will listen to you, assess your claim and if there is enough information will be able to advise you about what you are entitled to and how much your claim is worth.