Personal Injury Lawyers Gold Coast & Brisbane Explain How Economic Loss is Calculated in Personal Injury Claims. No Win No Fee Lawyers Gold Coast & Brisbane.
We have already discussed what compensation entitlements there are in a personal injury claim in our post entitled, “How Much Compensation Will I Receive for My Personal Injury Claim?”. One of the areas of compensation, or what are termed “Heads of Damage”, in personal injury claims is economic loss. This is a claim for the loss of income that a person suffers because of their injury. The claim for economic loss includes both past and future income lost because of injury.
In the majority of personal injury claims, the claim for economic loss provides the largest amount of compensation in a personal injury claim. This is because it is a very important element of any personal injury claim. If injury impedes a person’s ability to earn an income, then this will seriously compromise their ability to support themselves, and in many cases, their families, into the future.
No Win No Fee Personal Injury Lawyers Explain How Economic Loss is Calculated in a Personal Injury Claim
How economic loss is calculated is basically the same for all personal injury claims in Queensland, whether your injury is from a car accident, workplace accident, medical malpractice, or generally because of the negligence or wrongful actions of another.
The Head of Damage of Economic Loss in a personal injury claim includes claims for both past and future lost income. Past economic loss is quite simple to calculate. It is simply based on what loss of income has been sustained by the claimant, from the date of the injury occurring. Future economic loss however, is not as easily calculated and is somewhat of an unknown quantity – like looking into a crystal ball.
Basically, when calculating what amount should be awarded for loss of income, a Court will consider what the most likely scenario would have been for the claimant earnings-wise, had the injury not occurred. Past economic loss will simply be the amount the claimant would most likely have earned if not for the injury occurring, less what the claimant has earned over the period since the incident causing the injury. Future economic loss will be similarly calculated, being the difference between what the claimant would most likely have earned in the future but for the injury, less what the claimant is now likely to earn in the future with the injury.
Factors Considered when Calculating Economic Loss in Personal Injury Claims
Residual earning capacity – a major factor when calculating economic loss in a personal injury claim
Obviously, what a claimant can do work-wise post-injury is a very big factor in the calculation of lost income. The term used for a claimant’s post-injury work capacity is called the “residual earning capacity”. This is usually determined on the basis of what medical experts have assessed the claimant’s options for work are, with their injury, and the demonstrated capacity for work post-injury shown by the claimant themselves.
In cases of serious injury, a claimant may be left with no residual earning capacity at all. The injury has made them unemployable. But a claimant doesn’t have to suffer a serious injury to become unemployable and without residual earning capacity. A claimant may, because of their injury be relegated to work which they are incapable of, or unlikely to achieve employment in, due to their age, limited education or academic ability, or a pre-existing medical condition. In such case, even though there is employment the claimant could undertake with the injury, the claimant’s circumstances make such employment unlikely. The injury has, realistically, rendered the claimant unemployable.
Pre-injury work & earnings history and opportunities for increased income
When considering what loss of income has been sustained by a claimant, the earnings history of the claimant will be taken into account, as well as what opportunities for increased income the claimant had prior to their injury occurring. So, where a claimant has a strong work history, with consistent earnings, then it is likely a Court will accept that this would have continued but for the injury occurring.
But say a claimant has a pre-injury history of moving in and out of employment, and taking time away from work. In such case, a Court may reduce economic loss to reflect this prior inconsistency in earnings. And vice versa, where a worker has a history of consistently increasing their income prior to sustaining their injury, or there is strong evidence to support that the claimant was to move into employment with higher earnings, then this will be taken into account when calculating economic loss.
The age of the claimant is another important factor
Age is another factor in calculating economic loss. Obviously the less years a claimant has left for employment, then the less economic loss he will be due. In the majority of cases, it is considered a claimant will work to the age of retirement, which is presently accepted as the age of 70 years. However, if there is evidence indicating that this was most likely not to be the case, then this will be taken into account and the age of retirement reduced or increased according to the most likely scenario, on the evidence.
The pre-injury health of a claimant can also impact their economic loss claim
The pre-injury health of a claimant is also important when economic loss is being calculated. If a claimant’s pre-injury health was likely to impact upon the claimant’s ability to work and earn income, whether the accident injury being claimed for occurred or not, then this will also be considered when calculating what damages the claimant should be awarded for economic loss.
Examples of How These Factors are Taken Into Account in Assessing Loss of Income in a Personal Injury Claim
For example, John is a 40 year old employed bricklayer. He suffers a back injury in his work and can no longer perform his bricklaying duties. As a bricklayer he was earning around $1,000 per week in his hand. John is unable to return to his previous heavy duties bricklaying, but doctors tell him that he is able to work undertaking lighter work duties. John obtains a job in a hardware store and earns $500 per week. John’s residual earning capacity is $500 per week.
Therefore, when calculating John’s loss of income, it is quite simply a calculation of the loss of $1,000 per week until his return to work in the hardware store, when the loss reduced to $500 per week. And similarly for future economic loss, John can claim the loss of $500 per week to the age he was most likely to retire from bricklaying.
Now bricklaying is a very heavy job and most bricklayers don’t work to age 70 years. So a Court may consider that John would most likely have retired from bricklaying at an age earlier than this, such as age 60 years. John’s economic loss will therefore be reduced to allow for this.
Or, say John suffered from a pre-existing neck injury that doctors opine would most likely have started to be a problem for John in his work by the age of 55 years. In such case, John’s damages for future economic loss will be reduced to some extent to account for this. That John’s pre-existing neck injury may have stopped him from working as a brick layer in any case by age 55 years.
And take into account the scenario where John had a history of only performing his bricklaying work 8 months a year and and travelling for 4 months a year. Then a Court will have to take this into account when calculating his economic loss claim. The Court will consider that John would have most likely continued to do this if his injury had not occurred, and will reduce his economic loss claim to take this into account.
And, in the reverse scenario, say John had intended to move into a higher paying supervisory role, or was studying to become say, an Occupational Health & Safety Officer on construction sites, paying more in wages, prior to sustaining his injury. Then the likelihood of this occurring will be taken into account when John’s loss of income is being calculated. Of course, the Court would need to have firm evidence that this was most likely to occur in the future, to consider increasing John’s damages because of it.
No Win No Fee Personal Injury Lawyers Explain Calculating Future Economic Loss on the Litigation Tables
A lot of clients immediately think that their future economic loss will simply be calculated on their lost weekly income into the future. So if they are losing $500 per week to the age of retirement, then it is simply a calculation of $500 per week over the number of years to retirement age. But this is not how a Court will calculate future economic loss.
Reduction of future loss of income under the Litigation Tables
The Court uses what we call, “Litigation Tables” when calculating future economic loss. These tables bring the calculation down to present day values. The reason for this is because a claimant would have earned the income over a long period of time into the future, and not received it in one lump sum today. The Litigation Tables, reduce the weekly loss, taking into account that lost earnings would have been earned gradually over time into the future and, that the lump sum received today can be invested to earn interest over time. The Litigation Tables also take into account wage increases through wage indexation into the future.
For example, in John’s case, say it is accepted that John would have worked to age 65 years as a brick layer. His claim for future economic loss would be $500 per week loss over 25 years into the future. In making this calculation the Court does not simply multiply $500 x 52 weeks x 25 years = $650,000. The Court applies the weekly discount under the 5% Litigation Tables for 25 years, changing the calculation to $500 x 754 = $377,000.
Reduction of loss of income claims for contingencies of life
The Court will, in the majority of case, reduce future economic loss for what we call, “Contingencies of Life”. Contingencies of life are such things as the potential for life to throw a curly one our way every now and again. For instance, a person my suffer illness or be in an accident in the future, and this may affect their ability to earn income.
The longer the period into the future for which loss of income is being claimed, the more likely a Court will reduce for Contingencies of Life, and the greater that reduction will be. The percentage reduction normally applied for Contingencies of Life is 15%, but the shorter the period into the future, the less the percentage reduction will be. For instance, if the claimant is 65 years of age, and in very good health, then a contingency applied for the 5 years to the age of retirement at 70 years may only be 5% or none at all.
Reduction of loss of income claim for the contingency that what is claimed may or may not happen
A Court may also apply a contingency reduction in other cases. And this may apply not just to future economic loss, but also past economic loss. This contingency reduction will apply where claims are being made for income that was not certain prior to the injury occurring, but there was a strong likelihood it would occur. The Court may allow the claim for increased lost income, but reduce the claim for the contingency it may not have come to fruition.
A good example of this is in the case of John the bricklayer. Say John claims that, but for his injury, he would have earned increased income by advancing to a supervisory role, or undertaking studies and entering a new role with increased wages. If the Court accepts what John is claiming, then it’s likely to reduce his economic loss claim by a percentage to take into account the contingency that what John is claiming may not have come to fruition. For instance, the Court may allow the increased claim, but reduce the total claim by 10% for the contingency that John’s expectation of increased wages, may not have occurred.
Capping of Economic Loss Claims in Personal Injury Claims in Queensland
Loss of income in personal injury claims is calculated on net and not gross income amounts. In some cases of personal injury claims, capping applies to economic loss claims. In such cases, the weekly loss of net income that can be claimed, is capped under the Civil Liability Act 2003 (“CLA”) to no more than 3 times the average gross weekly wage of a full time adult in Queensland (presently around $1500 per week). So weekly loss is presently restricted to around $4500 per week where this restriction applies.
The CLA doesn’t apply to work injury claims, and hence, work injury claims are not subject to capping of claims for lost income.
Global Awards for Loss of Income in Personal Injury Claims
In cases where there is no definitive weekly loss of income that can be precisely ascertained, but the injury is such that it is more than likely to impact upon the claimant’s employability, then a Court will usually award a global sum for economic loss.
This usually occurs in cases where the claimant continues in their usual employment or is earning similar sums to their pre-injury earnings in alternate employment suitable to their injuries. The Court will take into consideration the need for time off due to injury flare ups, loss of job security or advancement prospects due to the injury, the risk that the claimant may not be able to continue in their employment on a long term basis due to the injury, as well as the general loss of employability on the open labour market because of the injury.
Claims for Past & Future Loss of Superannuation Benefits in a Personal Injury Claim
The claim for Economic loss or lost income in personal injury claims, also includes loss of past and future superannuation benefits the claimant would have earned from their employer, but for their injury. This is usually based on the gross loss of past and future income sustained by the claimant, due to their injury. We will be dealing with entitlements to loss of superannuation benefits in personal injury claims, in a separate post.
Interest on Past Economic Loss Claims
Interest is claimable on past economic loss sustained due to injury. However, it is, in the majority of case, limited pursuant to legislation to around 2.5% per anum.
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