Client filing a personal injury claim

Understanding Loss of Earnings and Diminished Earning Capacity

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By Yosi Yahoudai
Founder and Managing Partner

If you have been hurt in an accident, your injury may have impacted your ability to return to work for a short or extended period of time. If you have lost income or cannot return to the same type of work following an accident, you may be entitled to compensation. Our California personal injury attorneys can assist you with determining the value of your claim.

What is a Loss of Earnings Claim?

Loss of earnings is a claim made by the injured party for an amount that compensates them for the difference between what they would have made if they had not been injured and what they actually made. The injured person has to present sufficient evidence to back up this claim. They can do so by providing wage statements, tax returns, and other evidence of income before their accident and showing a lack of similar income following the accident. 

Loss of earnings is a separate claim in your case from a claim for diminished earning capacity, medical expenses, pain, and suffering, or loss of consortium.

What is Meant by Diminished Earning Capacity? 

A claim may also be made for loss of future earnings if the impact of the injury on a person’s ability to work is uncertain or expected to be long-term. This is known as a claim for diminished earning capacity. California Civil Jury Instructions 3903D describes it as the amount the injured party would have been reasonably certain to earn if the injury had not occurred. This claim allows an injured person to recover for economic losses that extend beyond the immediate future.

However, this claim can be challenging to prove because, unlike lost earnings, which a person can usually establish with documentary evidence, this loss has not yet occurred. Factors taken into consideration include:

  • Seriousness of injuries
  • How long injuries may last
  • Age of injured party
  • Pre-injury life expectancy and health of the injured person
  • How long the person had been working
  • Prior earnings history, and
  • Many other relevant factors

In some cases, you may need a forensic economist to calculate what you could have made in the future or during a specific period.

How Do I Bring a Claim for Loss of Earnings or Diminished Earning Capacity?

Most personal injury cases must be filed within two years in California. The statute of limitations starts to run on the date you discover an injury or should have discovered the injury. If you do not file a lawsuit within this time frame, you lose your ability to do so. You should not delay speaking with an attorney about your situation to avoid missing this time limit.

What Types of Damages Can I Recover?

For a diminished earning capacity claim, you may be able to recover: 

  • Salary
  • Overtime
  • Commissions
  • Bonuses
  • Self-employment income
  • Raises
  • Vacation, personal or sick days
  • 401k or retirement contributions, and
  • Any other lost benefits

For a loss of earnings, the analysis is more straightforward. You can use information from tax returns and paystubs that show your income earned before and after the accident to determine how much income you lost before filing your claim and settling your case. Working with an attorney to help you recover all your losses, including loss of earnings and diminished earning capacity, is crucial. If you have been injured in an accident and have experienced negative impacts on your income, please contact our office today for a free consultation.

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About the Author
Yosi Yahoudai is a founder and the managing partner of J&Y. His practice is comprised primarily of cases involving automobile and motorcycle accidents, but he also represents people in premises liability lawsuits, including suits alleging dangerous conditions of public property, third-party criminal conduct, and intentional torts. He also has expertise in cases involving product defects, dog bites, elder abuse, and sexual assault. He earned his Bachelor of Arts from the University of California and is admitted to practice in all California State Courts, and the United States District Court for the Southern District of California. If you have any questions about this article, you can contact Yosi by clicking here.