In a typical personal injury claim, the injured party often seeks to recover damages under several categories, including compensation for non-pecuniary damages, past loss of earning capacity, cost of future care, future loss of earning capacity, and costs associated with loss of housekeeping capacity. The court assesses each category of damages by all applicable legal principles, which differ by the type of damage under assessment.
In this blog, we will explore claims of future loss of earning capacity in the context of personal injury claims, including a discussion of the circumstances in which such damages may be available, how to prove entitlement to same, and the criteria considered by the court in assessing damages owed in this category.
Car Accident Leads to Serious Injuries, Damages
The plaintiff and defendant in Federico v Viveros had been involved in a motor vehicle accident in BC on the evening of January 2, 2018. The plaintiff’s vehicle was struck by the vehicle driven by the defendant, who had refused to yield the right-of-way to the plaintiff and thereby caused the accident. The defendant admitted to liability for causing the accident.
Although both vehicles were written off due to the accident, which indicates the severity of the crash, none of the occupants required ambulance transport to a hospital in the aftermath of the accident. Occupants of the plaintiff’s car at the time of the accident included herself as the driver, her spouse as the passenger seat occupant and her two minor children (aged 6 and 8 at the time of the accident), who occupied backseats of the plaintiff’s minivan. The plaintiff’s ensuing claim for damages for personal injury included a claim for damages for future loss of earning capacity.
Plaintiff Experiences Mental Health Challenges in Aftermath of Accident
The plaintiff provided evidence to substantiate that she had experienced significant mental health effects as a result of the accident. In particular, she experienced significant anxiety concerning driving and even as a passenger in vehicles after the accident and had become hypervigilant when driving, in addition to which she began to experience severe anxiety and guilt concerning her children, whom she felt she had not adequately protected from the accident itself. This anxiety manifested in nightmares about the children’s safety, which she endured for approximately the first year post-accident and which significantly interfered with her sleep.
The plaintiff offered evidence that she had been unable to keep up with her typical household chores in the aftermath of the accident, such that her husband was required to take such chores on more frequently until he himself became disabled in a snowboarding accident in 2019. In the aftermath of that accident, when the plaintiff’s husband stayed at his parents’ home for four months, the plaintiff resumed all household chores for which she had been responsible pre-accident, although not without difficulty.
The plaintiff was terminated from her pre-employment position due to the company’s financial struggles and, as such, was forced to seek out a new career path as a real estate agent. Although employed by a realty company since September 2021, the plaintiff had struggled to hit her stride and had not yet achieved the success in her new career that she had hoped.
What are Damages for Future Loss of Earning Capacity?
Damages for future loss of earning capacity are intended to compensate a victim who has, due to an accident, suffered a diminishment in their ability to earn income in the future. Such damages are generally available when a plaintiff cannot continue their pre-accident employment or pursue their chosen career path due to injuries suffered in an accident.
How Can Damages for Future Loss of Earning Capacity be Proven?
To substantiate a claim for damages for future loss of earning capacity, a plaintiff must prove, on the balance of probabilities (i.e., to a certainty of 51 per cent), that there exists a real and substantial possibility that their future income will be less than the income they earned pre-accident. The courts have recognized that the question that underlies this analysis is “whether the plaintiff’s injuries make them ‘less valuable to [them self] as a person capable of earning income in a competitive labour market.’”
The three-part test implemented by the courts in assessing whether future loss of earning capacity has been established involves the following:
- assessment of whether the evidence supports the conclusion that a potential future event could incur a loss of earning capacity;
- if the evidence does disclose a real possibility that such a future event could occur, then the court will assess whether there exists a real and substantial possibility that such a future event would cause a measurable financial loss;
- if a real and substantial possibility is established that the event will cause measurable financial loss, then the court will undertake to evaluate such possible future loss
The courts will also assess whether any amount awarded is reasonable and fair to both parties.
What are the Methods by Which Future Earning Capacity can be Appraised?
The courts typically employ one of two approaches in assessing the damages associated with future loss of earning capacity: the capital asset or earnings approach. In the capital asset approach, courts award damages equivalent to that earned by the plaintiff in the one or two years before the accident. The courts employ the capital asset approach when it is difficult to quantify the loss and comprise the preferred approach to loss not easily measured via pecuniary methods.
With the earnings approach, the court forecasts potential future earnings to ascertain any loss to the plaintiff compared to their income pre-accident. This approach employs a comparison of hypothetical events to assess future loss of earning capacity, which involves consideration of multiple contingencies. General contingencies are typically modest and include any opportunities for advancement, potential health advancements and typical issues of human life that anyone may experience as part of the human experience. On the other hand, specific contingencies are relevant only to the particular plaintiff and must include evidence to substantiate their likelihood “as more than speculative possibilities.” Generally speaking, this requires that the court consider all substantial possibilities and assign each a weight by the likelihood of their occurrence, given the evidence.
Whatever approach the court implements, the Court of Appeal has directed trial court judges to ground their assessment in “rigorous and evidence-based consideration of the contingencies.”
Was the Plaintiff in this Case Entitled to Damages for Loss of Future Earning Capacity?
The court was satisfied that the plaintiff in this case had proven her entitlement to damages for loss of future earning capacity. Although the plaintiff’s physical challenges as a result of the accident were only minor and did not interfere with her ability to do the job she had held pre-accident, she had suffered mental health difficulties that were not so modest. The court found these challenges to have affected the plaintiff’s ability to do her post-accident job. As a result, she “has been rendered less valuable to herself as well as to her current and future employers” due to losses of both energy and confidence. Moreover, deficits in the plaintiff’s efficiency, resiliency and motivation, all attributable to the accident, created a real and substantial possibility that these impairments would equate to future economic loss.
The court implemented an earnings approach to determine that, had the plaintiff not been involved in the accident, she would have worked until the age of 65 and would have earned an income of $90,000 per year. The court used these numbers to calculate a loss of earning capacity from the ages of 51-65 of $300,000 and $115,000 for income lost between the ages of 45-59. The court applied a 5% deduction to the award of $415,000 to account for the possibility that the plaintiff would further improve with mental health treatment, which would, in turn, reduce any physical symptoms she experienced. Following applying this deduction, the plaintiff was awarded $400,000 in damages for loss of future earning capacity.
Vancouver Personal Injury Lawyers Advising On Personal Injury Claims
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