The courts clarify their position on future wage losses in personal injury cases.

As discussed in other blog postings, quantifying future wage losses can be extremely difficult. Doing so involves an attempt to predict the future and calculate an award based on a number of potential contingencies.

Once it has been established that there is a “real and substantial possibility” of future wage losses, the courts will generally use one of two approaches to estimate future losses:

  1. The Earnings Approach; or
  2. The Capital Asset Approach.

In this recent Supreme Court of British Columbia case, the courts clarified which of these above approaches is most appropriate:

The Earnings Approach is to be used in situations where some history of earnings exists and where the courts can reasonably estimate future loses. This approach involves a mathematical calculation to estimate earnings using estimated annual income adjusted for likely contingencies.

The Capital Asset Approach is to be used when there is no clear earnings history. This would include situation where someone is in the early stages of self employment or has yet to start a career. This approach involves consideration of the following factors:

  1.  has the plaintiff been rendered less capable overall of earning income from all types of employment;
  2. is the plaintiff less marketable or attractive as a potential employee;
  3. has the plaintiff lost the ability to take advantage of all job opportunities that might otherwise have been open; and
  4. is the plaintiff less valuable to herself as a person capable of earning income in a competitive labour market?

In the above noted case, a relatively young woman had somewhat recently started a human resources company. The plaintiff was claiming that she was likely to increase the revenue of her business over time and enter more lucrative areas of business. Despite the inherent uncertainties in this stance, the courts accepted the plaintiff’s argument about her future earnings losses and applied the Earnings Approach. The plaintiff was ultimately awarded a Loss of Future Capacity to reflect  a partial disability until age 65.

The above case involved a typical whiplash case that escalated into chronic pain with associated psychological injury, including depression. This case illustrates the challenges of assessing a complex case and why proper legal advice is necessary at every stage of a personal injury case.

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