Lost Income Damages in an Injury Settlement

A key aspect of any injury claim or settlement is the amount of your damages -- meaning compensable losses suffered because of the accident or injury. While an injured person can get compensation for medical treatment and pain and suffering stemming from the accident, another category of damages that should not be overlooked is lost income, which includes both money lost from the job you held when you were injured, and reimbursement for work opportunities you missed due to the accident and its effects.

Lost Income: What is Recoverable?

You are entitled to reimbursement from the person responsible for an accident for any income you have lost because of the accident or your resulting injuries. This includes both income lost because you were unable to work and time missed because you were undergoing treatment for your injuries. The right to be reimbursed applies whether you have a full-time or part-time job, regular or occasional employment, an hourly wage or weekly or monthly salary, or are self-employed.

It's important to note that income loss is not a part of the amount multiplied in the settlement value formula applied to special damages. It is added on after the multiplied amount has been arrived at.

For example, let's say that after an accident, your medical expenses total $400, and your income loss is $500. Because your injury was soft tissue only, a formula of two times specials is applied. Only your medical expenses of $400 would be multiplied by two, not your $500 income loss. Instead, the $500 income loss would be added on to the multiplied total. In this example, the formula would be 2 x $400 = $800, plus $500 lost income, for a formula total of $1,300. This total only begins negotiations, and it can go up or down depending on the facts of your individual case.

Sick Leave and Vacation Pay

The fact that you were able to take sick leave or vacation pay for the time you missed, and therefore did not directly lose income, does not matter. You were entitled to use that sick leave or vacation time for other periods when you might have needed or wanted it. Therefore, using up sick leave or vacation pay is considered the same as losing the pay itself.

To be reimbursed for lost income, you must be able to show two things:

  • the time you missed from work because of your accident, and
  • how much money you would have made during the time you missed.  

Documenting Lost Income

If you are regularly employed by someone else, col­lecting information about your lost income is simple. Ask your supervisor, boss, or personnel office to write a letter on company stationery. The letter should include your name, your ­position, your rate of pay, the number of hours you normally work, and the number of hours or days you missed following the accident. The ­letter need not indicate whether you took sick leave, vacation time, or a leave of absence.

If you are irregularly employed or are self-employed, proving lost income is more complicated. You have to show how much work time you lost and what you might have earned had you been able to work. You can use any evidence you have of a drop in billing or invoices, a calendar showing appoint­ments you had to cancel, and any letters or docu­ments showing meetings, conferences, or other appointments you were unable to attend.

After you have demonstrated how much work you missed, you have to show how much you might have earned. If you had been working a relatively steady amount immediately before the accident, you can show an average for the ­period by putting together copies of your billing, invoices, payments received, or other evidence of money earned. Then, depending on the amount you were working and how much you were earning, you can calculate how much ­income you are considered to have lost for the time you were unable to work.

If you work sporadically -- some weeks or months earning most of your income and other weeks or months earning little or nothing -- you can show the value of lost work time through evidence of what you make during an entire year, then dividing that into a weekly or monthly average.

The best evidence of your yearly income is your personal income tax return for the previous year. You need to show only the part of your tax return that gives your year’s gross income; the rest of the return -- deductions, exemptions -- is irrelevant, and an insurance company has no right to see it. If you had particularly low earnings during the previous year, include two or three years of returns to demonstrate how much you usually earn. If you also have some evidence of income for the current year showing a similar earning pattern, include that as well.

Lost Opportunities

In addition to time lost from work, you are entitled to be reimbursed for work opportunities you lost because of the accident and your injuries. Of course, it’s harder to prove you lost income by missing a job interview or a sales meeting than showing you lost income by missing actual work.

But even if you cannot point to specific dollar amounts you lost, the fact that an insurance adjuster knows that lost potential income is a valid part of your claim will move your final compensation amount upward. How much your final compensation is raised will depend on how strong your proof is of lost income opportunity, and how much that lost opportunity might have cost you.

This article is excerpted from How to Win Your Personal Injury Claim by Attorney Joseph Matthews (Nolo).

FEATURED LISTINGS FROM NOLO
Swipe to view more

Talk to a Lawyer

Want to talk to an attorney? Start here.

How It Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you
NOLO-web2:DRU1.6.12.2.20161011.41205