In many personal injury actions, the income loss claim is the largest damage component. The income loss claim has two components, namely: (1) loss of past earnings and (2) impairment of future earning capacity. An understanding of both aspects is needed in order to pursue or defend such claims.
A claim for loss of earnings is straightforward. A plaintiff in a personal injury action may seek recovery of lost earnings caused by the tortfeasor. Standard proofs are required. Lost earnings should be reasonably easy to document. Problems may arise in the case of a self-employed person. In such circumstances, testimony from an accountant may be needed to fully explain the scope and extent of the loss.
A claim for impairment of earning capacity is somewhat more problematic. The Pennsylvania standard jury charge provides a good overview and starting point. Standard Charge 7.40 states that a plaintiff is entitled to be compensated for any loss or reduction of future earning capacity that will result from the harm sustained. In this regard, the jury is instructed to: (1) first decide the total amount that the plaintiff would have earned had the injury not occurred; and (2) then determine the total amount the plaintiff is now able to earn with the restrictions imposed by the disability. The difference between these two amounts is the loss of future earning capacity. The standard charge then lists the following factors to be considered in determining the loss of earnings capacity:
Type of work the plaintiff did or was capable of doing;
Type of work the plaintiff would have been doing absent the injury;
Type of work the plaintiff will be able to do with the injury; and
The extent and duration of the disability.
Other relevant matters, including the age, education and experience of the plaintiff, are to be considered. This formula is consistent with Pennsylvania law.
In Pennsylvania, a plaintiff may present a claim for impairment of earning capacity even if earning the same or more money after the accident. In Bochar v. J.B. Martin Motors, 97 A.2d 813 (Pa. 1953), the plaintiff sustained a serious injury to his knee, resulting in permanent restriction. As a result, the plaintiff was required to take a different job. That job, however, paid more money. The defendant asserted that there could be no claim for impairment of earning capacity in that situation. The Supreme Court rejected that defense, stating that parity of wages, alone, is inconclusive of impairment of capacity. In so holding, the court stated:
"It is not the status of the immediate present which determines capacity for remunerative employment. Where permanent injury is involved, the whole span of life must be considered. Has the economic horizon of the disabled person been shortened because of the injuries sustained as the result of the tortfeasor's negligence? That is the test." (See also, Ruzzi v. Butler Petroleum, 588 A.2d 1 (Pa. 1991).)