If a catastrophic injury changes the course of your life, the financial consequences can be just as overwhelming as the physical and emotional trauma. After all, you might be unable to return to work or may face severe limitations that reduce your earning potential. Fortunately, the law in New York enables you to seek compensation for future earnings loss, which is a critical component of economic damages in personal injury claims.
However, calculating future earnings loss in catastrophic injury claims is not straightforward. It requires expert analysis, legal strategy, and a deep understanding of how the injury will impact your financial opportunities through the course of your life. As a result, understanding the basics and consulting with a personal injury attorney who specializes in this realm is the ideal way to go.
Difference Between Lost Wages and Lost Earning Capacity
Lost wages refer to the money you lose as income because you miss work when recovering from your injury. On the other hand, loss of earning capacity takes place when your injury reduces your ability to earn permanently. While past lost wages are easy to calculate, this is not the case with future economic damages.
Consider this example. A 30-year-old financial analyst working in New York suffers a brain injury. Medical and vocational experts opine that the victim might be able to handle a low-stress, part-time job, but no longer has the ability to handle complex data, work long hours, and climb the corporate ladder. In this case, the claim should account for the difference between the executive career that would have been and the limited career opportunities.
When it comes to the lost career trajectory for high-income earners, the amount can add up to millions over a lifetime.
What Is Future Earnings Loss?
Future earnings loss, future lost earnings, future economic damages, or loss of earning capacity refer to the income you might have earned if not for a life-altering injury. These can come in the form of:
- Salary or wages.
- Bonuses and overtime.
- Career advancement opportunities.
- Employer benefits (healthcare and retirement contributions).
- Self-employment business losses.
When calculating personal injury future wage loss, the focus is on earning potential, not just current wages. For example, while you might be able to work in a limited capacity, there might be a permanent reduction in your earning power.
Catastrophic injuries typically involved in future wage loss claims tend to eliminate or restrict employment options, at times for life. The most common ones include:
- Spinal cord injuries.
- Traumatic brain injuries (TBI).
- Amputations.
- Severe burns.
- Permanent neurological damage.
- Significant orthopedic trauma.
Why Future Lost Earnings Matter in Catastrophic Injury Claims
New York law allows the recovery of both past and future economic damages so that injured individuals can sustain a reasonable standard of living even if they never work again. It accounts for the fact that victims might have no financial security without compensation for future income, and understands that catastrophic injuries can lead to:
- Lifelong medical treatment.
- Physical limitations that prevent returning to prior jobs.
- Early retirement due to disability.
- The inability to take on physically demanding roles.
- The decline of cognitive or executive functioning.
Factors Considered When Calculating Future Income Loss in NY
If you’re wondering how to calculate future income loss or how future earnings are calculated in NY catastrophic injury cases, know that there’s more to it than looking at your W-2 from last year. You also need to account for salary growth, inflation, and a few other factors.
The answer to, “Can I get paid for future promotions I missed due to injury?” is in the affirmative. For example, if you were on track to become a senior partner, it’s crucial to factor in the promotion. You also need to account for inflation because $100,000 in today’s world will not have the same buying power ten years down the line.
Not surprisingly, attorneys and economic experts examine a wide range of evidence when calculating future earnings loss in catastrophic injury claims.
Pre-Injury Earnings
Your past earning history helps establish a baseline, and it’s common to look at your:
- Pay stubs.
- Tax returns.
- Prior career trajectory.
- Education and training.
Post-Injury Work Ability
When it comes to evaluating your ability to work after a catastrophic injury, doctors and vocational experts will look at whether you can return to your old job and whether it’s necessary to modify your job duties, and also arrive at a functional impairment percentage. This is because even a reduced ability to work can justify seeking compensation.
Work-Life Expectancy
How do New York courts decide future work-life expectancy? Well, they rely on life expectancy tables to determine how long a person of your age, gender, and education level would typically remain in the workforce. However, it’s common for defense attorneys to argue that one or more of your pre-existing medical issues would shorten your career in any case. As a result, you need to provide adequate medical evidence to substantiate your claim.
While your age and career path play in role in determining how long you would have remained gainfully employed if not for your injury, expected promotions, wage increases, and industry trends can also have an effect on this factor.
Lost Fringe Benefits
For many New Yorkers, especially those in civil service or members of trade unions, the hourly wage is only half the story. For example, if you are a member of a local trade union, your compensation package includes health insurance, annuity contributions, and a defined benefit pension. As a result, a union worker’s lost pension benefits in an injury claim can be significant.
Similarly, if a workplace accident forces you into early retirement at 35, you aren’t just losing wages; you are losing years of contributions to your pension fund. When calculating future lost wages, you must include the replacement cost of health insurance and the lost value of that retirement pension.
While the benefits are part of the total compensation account for health insurance and retirement plans, they also take into account bonuses and commissions. Depending on the specifics of a case, this section can make up 20% to 40% of the total loss of earnings compensation.
The Present Value of Future Wages
Calculating inflation and salary growth in injury claims is crucial because you need to express future lost earnings in the present day’s economic value. An economic expert typically carries out these calculations while accounting for wage growth vs. inflation and discounting future dollars to present value.
The Discount Rate
This is where the math tends to get tricky because courts must apply a discount rate to the future money to determine its present value. Simply put, given that the money invested today grows over time, a court calculates how much money to set aside to ensure you get your full lost wages later.
While defense attorneys do their best to argue for a high discount rate, which lowers the amount their side has to pay, your attorney will fight for a low discount rate, which increases the immediate value of the settlement.
The Role of Expert Testimony
Legal teams often rely on testimony from expert witnesses to prove future earning loss in New York courts. For example, while medical experts can establish the permanence of a disability, industry experts can shed light on lost career advancements or specialty-role limitations. More often than not, attorneys also rely on testimonies from other experts.
Vocational Rehabilitation Specialists
There’s a close link between vocational rehabilitation and future earnings loss. This is because a vocational rehabilitation specialist analyzes your residual earning capacity, which is what you can still do physically and cognitively.
For instance, in case of a traumatic brain injury, a vocational expert might testify that while you can walk and talk, problems with your short-term memory make you unemployable in any competitive field. In case of an amputation injury, the expert might determine that you can no longer perform manual labor but could retrain for sedentary work.
Keep in mind that while a vocational expert helps determine the type of work you can do, it also brings up the duty to mitigate. This legality requires that you try to find work that you can do based on the effect of your injury.
Forensic Economists
While a vocational expert helps establish the type of work you can do, a forensic economist helps arrive at a number to seek as compensation. They take into account aspects like pre-injury vs. post-injury income, tax implications, the discount rate, and macroeconomic trends.
Periodic Payment of Judgments
Article 50-B under New York’s Civil Practice Law & Rules governs the payment of future damages if they exceed $250,000. According to this rule, a court allows a lump sum payment for the first $250,000 of future damages, and the payment of any amount over this number takes place over a period of years or via an annuity.
How Insurance Companies Try to Minimize Their Liability
Insurance companies do their best to reduce their payouts by minimizing their liability, which is why you should consider hiring an attorney. On their part, insurance companies can argue that:
- You are overstating your disability.
- You can still work in a “light-duty” job.
- Your prior earnings are inconsistent or speculative.
- Future job market conditions are uncertain.
- You were likely to leave the workforce early for other reasons.
The Need for Legal Representation
Seeking catastrophic injury compensation is no easy task, given that calculating future lost earnings involves specialized economic and medical analysis. Without legal knowledge, building a strong claim on your own can seem like an uphill task, and an experienced personal injury attorney can help:
- Coordinate expert evaluations.
- Prove long-term disability and work limitations.
- Fight lowball settlement offers.
- Maximize recovery of future wages and benefits.
Conclusion
Catastrophic injuries often take away more than physical ability; they take away financial independence and career opportunities. What helps is that the law in New York recognizes this and allows victims to recover future earnings loss as part of their compensation.
However, calculating future earnings loss in catastrophic injury claims requires paying attention to different aspects, and you must have thorough documentation, expert support, and strong legal representation.
If you or a loved one has suffered a catastrophic injury in New York, understanding your rights is the first step toward rebuilding your future, and seeking advice from a personal injury attorney might be in your best interest.