Evidence of Lost Earning Capacity

This post is from the perspective of a Portland personal injury lawyer who has to establish in every serious injury case the future economic effect of disabling injuries. Proof of impairment of earning capacity is made by giving evidence of the difference between the earnings of the injured person before the injury, and after the injury. Since this requires prediction of the future as to earnings, the evidence does not have to be an exact monetary computation. The evidence will set out the injured person’s capacity to earn money in his usual way of making a living.

Conachan v. Williams, 266 Or 45 (1973), stated the rule for proving lost earning capacity:

It is obvious that plaintiff’s loss both before and after trial can be approximated only and that the calculation of the loss must rest upon factors which can be employed only in terms of probabilities, including the probable period of impairment, the plaintiff’s capacity to earn over that period, i.e., what his services would have brought in the labor market taking into account not only plaintiff’s capacity at the time of injury but also his probable chances for promotion (or demotion), the probability that the plaintiff would have employed his skill or talent, taking advantage of available opportunities to work, and other pertinent factors.

The jury may hear about other jobs for which the plaintiff could be qualified and the income paid for that employment. To introduce evidence of the earnings of other people, the injured person’s attorney must show that the circumstances of other employees are similar to the circumstances of the injured person.

For a self-employed person, the claim for lost income or lost earnings must be proven with reasonable certainty. The injured person must introduce specific evidence of past earnings.

Life expectancy

Mortality tables are used to help determine future damages, including for pain and suffering and for loss of earning capacity. Even if the case is not for wrongful death, a permanent injury will hurt the injured person for the rest of his or her life. Once a permanent injury is proven, mortality tables are admissible in evidence. If there is no evidence of permanent injury you may not introduce mortality tables. In a wrongful death case, the mortality table will help the jury estimate how long the deceased person would have lived, and how long he or she would have earned income to provide for the family.

Present value discount and inflation

A dollar today is worth more than a dollar in 10 years when you consider interest it will earn in the meantime. Monetary damages for loss of future wages or for impairment of future earning capacity can be discounted to present value.

Present value is the amount of money that, if invested today at a reasonable rate of interest, allowing for inflation factor, will give the injured person over time the amount that he or she would have earned without the injury. This calculation may also be applied to the injured person’s need for future medical expenses. The jury will decide present value.

Evidence for a present value calculation is not required, but is allowed. Sometimes an economist or accountant will testify about what is a reasonable interest rate to discount future payments to the present, and then do the arithmetic for the calculation. The calculation should also include a prediction of future inflation.

A high interest rate will decrease what will be a fair award. Inflation will increase what will be a fair award. Different witnesses can give different interest and inflation rates, and if so the jury decides which expert to believe.

Expert testimony on future rates can be confusing. Wrongful death cases will usually have an economist to testify. On the other hand, in many personal injury cases the injury will not be permanent and there will be a recovery. Such cases can be unnecessarily complicated by expert evidence on reduction to present value.