If you have been injured in an accident caused by someone else, you may be entitled to compensation. In addition to compensation for things like medical expenses and future care needs, you may be able to claim for future income loss if you are unable to work.
This article looks at damages for future income loss, in particular where the injuries suffered prevent the person from earning money in their chosen trade. We also look at a recent Ontario Superior Court of Justice decision in which a motor vehicle accident interfered with the plaintiff’s ability to work as an auto mechanic.
Types of damages for loss of income
In a court case for compensation following an injury, compensation for lost income may take several forms.
Firstly, it may be possible to claim for past income loss. This is to compensate for income that the plaintiff could not earn between the time of the injury and the time of the trial.
Secondly, if the plaintiff is unable to work after the trial, they may be able to claim damages for probable loss of future earnings. To calculate these damages, the court will compare income based on previous years with the plaintiff’s post-accident income.
Damages for loss of competitive advantage
A concept related to future income loss is the loss of competitive advantage. Damages for loss of competitive advantage may be awarded if an injured person is no longer able to perform the essential functions of their craft, trade or profession. Due to the injury suffered, the person is less able to compete effectively in the marketplace with other individuals of comparable qualifications and experience.
Importantly, damages for loss of competitive advantage may be awarded by a court even if the plaintiff has returned to their pre-accident level of income and therefore is not eligible for damages for loss of future earnings. Such an award may be warranted where, for example, the plaintiff has a higher risk of being unemployed in the future due to factors caused by accident.
Plaintiff was unable to work as an auto mechanic after motor vehicle accident
In Herrington v Brewer, the 56-year-old plaintiff was stopped at a red light when a van operated by one of the defendants rear-ended the vehicle immediately behind the plaintiff, which in turn was propelled into the rear of the plaintiff’s car.
The plaintiff suffered neck, back and elbow pain. While the neck and back pain cleared up, he suffered a tear in his left elbow, which left him unable to perform his duties as an auto mechanic. He owned and operated an auto repair shop and had spent his life working as an auto mechanic.
The parties disagreed about causation and the assessment of damages
While the defendants accepted liability for the collision, they argued that the plaintiff’s injury was not caused by the accident. Even if it was, they claimed that the plaintiff had successfully mitigated his financial losses because he was now making as much, or more, annual income as he was at the time of the accident.
Justice Smith preferred the expert evidence of the plaintiff and decided that the elbow injury was caused by the collision and was permanent in the sense that it was going to last indefinitely.
Plaintiff had to hire additional mechanics to allow the business to remain viable
On the issue of damages for loss of income, the plaintiff argued that he was entitled to an award for loss of competitive advantage because he could no longer complete his duties as an auto mechanic.
He explained that prior to the accident, he employed one assistant and had no plans to retire. However, following the accident, the plaintiff could only complete administrative and supervisory work. He had to hire additional mechanics to allow the business to remain viable.
While Justice Smith noted that the plaintiff continued to enjoy an income at or above the level he enjoyed at the time of the accident, his Honour thought that the plaintiff’s current mechanics were willing to work for an “inordinately low annual income” in light of the labour shortage for skilled mechanics.
Court finds that the plaintiff’s injuries caused a loss of competitive advantage
Justice Smith explained:
Given the challenges imposed by his injury the plaintiff is at a distinct disadvantage in terms of competing in the mechanic’s trade. Given the labour shortage there is a very real possibility that the plaintiff may one day find that he is unable to find skilled employees who he can rely upon to generate the income he currently enjoys. That in turn would bring the viability of his business into question…
As a result, his Honour found that the injuries caused by the accident had affected the plaintiff’s competitive advantage.
Court awards substantial damages for loss of competitive advantage
Regarding the quantification of damages, the plaintiff relied on expert evidence from a CPA who assessed the market value of the plaintiff’s pre-accident contributions to the business, adjusted to a present value over the remainder of the plaintiff’s projected pre-accident working life, then reduced to reflect the market value of the plaintiff’s post-accident projected future contributions to the business.
Justice Smith awarded the plaintiff approximately $570,000 in damages for loss of competitive advantage.
Contact Tierney Stauffer LLP for a Free Consultation Regarding Your Motor Vehicle Accident
At Tierney Stauffer LLP, we provide effective legal representation for motor vehicle accident victims in Ontario, tailored to the individual needs of each client. We can help you make decisions about what to do following your car accident and develop a strategy to seek compensation. We have many years of experience in analyzing the factors of each case in order to determine the appropriate course of action for your case. Contact us at 1-888-799-8057 or reach out online to book a consultation with one of our knowledgeable personal injury lawyers.