If you have been injured in a car collision and cannot work, or your working ability is down to part-time, you can claim your lost wages from the auto insurance of the driver who was at fault and caused your injuries and impairment. Recovering past wage losses is straightforward, it is just a matter of proving the loss of income was “caused” by the collision and your doctor or occupational therapist agreed you could not work. It is just a mathematical calculation, minus the tax you would have paid. Recovering future income loss is much more difficult.
Two Types of Future Income Losses
Proving a future loss of income, especially long term, is more challenging. The injury victim must prove that there is a real and substantial possibility of a future event leading to an income loss. If the Plaintiff discharges that burden of proof, then depending upon the facts of the case, the Plaintiff may prove the loss, either on an earning/mathematical loss approach, or a capital asset approach. The earnings/mathematical approach will be more useful when the loss is more easily measurable, and the capital asset approach is more useful when the loss is not as easily measurable.
Burden of Proof
Note that when proving future losses, the burden of proof is not on a balance of probabilities, it is a lower burden of proof of simple probability. The Supreme Court of Canada has clearly said the standard of proof to be applied when evaluating hypothetical events that may affect an award is simple probability, not the balance of probabilities. The court went on to state that possibilities and probabilities, chances, opportunities, and risks must all be considered, so long as they are a real and substantial possibility and not mere speculation. So, in Handel Law Firm’s view if the future events are not mere speculation, but they were opportunities that are now lost and risks that the Plaintiff will now have then the Plaintiff should be compensated for it.
The Alberta Court of Appeal in Lowe v. Larue  A.J. No. 55, commented on this head of damages called loss of a capital asset or loss of earning capacity, “the authorities cited support the principle that where a future loss of earning capacity has been established as at least a reasonable possibility and not mere speculation, the loss of a chance or an opportunity to earn a certain level of income in the future may be taken into account in calculating the loss of future income, a loss of which may otherwise be difficult or impossible to assess” (page 9, par. 51).
You Can Make a Future Wage Loss Claim Even If You Are Back to Full-time Work
With respect to the loss of earning capacity the courts have stated that it is “loss of earning capacity as a capital asset that requires compensation”, not just a mathematical calculation of the past wage loss. The courts have said, because it is impairment that is being redressed even a plaintiff who is apparently going to be able to earn as much as he could have earned if not injured, he is still entitled to some compensation for the impairment. He is entitled to it because for the rest of his life some occupations will be closed to him and it is impossible to say that over his working life the impairment will not harm his income earning capacity.
Some of the considerations to be considered in assessing the value of a lost asset include:
- Whether the plaintiff was less capable overall;
- Whether a plaintiff was less marketable;
- Whether the plaintiff had lost the ability to take advantage of all job opportunities which might have been available had he not been injured;
- Whether the plaintiff was less valuable to himself as a wage earner.
As you can read, this is a complex area of law. To make sure you receive fair compensation that our courts have said you are entitled for your injury and impairment contact Handel Law Firm and speak to one of our experienced injury lawyers. Do not leave your future wage loss compensation to chance or to the advice of the insurance adjuster. The insurance adjuster does not act for you. In fact, he or she acts against you trying to minimize your compensation and maximize the insurance company profits on your back!
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Structured Settlements in Alberta
Innocent victims who suffer catastrophic brain injuries or other serious injuries which impair their lifetime income earning capacity will receive a very large lump sum settlement. At the time of settlement, we advise our clients to invest a portion of the lump sum in a “structured settlement” and receive tax free monthly cash payments for life indexed to inflation. This provides a significant advantage as the injury victim who cannot work will have a steady stream of income guaranteed for life to provide for his or her needs. The payments are indexed to inflation so every year the monthly payments will increase.
Victim Can’t Blow It All
Perhaps the best reason for placing a large lump sum personal injury settlement award into a structured settlement is the fact that the structured settlement is irrevocable, and therefore the victim (or family members wanting money) cannot collapse it in the future to get at the lump sum.
This is important because a well-known American study indicates that within two months following receipt of a significant monetary settlement (personal injury award, fatal accident award, lotteries, sweepstakes, insurance, inheritances, etc.), 25% of the recipients had nothing left. By the end of the first year, 50% had nothing left. By the end of the first two years, 70% had nothing left. And within five years of settlement, 90% of the recipients had nothing left.
Another huge advantage of a structured settlement is that a catastrophically brain injured victim or other very seriously injured victim in Alberta is often on AISH (Alberta Income for the Severely Handicapped) and if they have a large lump sum of money in their account they will lose their AISH payments as they will no longer qualify. Since AISH uses the definition of income under the Income Tax Act and the Income Tax Act says structured settlements from personal injury claims are not income, the structured settlement will not be considered income or an asset in calculating eligibility for AISH. Therefore, the severely brain injured victim may maintain his or her AISH payments.
Protect Your Future
Therefore, given the above statistics, if you are receiving a large lump sum personal injury settlement award, and you need that money for your long-term future income supplementation and payment of future medical costs it is, in our firm’s opinion, imperative that a good portion of your settlement be placed in a structured settlement indexed to inflation to avoid the catastrophe that the above statistics represent. In other words, do not think that you will be the exception to the rule when the statistics indicate that 90% of recipients have nothing left of their significant monetary settlement after five years. Please also be aware that our law firm does not receive any fee or compensation whatsoever from the life insurance annuity company for placing the annuity. In other words, we are not in a conflict of interest in recommending a structured settlement for catastrophically brain injured clients.
Objections to Structured Settlements
Because of long term low interest rates, and given that structured settlements are conservative investment vehicles and the rate of return is based upon the rate of return of bonds, many people feel that a structured settlement is a poor investment as they could do better in the stock market. Setting aside the long-term return in the stock market being only marginally better than bonds, and setting aside the fact that in the stock market one can lose 50%, 75%, even 100% of investment capital, structured settlement companies recently developed two products to address people who still want to invest in the stock market with their personal injury settlement.
The first new product is a Market Indexed (MI) structured settlement. In a MI structured settlement, the indexation takes place by reference to market performance of the S&P 500 as opposed to the Consumer Price Index. A Market Index structured settlement has the certainty of a floor value and the upside benefit of increased income based on market performance – however it is capped with an annual ceiling at 5%.
The second new structured settlement product is the Convertible Lump Sump. This allows the injured victim to receive a specified lump sum payment on a specific future date with the goal that the victim will reinvest that sum in a predetermined structured settlement plan which would presumably be at higher interest rates sometime in the future.
The foregoing two products are a very good answer to victims who still are misguided by financial planners who want to steer them into the stock market (because of greater fees to the financial planner), as it allows for some upside to market performance. The bottom line however is that with existing structured settlements, and even without the foregoing innovations, structured settlements significantly beat comparable investment options when compared with the fact that structured settlements have tax free status. Only structured settlements from injury claims have tax free status – so take advantage of this tax concession if you are an injury victim.
If you are the victim of a serious motor vehicle collision and will have impaired work/earning capacity going forward, or future treatment costs, it is crucial that your personal injury lawyer discuss the structured settlement option. Indeed, in our opinion for the severely disabled it should form part of every large injury settlement.