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Calculating Lost Earning Capacity in a Car Accident Claim

Car crashes are the leading cause of accidental injuries nationwide. Alarmingly, the preliminary data indicates that collisions are rising. The National Safety Council (NSC) reports that 4.8 million people were injured in car accidents in the United States in 2020, despite less traffic volume than the previous year. An auto accident can cause a serious disruption to your life, leaving you stuck dealing with high medical bills, missed paychecks, and immense pain and suffering.

Following a car crash, it is imperative that you are able to access financial compensation for the full extent of your damages. In Nevada, you have a right to seek compensation for all of your economic losses, including your loss of earning potential. There are many myths and misconceptions about diminished earning capacity. In this article, our Las Vegas auto accident attorneys provide a comprehensive guide to calculating loss of earning capacity after a car crash in Nevada.

Loss of Earning Capacity: Defined

Also known as ‘diminished earning capacity’ or ‘loss of earning potential’, the term ‘loss of earning capacity’ refers to the tangible decrease in a person’s ability to earn income as a direct consequence of their accident. It is not the same as ‘lost wages’ because it covers future missed income, not merely the paychecks that have already been lost as the result of an accident. Whether you are entitled to recover financial compensation for lost income in your case depends on many different factors, including your health/medical condition and the current state of your employment.

Understanding Loss of Earning Capacity

As an example of how loss of earning capacity works, imagine that someone had a well-paying and reliable job as a construction worker in Clark County, Nevada. Unfortunately, the individual was then seriously injured in a crash with a reckless driver in Las Vegas. In the collision, the victim suffers a debilitating back injury that makes it impossible for them to return to their previous position as a construction worker. Instead, they are forced to take a lower-paying office job. Through a diminished earning capacity claim, the victim could seek compensation for the difference between the future wages they would have earned had they not been forced into a lower-paying job due to the accident.

What is the Difference Between Loss of Earning Capacity and Lost Wages?

If you were injured in a car crash in Nevada, you have the right to seek financial support for all of your economic losses, including for lost wages and loss of earning capacity. To be clear, lost wages and loss of earning capacity are two distinct types of economic damages. A full recovery means that both your lost wages and any long-term loss of earning power are compensated as part of your settlement or verdict. Here is the difference:

  • Lost Wages: The term lost wages applies to actual lost income or loss of work benefit that occurred between the accident and the settlement/lawsuit. In other words, lost wages look backwards. It is income that has already been lost.
  • Loss of Earning Capacity: In contrast, loss of earning capacity is future-focused. It covers the additional economic damage that they will likely suffer going forward, given the long-term or permanent disabilities/impairments related to the accident.

To summarize, the term “lost wages” refers to the employment income you have already missed out on because of your accident. The term “lost earning capacity” refers to the additional income you are likely to miss out on going forward. In practice, lost wages tend to be far easier to prove because they can be demonstrated with a high degree of certainty. Diminished earning potential is more challenging. Of course, that does not make it any less real. A Las Vegas, NV car accident attorney will help you fight for the full and fair financial compensation that you are owed.

Calculating Lost Earning Capacity: The Factors

Loss of earning capacity can be difficult to calculate. As this is a “future” damage, there is no single piece of documentation that can be referred to or presented to definitively prove the value of the loss. Instead, injured car accident victims should be prepared to present a comprehensive and well-supported case that highlights the true extent of their future damages. In Nevada, courts will consider the following factors when calculating loss of earning capacity/diminished earning potential:

  • How long injuries, disabilities, and impairments are likely to last;
  • Whether the victim can return to their previous employment;
  • Whether alternative employment will result in a loss of income;
  • The current age and expected remaining work years of the injured victim; and
  • All other factors that might have an impact on the victim’s ability to earn income.

The Key: The Difference in Total Lifetime Earnings Had No Accident Occurred

Every car accident injury claim is unique. There is no one definitive way to calculate loss of earning potential. That being said, there is an overriding principle: You should be granted compensation that covers the total expected difference in income caused by your car accident injuries. To maximize financial compensation for loss of earning capacity in a settlement or verdict, you are going to have to prove two things:

    1. You are dealing with a long-term injury or impairment that will continue well-beyond the date of settlement/trial; and
    2. The injury or impairment you are enduring will cause you to make less money than you otherwise would have been able to earn.

To calculate the proper amount of compensation for diminished earning capacity, we need to determine how much income you would have been likely to earn had no crash ever occurred. Then, we need to calculate how much income you are likely to earn in the future, given your remaining injuries, disabilities, or impairments. The difference between those two figures is your loss of earning capacity. You and your family should be fully and fairly compensated for that loss.

A Las Vegas Car Accident Attorney Will Help You Maximize Loss of Earning Capacity

Recovering full and fair compensation for loss of earning capacity is never easy. Unfortunately, the large insurance companies that defend most auto accident injury claims fight aggressively to try to resolve cases for as little as possible. Insurers look for anything that they can use to limit an injured victim’s ability to recover compensation for loss of earning capacity. These companies are notorious for undervaluing loss of earning potential and other future damages.

If your career was adversely affected by a car accident, you need a strong and experienced legal advocate in your corner. At Naqvi Injury Law, we have been recognized as the number #1 personal injury law firm in Las Vegas. With extensive experience obtaining successful results for car accident victims, our attorneys know how to hold insurance companies accountable and ensure that our clients receive full compensation for their lost earning capacity.

Call Our Las Vegas, NV Auto Accident Lawyers for Immediate Legal Guidance

At Naqvi Injury Law, our Nevada car accident attorneys fight aggressively to get victims justice and the maximum financial support. If you or your loved one suffered significant loss of earning capacity because of a car accident injury, we are here to help you get the full compensation that you deserve. Contact our team right away for a free, no commitment consultation. With a law office in Las Vegas, we represent auto accident victims throughout all of Southern Nevada, including in North Las Vegas, Henderson, Mesquite, Boulder City, and Summerlin.