As Vancouver litigation lawyers practicing personal injury law, we handle a wide range of negligence actions on a regular basis, including professional negligence claims (such as medical malpractice, product liability claims and ICBC claims).
Upon suffering a personal injury due to another’s negligence, a person’s life is often impacted in a variety of ways, both tangible and intangible. The law of damages attempts to undo these wrongful effects by restoring the plaintiff to his pre-accident condition (to the extent that a money award can do so). The law recognizes and undoes each of these negative effects by awarding damages under various heads of damage. These heads of damage include special damages for cost of future care, compensation for lost homemaking capacity and lost family income, and non-pecuniary damages for pain and suffering. The head of damage dealt with in this article is called damages for loss of earning capacity.
Damages for loss of earning capacity respond to a reduction in the plaintiff’s ability to earn a living as a result of the defendant’s negligence. The focus is not on the plaintiff’s lost future earnings, but rather on the plaintiff’s diminished capability or power to work productively—a “capacity viewed as a capital asset” (Remedies, The Law of Damages, by Jamie Cassels and Elizabeth Adjin-Tettey, pg. 130). The B.C. Court of Appeal has affirmed this distinction, noting that
“An award for loss of earning capacity is based on the recognition that a plaintiff’s capacity to earn income is an asset which has been taken away… Where a plaintiff’s permanent injury limits him in his capacity to perform certain activities and consequently impairs his income earning capacity, he is entitled to compensation. What is being compensated is not lost projected future earnings but the loss or impairment of earning capacity as a capital asset” (Rosvold v. Dunlop, 2001 BCCA 1, para 8) (“Rosvold”).
Because damage awards for loss of earning capacity are made in lump sums prior to any actual realization of lost earnings, this head of damage necessarily deals to some extent with the unknowable (Rosvold, para. 9). Thus, there is a hurdle of certainty that must be passed in order for a plaintiff to establish damages for loss of earning capacity. Specifically, a plaintiff must prove that there is a real and substantial possibility that lost capacity will result in pecuniary loss (Ruscheinski v. Biln, 2011 BCSC 1263, para 114) (“Ruscheinski”). A “future or hypothetical possibility” will be considered as long as such possibility is “real and substantial” and “not mere speculation” (Ruscheinski, para 114).
Once a plaintiff has demonstrated a real and substantial possibility of future pecuniary loss resulting from the defendant’s negligence, then the damages for lost earning capacity must be assessed. There are two correct methods for assessing damages for lost earning capacity: the earnings approach and the capital asset approach. The earnings approach will be more appropriate in situations where the loss is more easily measurable, while the capital asset approach is more appropriate where the loss is less easily measurable.
The earnings approach is exemplified by Steenblok v. Funk ( B.C.J. No. 1158) (“Steenblok”), in which the 47 year old plaintiff suffered injuries to his back and neck in a motor vehicle accident. Prior to the accident, the plaintiff had been a raker; however, post-accident, pain and discomfort made raking work difficult, and the plaintiff quit his job to take on, temporarily, a job as a security guard. The plaintiff was unable to return full-time to his former raking job (Steenblok, pg. 2, 4).
In assessing damages for loss of earning capacity, the court used the earnings approach by calculating the difference between the plaintiff’s earnings as a raker and his earnings either as a security guard or as a raker working 25% of the plaintiff’s usual workload. Once the present value of that difference was determined, the court then adjusted the figure according to contingencies (i.e. the court reduced the award by 20% to account for the possibility that the plaintiff’s chronic pain would be reversible) (Steenblok, pg. 4).
The capital asset approach is exemplified by Brown v. Golaiy ( B.C.J. No. 31) (“Brown”). The plaintiff in Brown, like the one in Steenblok, suffered personal injuries as a result of a motor vehicle accident. Prior to the accident, the 28 year old plaintiff was working as a truck driver; however, following the accident he was medically advised to discontinue truck driving, and started working as a car salesman (Brown, para. 2).
The court assessed the damages by employing the capital asset approach, taking into account whether: (1) the plaintiff has been rendered less capable overall from earning income from all types of employment; (2) the plaintiff is less marketable or attractive as an employee to potential employers; (3) the plaintiff has lost the ability to take advantage of all job opportunities which might otherwise have been open to him, had he not been injured; and (4) the plaintiff is less valuable to himself as a person capable of earning income in a competitive labour market (Brown, para. 8). Applying these factors, the court awarded $20,000, or the equivalent of one year’s salary as a truck driver, to the plaintiff even though it was “unlikely that he would miss that much time from work all at once” and it was “uncertain, when, or if, he will miss time from work at all” (Brown, para 11). The award was made because the plaintiff was nonetheless “diminished in his ability to find employment, to work, and to pursue certain kinds of employment” (Brown, para 11).