The Right Way to Include Lost Income in Your Personal Injury Settlement

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The financial toll of unforeseen injuries can be devastating. If you've been injured due to the negligence of another person or entity (like a corporation), you have a right to be reimbursed for the income you lost while treating and recovering from your injury.

When calculating lost income for a personal injury settlement, you must include all forms of income. Total employment compensation includes much more than just your lost wages.

Lost Income vs Lost Compensation

Courts have traditionally ruled that personal injury victims are entitled to reimbursement for all the income they lost while treating and recovering from their injuries. That lost income includes not only the wages a victim would have earned if they hadn't been injured, but any additional compensation on top of a normal salary.

Lost income (or wages) is the amount of money your employer pays for the work you do. The money may be paid weekly, bi-weekly, or monthly, and comes in the form of a company check or direct deposit.

Lost compensation represents the additional financial benefits of your employment, plus what you have the capacity to earn. It's compensation over and above your lost income. For the purposes of personal injury insurance settlements, lost compensation can include sick and vacation days, pay bonuses, and other perks of employment.

Other Types of Employment Compensation

  • Sick Days
    If you had accumulated 14 sick days and had to use 10 of them while recovering from your injuries, you have a right to be reimbursed for the value of those 10 days. Each one of those days represents a day's wages. You no longer have those days if you need to stay home to recover from the flu or other ailment.

  • Vacation Days
    If you had to use your vacation days while recovering, you should be compensated for them. Each one of those days represents a day's wages you lost. Your settlement should include reimbursement for every vacation day lost due to your injuries. You shouldn't have to lose those days because of someone else's negligence.

  • Bonus Days
    Bonus days are any other days off from work you earned or could have earned. These could be national holidays, birthdays, "mental health" days, performance days, etc. Like sick and vacation days, each bonus day represents a day's wages.

  • Pay Bonuses
    Bonuses are usually paid by employers based on an employee's performance. This could be because you had the highest sales for the month, or hit some other type of benchmark. If you were realistically in contention for a bonus, and your injuries prevented you from getting it, you can demand reimbursement for those amounts.

  • Other Perks and Benefits
    Perks are similar to bonuses, but usually represent non-monetary compensation. These might include a company "work" vacation, use of a company car, free golf outings, or any other perk you realistically would have had if not for your injury.

These various forms of lost compensation are frequently overlooked by victims in personal injury claims. The insurance adjuster isn't going to tell you to include them in your demand, so you must know what you're entitled to, and add them yourself.

Insurance companies normally lump lost wages and lost compensation together and refer to them both as lost income. That's fine, as long as you know the difference. Knowing all the types of lost compensation you can include in your demand can substantially increase your final settlement amount.

Evidence of Lost Income

Before taking any time off from work, you first need to have suffered legitimate injuries. The best proof of those injuries comes in the form of a doctor's narrative. This is a detailed write-up of your injuries, including your diagnosis and a prognosis for recovery. It must state your prescribed treatment and how long you should be out of work.

The narrative can include a "progressive prognosis," in which the doctor gives an approximate time it will take before you can return to your full job duties. It generally states you can return to work with restrictions on the duties you can perform. For example, the amount of time you can spend standing, or the amount of weight you're able to lift.

Tell your doctor you need a medical narrative for your claim. The more detailed and supportive of your injuries, treatment, and your approximate recovery time, the better chance you'll have of reimbursement. You don't want a vague narrative. It gives the adjuster a position for arguing against paying your lost income.

Letter from Your Employer

To be successful in your claim, you need to produce legitimate proof of the income and additional compensation you lost during your treatment and recovery. This comes in the form of a written letter from your employer. Make sure it's on company letterhead and signed by a manager.

The written documentation from your employer should confirm:

  1. The days you were absent

  2. Your hourly pay or salary at the time of the injury

  3. The number of hours you normally work each pay period

  4. Any overtime you worked in the weeks or months before the injury

  5. Any special projects you were working on that would have resulted in additional compensation

  6. A promotion you were being considered for, but now isn't available

  7. Any lost prizes for work performance, including vacations, tickets to shows, etc.

  8. Vacation, sick and bonus days you used while recovering

  9. Any perks or other benefits you lost

Lost Income for the Self-employed

Self-employed people have the same right to recover lost income as anyone else, although gathering proof of that lost income is a bit more challenging. Claims adjusters often consider lost income claims from the self-employed as suspect. If your lost income is substantial, you may need to hire a forensic accountant.

Forensic accountants can study the past income of a self-employed individual and forecast potential future income. They can prepare a detailed report of future income by factoring in the growth rate of your business and the addition of new customers. They can also factor in the income levels of similar businesses in your area.

If your business is not that complicated, you can do without a forensic accountant. Gather a current financial statement and your tax returns for the past several years. If your business has been growing steadily for several years, you can include the average growth rate in your calculations.

If you were working with potential customers and lost them when you were injured, you can include copies of your correspondence, proving how close you were to bringing them on. If you can get them to write a letter confirming they would have become a customer, if not for your being injured, that would be even better.

Tell the truth!

Don't be tempted to exaggerate or "pad" your financial statement. If the adjuster catches it, you'll lose all credibility, and every document you submit as evidence in your claim will be very closely scrutinized.

Take your documentation to your regular accountant and ask her to prepare a financial report supporting your calculations. Make sure she includes her fees. Then forward it to the adjuster. If the calculations are credible and supported by legitimate proof, the adjuster will approve your request for lost income and related compensation.

The adjuster can't refuse to include your lost income simply because you're self-employed. But she'll likely dispute the amount you first demand. It most often comes down to how effectively you can prove the legitimacy of that lost income.

Special Damages

The entire amount of your lost income is considered part of your special damages. Because the final amount of your personal injury settlement is based on a multiple of your special damages, the more proof you have of the entire amount of lost income, the higher your total settlement will be.

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