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:
- The days you were absent
- Your hourly pay or salary at the time of the injury
- The number of hours you normally work each pay period
- Any overtime you worked in the weeks or months before the injury
- Any special projects you were working on that would have resulted in additional compensation
- A promotion you were being considered for, but now isn’t available
- Any lost prizes for work performance, including vacations, tickets to shows, etc.
- Vacation, sick and bonus days you used while recovering
- 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.
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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Visitor Questions on Claiming Lost Income
Can I claim loss of vacation days? I was injured in an auto accident. The other driver has taken 100% responsibility for running a red light and colliding with my car at an intersection. I was in the midst of some scheduled vacation days when this happened, so I did not miss work, but I missed the enjoyment of my vacation days.... Read More >>
Is past 5 years of tax returns necessary to prove lost income for an Independent Contractor? Let me start by complimenting you for the information you provide on this site. It has been very helpful. I am negotiating, representing myself, with an insurance company for settlement on a personal injury claim from an auto collision. There is no dispute that the other driver was at fault, my husband and I were... Read More >>
Are there any time limits for claiming lost income? I was rear ended by a drunk driver 5 months ago. There has been no settlement yet. My wife was a passenger and has brain trauma issues and has been unable to work, per Doctor’s orders. It has been a struggle. She is now only part time. After 5 months I was told I have... Read More >>
Insurance company only pays a maximum of $200 per week? I was a passenger in a car that was rear ended. I have a shoulder injury from the seat belt requiring surgery. I will miss at least 6 weeks of work after the surgery. I am an RN and I work full time. I have been told by the insurance company that they only pay... Read More >>
Can I claim lost wages from my per diem job? I was in a car accident and had a right hand soft tissue injury and swelling. I am a critical care nurse and right handed. I do contract nursing and have to work an agreed amount of hrs each week or pay back an agreed amount and lose the hourly pay for hrs not worked.... Read More >>
Insurance refusing to cover wages lost while caring for my injured child? My daughter was a passenger in a vehicle that was t-boned. The driver of her car was at fault. The insurance company acknowledges fault. I had to take off work to take my daughter to several doctor’s appointments. Because I am only paid when I work, this resulted in lost wages. The car insurance company... Read More >>
How does self-employed person verify proof of lost wages? I was in an accident in January. I made $500/week as a nanny/babysitter prior to the accident. I was wondering if I can still show proof of my earnings prior to the accident if I do not have tax returns. I have checks, records of my schedule each week, and letters from clients. Also, do... Read More >>
How to get reimbursed for loss of wages and head injuries? My accident occurred on Sunday, January 31, 2016. My wife and I were sitting at a red light and were rear-ended by the at-fault driver, Teresa. I had blacked out for a few moments, but called 9-1-1 immediately after gathering myself. My wife was blacked out for several moments and I tried waking her after... Read More >>
Not able to accept job offer due to car being disabled in accident? I was in an auto accident. The other driver was at fault. As a result my car was disabled and I no longer have reliable transportation. I am a server so my income varies. I was attempting to look for a second job and had just been offered a job the day before the accident... Read More >>
Child injured eye at camp… My child is 10 years old and while at a camp he got injured on his eyes. I think there was neglect from the camp supervisor for sure. I took him to the ER where we spent half of the night. They confirmed a scratch in his cornea and said he can’t be exposed to... Read More >>
How are lost commissions calculated in lost wages compensation? I am a sales executive and 40-50% of my total annual income comes from commissions earned. I was involved in a car accident that reduced my ability to do my job as effectively and efficiently as normal for 7 months prior to surgery due to the severe pain. I had extensive surgery to repair a... Read More >>
Do I need a doctor’s note to get compensated for lost wages? I was rear ended on an interstate in SC. The driver that hit me was at fault and received a ticket. I didn’t request an ambulance, but my husband took my daughter and I to the ER a few hours later. She is OK, they checked for a possible concussion and they said she would... Read More >>
Credit damage due to unpaid medical bills by employer? I was lifting heavy pots of bacon at work and it resulted in a hernia. I reported it to my manager and immediately went to the hospital. I had surgery and thought it was over. I never received paperwork, thinking my employer had taken care of the matter. After 2 years, I checked my credit... Read More >>
Will homeowners insurance cover time lost from work? I was visiting my girlfriend’s grandmother and my truck rolled down a hill and pinned me between her van and my truck. Her homeowner’s insurance company said they would cover my hospital bills, but I’ve also lost a week from work. So I was wondering if the homeowner’s insurance would also pay for the time... Read More >>
Will State Disability Affect My Car Accident Claim? I was rear ended on the freeway and the other driver’s insurance is accepting liability. I am claiming loss of wages, but I now may need surgery on my cervical spine due to the accident. I already have been off work for a month but now it might be two or more months for recovery.... Read More >>
Will auto insurance pay for lost wages? I’m wondering if I can take time off work to take care of my wife due to a car accident. The doctor took her off work for at least six months and she applied for a leave of absence from her job under the Family and Medical Leave Act (FMLA). She now legally has 12... Read More >>
Is Settlement Money Received for Lost Wages Taxable? I am asking this question for someone else – He was in a vehicle that was hit by another vehicle – he had injuries and was out of work for 3 months – He will be getting a settlement for lost wages and also out of pocket medical expenses – Is the money received for... Read More >>