Tag: diminished earning capacity

Insufficient Reasons Lead To Retrial Of Diminished Earning Capacity Award

Update May 27, 2014After reassessment the trial judge assessed damages at the original amount
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Reasons for judgement were released last week by the BC Court of Appeal sending a case for re-trial after a judge failed to adequately explain how substantial damages for diminished earning capacity were assessed.
In the recent case (Morgan v. Galbraith) the Plaintiff was injured in a 2006 collision. He worked as a senior account manager at the Royal Bank of Canada at the time.  Following the crash he returned to this job with accommodation until his contract expired.  From there he never returned to work at the bank instead he pursued a career in professional lacrosse.  This chapter of his life ended with a concussion suffered in 2011.  By the time of trial he was working as a basketball and lacrosse coach.
At trial it was found that the Plaintiff suffered from ongoing injuries from the collision.  His diminished earning capacity was assessed at $700,000.  The BC Court of Appeal found that the reasons supporting such an assessment were lacking from the trial judgement and the matter was sent back to trial for reassessment of this loss.  In doing so the BC Court of Appeal provided the following reasons:
[54]         The economic evidence relied on by Mr. Morgan quantified lifetime earnings of a sport coach in Oregon at $883,004.  The judge did not explain the basis of his $700,000 assessment.  This amount approximates 80% of lifetime earnings of a coach, notwithstanding that Mr. Morgan is now employed as a coach.  I do not mean to imply that the assessment must be a mathematical calculation.  Rather, my point is that there must be findings of fact on which to base the assessment.  Here, the reasons for judgment on this point are not sufficient to permit appellate review.  The judge gave no hint as to the factual basis on which he reached the conclusion that on these facts $700,000 was an appropriate measure of Mr. Morgan’s future damages.  The judge did compare this case to another similar case, but, in my view, that would not be an appropriate way to assess what is essentially a pecuniary damage award.  I do not consider that it is appropriate for this Court to infer from the judge’s reasons the necessary findings of fact in order to substitute a different award or to affirm the correctness of the award. 
[55]         The judge could well have chosen the earnings approach given that Mr. Morgan was likely to pursue a career in sport regardless of the accident and that doing so after the accident was possible but with limitations.  The judge made no findings concerning the extent of those limitations.  As I have concluded that the appropriate disposition of this appeal is to remit the question of the assessment of damages for future loss of earning capacity to the judge, I will leave to the trial judge the question of the appropriate approach to adopt.  To reiterate, I agree with Mr. Morgan that on a proper evidentiary basis the judge has already found that there is a loss of future earning capacity under the Perren test.  He need not reconsider that finding.  But it will be necessary for him to revisit the assessment on a proper factual underpinning.
[56]         If the assessment is still to be based on the capital asset approach the judge must consider the four questions in Brown in the context of the facts of this case and make findings of fact as to the nature and extent of the plaintiff’s loss of capacity and how that loss may impact the plaintiff’s ability to earn income.  Adopting the capital asset approach does not mean that the assessment is entirely at large without the necessity to explain the factual basis of the award: Morris v. Rose Estate (1996), 23 B.C.L.R. (3d) 256 at para. 24, 75 B.C.A.C. 263; Mulholland (Guardian ad litem of) v. Riley Estate (1995), 12 B.C.L.R. (3d) 248 at para. 43, 63 B.C.A.C. 145.
[57]         In conclusion, on this ground of appeal, I would remit the question of the quantification of future loss of earning capacity to the trial judge to reassess damages in accordance with these reasons.

Diminished Capacity Claims Open Door To Broad Cross Examination

Reasons for judgement were released this week by the BC Court of Appeal addressing the broad scope of permissible cross examination when a Plaintiff advances a claim for diminished earning capacity.
In this week’s case (McBryde v.Womack) the Plaintiffs were injured in various motor vehicle collisions.  Their claims proceeded to trial by Jury where only modest damages were assessed. The Plaintiffs appealed arguing numerous errors including the scope of the cross examination discussing government financial benefits that were received.  The Court of Appeal held that no overriding errors occurred at trial and upheld the Jury verdict.  In finding the broad cross examination fair game the Court provided the following comments:
[40]        Ms. Golestani contends that she should not have been cross-examined about receiving government financial assistance when immigrating to Canada or about leaving her studies to pursue the business opportunity with Mr. McBryde. Ms. Golestani initiated proceedings to recover damages from some of the respondents, and in so doing placed a number of matters in issue, including her earning capacity and her occupational goals. In my view, the cross-examination complained of was an attempt to explore these issues, and did not exceed the permissible limits of cross-examination. 
 

Possibility of Jail Not a "Negative Contingency" When Assessing Diminished Earning Capacity


This week the BC Court of Appeal provided reasons explaining that it is not appropriate for a judge or jury to reduce damages for diminished earning capacity when there is a possibility the Plaintiff will be incarcerated in the future.
In this week’s case (Albert v. Politano) the Plaintiff was seeking substantial damages for a collision caused injury which impeded him in his usual occupation.  Prior to his injury trial the Plaintiff was charged with a criminal offence which he was disputing.  The Defendant argued that the jury could consider the possibility of conviction and incarceration in assessing injury caused diminished earning capacity.  In finding this inappropriate the BC Court of Appeal provided the following comments:
 42]        I do not agree the judge erred as alleged. I reach this conclusion for three reasons. First, the judge was not asked to give the instruction now advocated, notwithstanding the opportunity given to counsel to comment on the proposed instructions. Second, there was no evidence upon which a jury could assess the value of such a contingency. Third, and most important, I do not consider it would have been appropriate for the jury to reduce the future damage award for the negative contingency of a possible future jail sentence, in the circumstances before the Court. Mr. Albert stood in the courts, and in the community, as innocent until proven guilty. Even if proven guilty, there was no certainty that he would receive a jail sentence. In my view, it would have been entirely speculative for the jury to reduce the damage award to reflect the chance that he might be convicted on the outstanding charges. This is unlike the case relied upon by the appellants, British Columbia v. Zastowny, [2008] 1 S.C.R. 27, (2008) S.C.C. 4, wherein the Supreme Court of Canada, on appeal from this court, affirmed the appropriateness of a deduction in damages to take account of a period of incarceration that was established as a fact at the trial.

Increased Earnings Are Not A Barrier to Diminished Earning Capacity Damages

As the BC Court of Appeal recently confirmed, it is not ‘wage loss‘ that is compensible in a personal injury lawsuit but rather ‘diminished earning capacity‘.  With this in mind it is important to remember that damages for diminished capacity can be available in circumstances where there is no past wage loss and even in cases where a Plaintiff’s earnings increase following a collision.  Reasons for judgement were released this week by the BC Supreme Court, Nelson Registry, with such a result.
In this week’s case (Brechin v. Pickering) the Plaintiff was injured in a 2007 collision.  Liability was admitted focusing the trial on an assessment of damages.  The Plaintiff suffered various soft tissue injuries to his neck, knee and shoulder.  He worked as an electrician and took ‘very little time off‘.  In addition to this the Plaintiff’s earnings increased in the years following the collision as follows:
[52]  Mr. Bredin’s work history since 2002, shows the following pattern:
2002  $49,991
2003  $29,917
2004  $23,866
2005  $64,256
2006  $40,059
2007  $68,986
2008  $84,142
2009  $80,255
2010  $99,802
The Plaintiff’s injuries were expected to linger and although he could continue to work in his own occupation he was limited in tasks ‘at the heavier end of the scale‘.  As a result the Court awarded damages for diminished earning capacity.  In doing so Mr. Justice McEwan provided the following reasons:
[78]  What emerges from Ms. Mihalynuk’s evidence is a portrait of a person who is rather self-contained, proud of his work and inclined to do very little on his time off..
[80]  Mr. Brechin is now 42 years old in a setting in which he may retire in 15 to 20 years.  There are significant physical demands in the work some of the time, although as he continues to take leadership roles, he is likely to work more often at a reduced physical level of strain.  The primary concern for his future is whether he will be able to continue to retirement without interference from the effects of the accident…
[83]  I accept that work at the heavier end of the scale ought to be avoided, and that he could probably not stay in an occupation that demanded continuous heavy labour.  In the field in which he is employed, however, this does not appear to be expected.
[99]  The possibility of a future event is not specifically that Mr. Brechin will be laid off because of his condition, which is relatively unlikely, given that the medical evidence suggests that his condition is not disabling, but the more general vagaries of business that have made employment “for life”, once a common expectation, highly uncertain.  Should Mr. Brechin lose his position for such a reason he would be put back into a competitive environment where a fraction of the heaviest work would be lost to him…
[100] In this case, that involves a consideration of the medical evidence; Mr. Brechin’s age and likely working life; the relative stability of his employment at Fortis; the possibility that either Mr. Brechin’s condition, or larger workplace and market forces will change his situation, and the prospects he could have were that to happen.  It seems clear that Mr. Brechin could work but that to some extent this range of opportunities would be limited at the heavier end of the work.  The degree to which this is attributable to the accident diminishes over time as age and other factors come into play.  I think it would be an error to assume the same capacity for heavy work in a 50 year old, that one would find in someone significantly younger.  Doing the best I can to assess these factors, I fix $60,000 for future loss of income due to the diminishment of his capacity viewed as a capital asset.  I have done so, bearing in mind his present income earning capacity, which is an improvement over the years before the accident, but that the injuries suffered in the accident may reduce, somewhat, his broader opportunities to work as an electrician.

BC Court of Appeal: Past Capacity Awards Permissible Even Where Wage Loss Fully Mitigated

Important reasons for judgement were released yesterday by the BC Court of Appeal holding that an award for past diminished earning capacity can be made even when a plaintiff has fully mitigated their past wage loss.
In yesterday’s case (Ibbitson v. Cooper) the Plaintiff worked in the logging industry as a heli-faller.   He was injured in a collision and these injuries disabled him from his own occupation.  Despite this he was able to keep working in an alternate occupation which paid less.   By working longer hours at the lesser hourly rate the Plaintiff fully mitigated his past loss of income.  At trial the Court awarded the Plaintiff $95,000 for past diminished earning capacity.  The Defendant appealed arguing no award should have been made as there was no past wage loss.  The BC Court of Appeal disagreed and upheld the award.  In doing so the Court provided the following reasons for judgement:
[14] The issue on appeal may be stated in this way – did the trial judge err in giving an award for past loss of earning capacity in circumstances where the plaintiff had fully mitigated his loss of income but where the circumstances of his replacement employment required him to work longer hours?…

[19] While in many cases the actual lost income will be the most reliable measure of the value of the loss of capacity to earn income, this is not necessarily so. A hard and fast rule that actual lost income is the only measure would result in the erosion of the distinction made by this Court in Rowe: it is not the actual lost income which is compensable but the lost capacity i.e. the damage to the asset. The measure may vary where the circumstances require; evidence of the value of the loss may take many forms (see Rowe). As was held in Rosvold v. Dunlop, 2001 BCCA 1 at para. 11, 84 B.C.L.R. (3d) 158, the overall fairness and reasonableness of the award must be considered taking into account all the evidence. An award for loss of earning capacity requires the assessment of damages, not calculation according to some mathematical formula.

[20] In this case, the respondent clearly suffered as a result of the accident; he can no longer perform the job he was engaged in prior to the accident. He has suffered a pecuniary disadvantage as he needs to work longer hours to maintain his approximate pre-accident level of income.

[21] The trial judge considered pre-trial earnings both before and after the accident, explaining that calculating a precise value for the extra hours was a difficult task, and chose to assess the damages “at large”. Had Mr. Ibbitson worked the same amount of hours post-injury as he had pre-injury, he surely would have been found to have suffered a compensable loss of earning capacity. His entitlement to such damages does not disappear due to his industrious efforts to maintain his level of income, exceeding his legal requirement to mitigate. I agree with the trial judge’s conclusion and analysis.

Diminished Earning Capacity – Expert Fact vs Opinion

Reasons for judgement were released this week by the BC Supreme Court, Vancouver Registry, dealing with the admission of evidence relating to diminished earning capacity in which the Court highlights the ability of lost opportunities being proven through factual, as opposed to opinion, evidence.
In this week’s case (Fabretti v. Singh) Plaintiff was employed as a Regional Vice President at an independent financial services organization.  The Plaintiff was injured in a collision and advanced a claim for diminished earning capacity.
In the course of the claim the Plaintiff obtained a report from his employer’s National Sales Director who provided evidence with respect to the Plaintiff’s employment opportunities.  The Defendant objected to the admissibility of this report for a number of reasons.  Mr. Justice Savage ultimately held that the report was not admissible as it was not written by a ‘properly qualified expert‘.
The Court noted, however, that much of the evidence could likely be admitted simply as a matter of fact (as opposed to opinion).  In doing so the Court provided the following reasons:

[19] In this case, the subject matter of Mr. Andruschak’s Report is the plaintiff’s future earning capacity. However, Mr. Andruschak’s experience is properly viewed as concerning the earning possibilities for RVPs at Primerica generally; his experience is not in preparing objective reports on how such earning possibilities might manifest themselves in specific individual into the future.

[20] Thus, while having firsthand knowledge and experience in RVPs’ earning potential at Primerica, based on their actual earnings, which is information that may be useful to the Court, Mr. Andruschak does not offer particular expertise in the subject matter of the Report, purporting to prepare an objective estimate of future income and thus income loss for a specific person. As such, on the basis that Mr. Andruschak does not qualify as an expert, the Report cannot be admitted on that basis.

[21] Given my findings regarding Mr. Andruschak’s qualifications as an expert, it is unnecessary for me to canvass the defendant’s arguments regarding the Report’s formal compliance with the Rules. As I have said, however, much of the information in the report is potentially relevant and germane. I will leave it to counsel to review and discuss that matter amongst themselves. If required I will make further rulings on the proposed evidence. It may be that Mr. Andruschak’s evidence would be better presented simply viva voce with the assistance of a few graphs or charts.

The Diminished Earning Capacity Checklist


It is always a welcome development when a complex area of the law is judicially drilled down to point form.  Last month Mr. Justice Savage of the BC Supreme Court did so with resepect to the law of ‘diminished earning capacity‘.  In last month’s case (Parker v. Lemmon) the Court provided the following useful breakdown:

[42] The approach to such claims is well set out in the decision of Garson J.A. in Perren v. Lalari, 2010 BCCA 140 at paras. 25-32, which I summarize as follows:

(1) A plaintiff must first prove there is a real and substantial possibility of a future event leading to an income loss before the Court will embark on an assessment of the loss;

(2) A future or hypothetical possibility will be taken into consideration as long as it is a real and substantial possibility and not mere speculation;

(3) A plaintiff may be able to prove that there is a substantial possibility of a future income loss despite having returned to his or her employment;

(4) An inability to perform an occupation that is not a realistic alternative occupation is not proof of a future loss;

(5) It is not the loss of earnings but rather the loss of earning capacity for which compensation must be made;

(6) If the plaintiff discharges the burden of proof, then there must be quantification of that loss;

(7) Two available methods of quantifying the loss are (a) an earnings approach or (b) a capital asset approach;

(8) An earnings approach will be more useful when the loss is more easily measurable;

(9) The capital asset approach will be more useful when the loss is not easily measurable.

It is Common Sense that "Constant and Continuous Pain Takes its Toll"

Reasons for judgement were released today by the BC Court of Appeal making it clear that it is a matter of common sense that chronic pain can, over time, have a detrimental effect on a person’s ability to work.
In today’s case (Morlan v. Barrett) the Plaintiff was injured in a motor vehicle collision.  She was ultimately diagnosed with fibromyalgia.  At trial the Court awarded significant damages for diminished earning capacity despite the Plaintiff having no past loss of income.
The Defendant appealed arguing that the Judge erred in awarding these damages because the judge relied on “common experience that a person with a stable but persistent energy-draining condition will find it more difficult to continue working as he or she grows older“.  The Defendant argued that this was speculative and there was no evidence to suggest this is so.
While some of the Plaintiff’s damages were ultimately reduced, the BC Court of Appeal was quick to dismiss the above argument finding it was simply a matter of common sense that chronic pain takes its toll.  In doing so the Court provided the following reasons:
[41] Accepting that, to use the expression used at trial and at the hearing of this appeal, Ms. Morlan’s condition had “plateaued”, the fact remains that she would forever suffer from debilitating chronic pain along with headaches, symptoms that could be reduced, but not eliminated, by medication.  In other words, throughout each and every day of her life, Ms. Morlan would have to cope with some level of discomfort.  In my view, it was open to the trial judge to find—essentially as a matter of common sense—that constant and continuous pain takes its toll and that, over time, such pain will have a detrimental effect on a person’s ability to work, regardless of what accommodations an employer is prepared to make.

What's Sex Got to do With It? Gender and Damages for Diminished Earning Capacity


Imagine two individuals catastrophically injured due to the negligence of others.  The injuries will be totally disabling over the course of their lifetime.  The individuals are identical in every way except for their gender.  Statistics tell us that the man’s lifetime earnings absent injury would likely exceed those of the woman.  In these circumstances is it fair to award the woman less damages in a personal injury lawsuit for diminished earning capacity (future wage loss)?
The BC Court of Appeal addressed this issue in reasons for judgement released this week (Steinebach v. O’Brien).  In short the BC Court of Appeal held that while it is improper to reduce a female’s diminished earning capacity award based on “simply discriminatory” components, statistics as to the difference of lifetime earnings cannot wholly be ignored.  However, the Court went further and stated that it would be proper to offset this difference in part by adding an economic value to females statistically greater participation in child-rearing and housekeeping activities and addressing this in damages for pecuniary loss.   Mr. Justice Groberbam provided the following useful reasons for judgement:

[60] There are, in fact, a number of different components that account for the difference between women’s average earnings and those of men. Some are simply discriminatory – they reflect historical patterns of undervaluing the work that women do, and paying them less than men for similar work. The defendants appear to concede that such factors should not be used to reduce damage awards for infant female plaintiffs.

[61] It seems to me that such a concession is appropriate. It is no longer seen as acceptable that women should earn less than men simply by virtue of their sex. It would appear that such blatant discrimination is vanishing; in any event, the courts should not countenance such discrimination by incorporating it into damages awards.

[62] Others components of the difference between men’s and women’s average earnings may, indeed, reflect lifestyle choices. Of particular importance are patterns of earning related to childbearing and child-rearing. Women, to a much greater extent than men, leave the workforce or engage in part-time work so that they are able to bear and raise children.

[63] In MacCabe v. Westlock Roman Catholic Separate School District No. 110, 2001 ABCA 257, 96 Alta. L.R. (3d) 217, it was held that it was an error in principle for the trial judge not to have taken into account negative contingencies associated with childbirth and child-rearing in assessing future income loss for a female plaintiff who had indicated, before she suffered her injury, that she wished to have several children and would consider staying home with them…

[65] To some extent, I agree with the reasoning of the Alberta Court of Appeal. The fundamental purpose of tort damages is compensation of victims. It would be highly artificial to impose on that system of compensation a regime designed to deal with inequalities that are inherent in the lifestyle choices that people actually make.

[66] The difficulty I have with the approach in MacCabe, however, is that it treats child-rearing as an activity having no economic value. I do not believe that this reflects the reality for most parents who choose to withdraw from the paid workforce to raise children, or choose to take part-time work in preference to full-time work. Nor am I of the view that the law requires child-rearing to be treated as a non-economic activity.

[67] The value of child-rearing has long been recognized in the domain of family law. Spouses are treated as economic partners. Where one takes over child-rearing responsibilities that would otherwise have to be paid for or shared by a spouse, he or she is still seen as contributing to the family’s economic well-being, and this may have an effect on family asset division in the case of marital breakdown.

[68] This is not a mere quirk of family law, but the reality of most family units where one spouse withdraws from the workforce (or reduces his or her working hours) in order to raise children. Such a decision is rarely taken lightly, and is typically accompanied by a re-allocation of family resources rather than being a hardship suffered by the non-income-earning spouse alone.

[69] The burden of economic costs being a shared one, it can be misleading to represent it as simply being borne by the spouse who does not earn an income. Yet, for the purposes of earnings tables, this is exactly how the burden is reflected. For certain purposes, it would be more accurate to account for the shared burden by notionally transferring earnings from the income-earning partner to the partner who decreases his or her income in order to devote time and effort to child-rearing.

[70] Women are much more likely than men to leave the workforce temporarily or reduce their paid work in order to take on homemaking or child-rearing roles. The result is that earnings tables reflect the economic costs associated with such decisions as falling disproportionately on women. Earnings for men are thereby overstated, while those for women are understated.

[71] Even if it were to reject the idea of treating the costs associated with such decisions as shared ones, the Court would still have to adjust earnings table amounts to reflect the economic value of child-rearing. At one time, it may have been debatable whether a spouse who took on child-rearing or housekeeping responsibilities could claim compensation if, as a result of a tort, s/he became unable to continue to perform them (see Regina Graycar, “Hoovering as a Hobby and other Stories: Gendered Assessments of Personal Injury Damages” (1997) 31 U.B.C. L. Rev. 17). It is now established, however, that a person who undertakes housekeeping activities and is disabled from doing so can make a claim to pecuniary damages: Kroeker v. Jansen (1995), 123 D.L.R. (4th) 652, 4 B.C.L.R. (3d) 178 (B.C. C.A.).

[72] It seems to me that, in line with Kroeker, the courts must not presume that the absence of monetary recompense for an activity necessarily means that pecuniary damages will be unavailable to a plaintiff who is disabled from engaging in it. Because earnings tables fail to account for the value of such unpaid activities as child-rearing and housekeeping, they will tend to represent under-estimates of a plaintiff’s loss of future earnings.

Gazing at the Crystal Ball: ICBC Claims and Future Wage Loss


If you are injured through the fault of another and your injuries effect your ability to earn a living you can seek compensation for ‘diminished earning capacity‘.  Valuing this loss requires an assessment instead of a mathematical calculation.  Since these losses are ‘assessed‘ this gives rise to a wide latitude of legally justifiable awards. This latitude was discussed in Reasons for Judgement released yesterday by the BC Court of Appeal.
In yesterday’s case (Mackie v. Gruber) the Plaintiff was injured in a 2006 BC motor vehicle collision.  At trial the Plaintiff was awarded almost $250,000 including $130,000 for loss of future earning capacity.
Both the Plaintiff and ICBC appealed this award.  The Plaintiff argued it was too low claiming that the judge made a “palpable and over-riding error” in failing to consider the fair value of the Plaintiff’s entrepreneurial capacity.   ICBC appealed arguing that the award was too high since “the Plaintiff returned to work within two weeks of the accident and her past loss of earnings up to the date of trial was only $19,546“.
The BC Court of Appeal held that the trial judge did not err and dismissed both appeals.  In doing so the Court provided the following reasons addressing the wide latitude of permissible results in quantifying diminished earning capacity:

[18]         Quantifying an award for loss of future earning capacity is a notoriously difficult judicial task given the multitude of factors and future uncertainties at play. It is not a mathematical calculation, but a matter of assessment and judgment, guided by the basic principle that a plaintiff is entitled to be placed in the same position she would have been in but for the accident, and directed at producing an award that is reasonable and fair to all parties: Rosvold v. Dunlop, 2001 BCCA 1, 84 B.C.L.R. (3d) 158.

[19]         In Pallos, the case referred to by the trial judge, Mr. Justice Finch set out a number of approaches to this task:

[43]      The cases to which we were referred suggest various means of assigning a dollar value to the loss of capacity to earn income. One method is to postulate a minimum annual income loss for the plaintiff’s remaining years of work, to multiply the annual projected loss times the number of years remaining, and to calculate a present value of this sum. Another is to award the plaintiff’s entire annual income for one or more years. Another is to award the present value of some nominal percentage loss per annum applied against the plaintiff’s expected annual income. In the end, all of these methods seem equally arbitrary. It has, however, often been said that the difficulty of making a fair assessment of damages cannot relieve the court of its duty to do so. In all the circumstances, I would regard a fair award under this head to be the sum of $40,000.

[20]         I am not persuaded that the trial judge’s approach in this case resulted in an award that was unfair or unreasonable. In my view, both the appeal and cross-appeal must fail.

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ERIK
MAGRAKEN

Personal Injury Lawyer

When not writing the BC Injury Law Blog, Erik is the managing partner at MacIsaac & Company, based in Victoria, B.C. He is also involved with combative sports regulatory issues and authors the Combat Sports Law Blog.

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