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Part 1: How much is my claim worth? – Future Economic Loss

Emily Billiau


Most people have heard of personal injury claims but very few would understand what quantum is.

…and they really should – behind liability, it's the second most significant determinant of a successful claim.​

You’d be forgiven for thinking quantum has something to do with physics. But it nowhere near as difficult to wrap your head around.

Simply put, quantum means an amount. So, it refers to the amount of compensation a person will receive for a personal injury.

As we learn through this four-part series, there are a number of areas under which you can determine what your quantum is and in turn discover how much your claim is worth.

The first topic we will be covering is a person's future economic loss. This area often makes up the most significant percentage of your quantum.

[RELATED: Calculate your Future Economic Loss using our worksheet here)

What is Future Economic Loss?

Future Economic Loss relates to an injured person’s ability (or inability) to work after an accident.

Simply, it covers a person's reduced income.

For example, this area of compensation might cover a person’s:

  • Total inability to return to work
  • Fewer hours or a move to part-time work
  • Change in duties or job
  • Inability to progress career through promotions or job changes

..up until they retire.

How much can you get for it?

The amount awarded for future economic loss varies considerably.

It depends on five major factors including:

  • The extent of injuries and their lasting impact on the ability to continue working
  • Pre-employment history
  • Likely career trajectory
  • The ability to prove the above three factors; and
  • Age at trial or settlement (how far you are away from retirement).

Example 1 – Bicycle-car accident, long-term soft tissue injury

Olly was on a bike when a car switches lanes and pulls in front of him. Olly runs into the back of the car, falls off his bike and hits the ground.  

Hospital X-rays show ligament damage to his injured ankle and a cracked left wrist, which is put in a cast. Despite having worn a helmet, Olly has a concussion and is kept in hospital overnight. Olly is advised to begin a physical therapy on his ankle and wrist once its removed from its cast. 

He misses out on a week of work. 

Two months of physical therapy has had little impact on his ankle.  He found he had continuing pain for many months but was mostly able to work through it.

At age 29, he has most of his working career as a Teacher ahead of him. While he never lost the ability work (beyond his week off), Olly felt he lost work opportunities because of his continual pain meant he couldn't go the extra mile in his job. This reduced the likelihood he would be picked for new job or promotions. As it's difficult to quantify missed job opportunities, Olly's lost future earning capacity couldn't be calculated mathematically.

As a result, the judge awarded a small estimated figure to compensate his loss. Olly was awarded $40,000 in lost future economic loss. This is largely due to his young age. Otherwise, his injury has had only minor impact on his future economic loss. 

Example 2 – T-Bone collision, permanent hard injury

Jane cycling to work one morning. As she rode alongside a row of parked cars the door of one car unexpectedly flew open. Jane was thrown over the front of her bike and head first into the door. Jane suffered severe whiplash, ligament damage to her left knee and broke both wrists as a result of the incident. Jane required surgery to stabilise her wrist fractures which required her to take three months off work.

Jane was 35 and worked a registered nurse. She was in line for promotions to managerial positions. Because of the injuries suffered in the accident, she has difficulties working for long periods of time. This means she is unable to put in the hours required for her promotion. She has also found that she struggles to complete her clinical duties and cannot accept overtime hours.

As Jane’s weekly income is reduced (because she cannot accept overtime), she is $300 worse off every week. Adding to that, had Jane been successful in her promotions she would have added $500 to her weekly wage.  Combining this and multiplying it by the number of weeks until her retirement, Jane's economic loss totalled $657,600.

What factors influence it?

How is someone's future loss of earnings calculated for personal injury claims?

Someone's future loss is usually calculated by looking at four things.

  • 1
    A person’s pre-injury weekly salary is compared with their pay at trial (or settlement). This difference will fairly quantity any reductions in work hours. Understanding weekly changes in your wage is important, particularly, if the injured person has had to move to part-time work or is no longer able to take overtime work. 
  • 2
    The person's maximum salary over the course of their career is determined. This decision will quantify any lost job opportunities.  A difference between maximum earning potential and the pre-injury wage is determined.
  • 3
    An amount is then deducted from your weekly earnings to compensate for the fact you are likely to accumulate interest on your salary. This deduction is known as applying discount rate (see below). In Queensland, we use 5% multiplier. 
  • 4
    Finally, the superannuation you would have lost is accounted for based on your maximum earning potential.

How future economic loss is calculated sounds complex, but if you follow our worksheet it breaks down the steps into easy to understand (and action) summaries.

Want to know how to calculate your future economic loss?

Our FREE guide shares the secret formula insurance companies use to discover what your future earning capacity. 

  • check
    step-by-step guide
  • check
    clear examples
  • check
    gives you evidence to support your claim that WILL stand up in Court.

Not downloading the guide may be the most expensive mistake of your life. 

In exceptional circumstances, calculations cannot be made.

When a person’s earning capacity is difficult to determine (such as in children’s cases, or where a person hasn’t taken time off work) a court will award a global sum.

This a blanket award of money determined by the trial judge. Such a case was evidence in example 1 above.

More on discount tables...

The discount rate relates to the rate of return that may be expected on money awarded in a lump sum settlement and is expressed as a percentage per annum.

A discount rate of 5% implies an expectation that the money, when invested, will achieve a return of 5% per annum.

Discount rates are used when assessing someone's future economic loss.

They are essential in determining how much needs to be paid now to compensate for amounts that would have been received in the future.

[RELATED: Calculate your Future Economic Loss using our worksheet here)

What evidence will you need?

Critical pieces of evidence required to prove your future economic loss include:

  • Pay summaries
  • Salary estimates or your current and future jobs
  • Examples of colleagues who have progressed and their wages
  • Average retirement age in your industry
  • Medical reports on your likelihood of returning to work
  • Pre-injury medical history

Next Steps...

Like the saying – don’t put all your eggs in one basket - don’t forget to read the rest of the articles in this series on the other areas of compensation available to you.

Part 2: How much is my claim worth? – Care Costs
Emily Billiau Principal Care costs can be the single most significant component of a claim.  Particularly when the injured party[...]
Part 3: How much is my claim worth? – Medical Expenses
Emily Billiau Principal Medical Expenses are a crucial part of all claims for compensation. Why? Well apart from the obvious[...]
Part 4: How much is my claim worth? – Pain & Suffering
Emily Billiau Principal It is a significant part of a compensation claim. Particularly for those who cannot claim wage losses,[...]

Written by Emily Billiau | Principal


Calculating lost income: Why you should call in an expert

An injury often leads to time away from work. Whether you’re an employee, a contractor or a business owner; this usually means economic loss.

Compensation claims can cover for this loss, but figuring out how much to claim is not always easy. Find out why the Judge rejected Gary’s calculation (in Land v Dhaliwal & Anor [2012]), and how you can avoid the same outcome.

Gary's Story

Let me introduce you to Gary Land.

Gary had an interesting work history. Like many people, he’d tried a few things. He’d worked as a fitter and turner, a barman, a go-go dancer and a cleaner. He’d studied, he’d travelled, and he’d owned a doughnut business.

About 4 years prior, he became involved with bicycle shops – as an owner and also a mechanic. One year before the accident, Gary purchased the bike shop he was working at and took over the running of the business.

Gary was looking forward to building his business to support his family.

Gary's Dream

I have finally found something I am passionate about and good at. 
I am working hard to make this business profitable for me and my future family.
My wife and I are expecting our first daughter this year so I am really pulling out all the stops now.

Then the accident happened. Gary was cycling along Airport Drive in Eagle Farm, Brisbane when a taxi driver pulled in front of him. The driver came to an immediate and sudden stop. Gary was flung over the boot of the car. 

Gary suffered an extensive back injury and aggravated an existing knee injury. 

He underwent several surgical procedures to both his back and knee but was left with chronic pain.

After the accident, Gary couldn’t return to his normal life. He couldn’t stand for long periods, struggled to sleep, and suffered memory difficulties.

Gary was frustrated.

He struggled to work and do simple everyday tasks he had done before the accident.

Gary’s frustration started affecting his relationships and work. He could no longer remain patient with customers and he had to employ more staff to cover the work he couldn’t do.

With mounting medical bills and more stress at work, Gary was forced to sell his business. His dream of being able to provide his family with a stable income was now impossible.

He felt like he had let everyone down.

A cyclist shouldn't be left in a financial hole because a careless driver failed to look. 

The government recognises this and provide people like Gary an avenue to access compensation to cover their financial hardship, known as Compulsory Third Party (CTP) scheme.

It also provides an opportunity for cyclists to hold motorists accountable for their negligent acts.

CTP Insurance Scheme

Click the term to reveal it's definition. 

CTP Scheme

Gary brought a personal injury claim to compensate him for his injuries and the effect they had on his life. He brought his claim against the taxi driver and the taxi driver's compulsory third party (CTP) insurer. His claim consisted of the following components:

  • General damages (for pain and suffering)
  • Economic loss (for financial loss he had already suffered, and would suffer in the future)
  • Out-of-pocket expenses (for treatment and medication he had paid for, and the costs of travelling for that treatment)
  • minus
    Future treatment (for the costs of surgery and medication he would need in the future)

Most parts of his claim were simple. But as Gary soon found out, putting a dollar figure on the impact the injuries have had on his life was harder than he thought.

Because of his varied and complex work history, Gary’s assessment for economic loss was a contentious issue at trial.

For Gary's claim to succeed he had to establish how much income he had lost. 

How do you calculate economic loss?

To calculate Gary’s economic loss, the Judge had to calculate:

  • Pre-accident earning capacity: What would Gary have earned if the accident never happened?
  • Post-accident earning capacity: What has Gary earned, and what is he likely to earn, now that the accident has happened?

Gary’s economic loss is the difference between those two amounts.

The tricky part was figuring out what those two amounts were. Gary and the defendants had very different ideas about this.

Gary's Calculation

Gary relied on a chartered accountant to calculate his loss. The accountant estimated Gary’s economic loss to be over $750,000.

The accountant came to this figure by looking at the profit of Gary’s bike shop before the accident, and the profit of Gary’s bike fitting business some years after the accident.

The accountant calculated the difference between those two figures and claimed that that loss would occur every year until Gary’s retirement.

The Judge did not like this approach for a few reasons:

  • Gar​​​​y’s potential earnings were not necessarily equal to the profits of his shop or business;
  • There is no reason why the bike shop profits were a good indicator of Gary’s pre-accident earning capacity;
  • minus
    There is no reason why the business profits were a good indicator of Gary’s post-accident earning capacity.

The Judge rejected Gary’s calculation, saying:

Judge Daubney

“The methodology adopted by [the accountant]…suffers from…difficulties… accordingly, I do not accept the bases advanced by [Gary].”

The Insurer's Calculation

The defendants engaged a forensic accountant to properly analyse Gary’s earning capacities.

The forensic accountant provided an expert report and later gave evidence at trial.

The forensic accountant focused her calculations around the value of Gary’s labour. She figured out what this was by looking at what Gary paid his staff to fill in for him. Or in essence, how much Gary would have earned working for another company as a retail manager and bike mechanic.

The forensic accountant went into great detail and explored many hypothetical scenarios. Importantly, all of these scenarios matched how the Courts typically assess economic loss.

The Judge liked the forensic accountant’s calculations, saying:

Judge Daubney

“…the methodology employed by [the forensic accountant] is consistent…with the relevant principles for the assessment of economic loss.”

Gary lost his argument.

The Judge adopted the forensic accountant’s approach and awarded Gary just under $250,000 for economic loss.

This was $500,000 less than what Gary was claiming.

Gary's case is a timely reminder of the importance of arming yourself with sound, expert evidence. 

Gary was smart enough to know he needed help – but he called in an accountant who wasn’t equipped for the job.

The defendants were smarter and called in an expert in this area of accounting – one who was familiar with how the courts expect economic loss to be calculated. As a result, she came up with a much more compelling argument, provided multiple alternatives to cover her bases and won.

Even if an injured person’s career path is more straight-forward than Gary’s, it’s still difficult to predict what their earning capacity might have been and what it is now. There’s no crystal ball that can show us both scenarios.

To properly calculate economic loss, there needs to be careful analysis of things like:

  • Work history;
  • Education and qualifications;
  • minus
    Career goals (and the likelihood of those goals being met);
  • minus
    Earning potential;
  • minus
    Career trajectory (before and after the accident).

Asking an expert to do this analysis can make a lot of difference. In Gary’s case, it was a $500,000 difference.

Learn from Gary’s mistake. If in doubt, back up your claim with an expert – preferably one that knows the Court system.

Written by Verity Smith | Law Graduate