Legal Boot Camp (First Class): The Story of Pam – Maryland’s Law on Earning Capacity

This post was authored by Sarah Keogh and posted to The Eye Opener on May 26th, 2011.

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Wondering what “Legal Boot Camp” is all about? Check out our announcement, find out, come along, have some fun and learn some “law stuff” while you’re at it.   Please see our disclaimer at the end of this blog for a better understanding of the limitations of this series and our mission statement.

Class is now in session….

A 41-year-old woman, Pam, who was laid off from her job as a swimming instructor and swim coach in December of 2009, has been struggling to find a new position for the last few years. Even though Pam had been working as a swimming instructor full-time for the past 18 years, she felt that she needed to jump into a new career while waiting to find a new position as a swimming instructor and coach. Starting in October of 2010, her father died leaving her a rundown home that he had recently purchased with the intent of renovating it. Pam felt that she could put her physical fitness and knowledge of home aesthetics to work, not to mention the ideas she picked up watching renovations shows while unemployed, by renovating the home her father left and selling it for a profit. Since Pam thought that this could be her new vocation along with being a swim instructor, she formed a company for her new real estate and renovation business. She also bought a few additional run-down properties at auction. She started the renovations on the first house and completed a stunning new kitchen and had begun the demolition for a new bath by January of 2011. While still unemployed as a swimming instructor and before making any profit on her real estate business, Pam underwent a routine medical procedure at a local area hospital. Unfortunately, while still in the hospital following the procedure, she was severely injured and has been left paraplegic.

Now, Pam is considering filing a lawsuit as a result of the negligent care she received while hospitalized. Given the extent of her injuries, she will not be able to return to her job as a swimming instructor and she will have to hire workers if she is going to complete any additional renovations in the homes that she purchased. She may be able to work again, but not without significant assistance and not in either of her prior capacities. The question for today is what damages might she be able to claim in terms of a lost wages claim or a diminished earning capacity claim in Maryland.

Unemployment Not a Bar to Recovery for Loss of Earnings

In personal injury actions in Maryland, unemployment or self-employment without earning a profit at the time of injury are not a bar to recovery for loss of earning or loss of earning capability. In Ihrie v. Anthony, to Use of Gov’t Emp. Ins. Co., 205 Md. 296,107 A.2d 104 (1954), a woman was injured in a car accident while unemployed. She had previously worked in several jobs, both office positions and real estate work. Ihrie, 205 Md. at 303-304,107 A.2d at 107. After her injury, she was unable to continue to work in these types of positions, though there is some dispute about that. Id. at 304, 107 A.2d at 107. What is important to consider for Pam is that in the Ihrie case, the injured woman was allowed to recover. Id. at 309, 107 A.2d at 110.

The court held that “[t]he fact that the plaintiff was unemployed at the time of the accident and for several years prior thereto is not fatal to her right to recover.” Id. at 305, 107 A.2d at 107. In that case, like the one we are considering today, the woman who was injured had worked in the past and had a history of employment and wages to consider. The judges took the woman’s injuries and her past earning history into account in making their decision:

We are of the opinion that there was sufficient evidence of the permanence of the plaintiff’s injuries and of their impairing her earning power to warrant the submission of those issues to the jury and that there was sufficient evidence to serve the jury as a guide in measuring the extent of her loss of earnings.

Id. at 306-307, 107 A.2d 104, 108. Pam’s injuries and her past history of employment as a swim instructor should be presented at trial in her claim for loss of earnings. The past year and a half of unemployment should not bar her recovery since she has an eighteen-year history of employment to measure her loss of earnings for the future.

Can She Recover for Her Business?

What about Pam’s fledgling real estate business? She was working herself on the houses, which she will not be able to do moving forward. In order to complete the renovations and sell the homes, she will have to hire renovators at a significant expense. Since her business did not yet have a profit, she does not have the same sort of earnings history as she does for her past job as a swim instructor. However, she may still be able to recover for a loss of earning capacity.

In Anderson v. Litzenberg, 115 Md. App. 549, 694 A.2d 150 (1997), the court found that if someone is self-employed in a not yet profitable business at the time of their injury, they may still be able to recover for their loss of earning capacity. The case examined the situation of a man who was injured in an accident while he was partially self-employed in a real estate business that was not making a profit. Id. The court examined the question of loss of earning capacity. Id. The court defined impairment of earning capacity as the “lost capacity to earn, rather than what a plaintiff would have earned.” Id. at 572, 694 A.2d at 161 (internal citations omitted). The court explains that:

It is generally recognized that impairment of earning capacity seeks to compensate the plaintiff for a reduction in his ability to earn through his personal services. Once the fact of impaired earning capacity is established, the plaintiff must submit evidence so that the extent of the impairment can reasonably be determined. The prevailing proper measure of lost earning capacity is the difference between the amount that the plaintiff was capable of earning before his injury and that which he is capable of earning thereafter. Essentially, the plaintiff must establish the disparity between the market value of his services before and after the injury.

The objective is to place [the victim] in the same economic position as would have been … had the injury not occurred. We seek to accomplish this goal by a formula which … consists of determining what [plaintiff's] annual earning power would have been but for the injury, deducting what it will be thereafter, multiplying the result by [plaintiff's] expectancy, and discounting the product to present value.”

Id. at 572-73, 694 A.2d at 161-62 (internal citations omitted). This would be the formula that would need to be considered in Pam’s case. The necessary proof would need to be provided of Pam’s former earning capacity before her injury and whatever earning capacity she has with her injury. However, Anderson makes clear that the specificity of earning capacity need not be as great as that of lost earnings – as it would be nearly impossible to know for certain what sort of profit Pam might make in the future. See id.

There are many factors to consider when deciding whether to file a personal injury action for medical malpractice. One of the considerations is certainly whether the potential damages award makes it worthwhile to undertake the costs of litigating for the wrong inflicted upon the injured party. Have you ever been involved in a case involving lost earnings or loss of earning capacity in a personal injury case? Was there unemployment involved? This seems likely to be a more frequent question with the current economic realities in our country.

Related Posts:

Every bad outcome or injury does NOT a malpractice case make! Some practical advice.

Should you sue a healthcare provider? Some guidelines to help you decide.

 

Disclaimer: As is the case with all of our blogs and the writings posted on our website, we are not offering legal advice to our readers. This information in our series,Legal Boot Camp, is being presented in the hope that we can provide some education about the law in Maryland and the District of Columbia. The law in the field of personal injury (and particularly in our sub-specialty of medical malpractice) can be complex and confusing at times. Even in these two jurisdictions where we are licensed to practice, the laws and their interpretation by the courts can vary significantly. It is simply our hope that by presenting this series – Legal Boot Camp - that we can provide a better understanding of some legal principles that can come into play when bringing a civil claim or lawsuit for damages as a result of the wrongdoing of others.

For those who do not live in either Maryland or the Washington, D.C., we hope that we can at least raise some issues for you to consider when you speak with an attorney licensed to practice in the state in which you live. Many times the basic concepts of law are similar. We hope that by raising some of these issues applicable to Maryland and the District of Columbia, you will at least have a basic understanding of some terms and principles that may apply to your situation. Don’t be afraid to raise these issues with your attorney. Education – be it in law or medicine – is our main goal.

 

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