- Legal term
- Economic Loss
- Jurisdiction
- Queensland, Australia
- Commonly arises in
- Workplace injury, motor vehicle accident, public liability, and medical negligence claims.
- Related concepts
- Damages · General Damages · Loss of Earning Capacity · Causation · Liability
Economic loss is a category of damages concerned with the financial consequences of an injury, particularly its effect on a person’s ability to earn income.
In Queensland personal injury matters, economic loss may include earnings lost because of an injury and the financial consequences of a reduced ability to work in the future.
Economic loss is distinct from general damages, which concern non-economic consequences such as pain, suffering, and loss of amenities of life. The assessment of economic loss depends on the available evidence and the legislation governing the particular claim.
Economic loss refers to financial loss resulting from an injury, particularly lost earnings and reduced earning capacity. In Queensland personal injury claims, it may include both past economic loss and future economic loss, subject to the applicable legal requirements.
What is economic loss?
Economic loss refers to financial loss caused by an injury. In personal injury claims, the term is commonly used to describe the effect of an injury on a person’s earnings and earning capacity.
For example, an injured person may be unable to work for a period, may return to work on reduced hours, or may no longer be able to undertake the same type of employment.
The resulting financial consequences may be relevant to a claim for economic loss, provided the necessary legal requirements are established.
Economic loss is generally considered in two categories: past economic loss and future economic loss.
What is past economic loss?
Past economic loss concerns earnings or earning capacity lost between the date of injury and the date at which damages are assessed.
This may include periods when a person was unable to work, worked reduced hours, or earned less because of injury-related restrictions.
The assessment may involve comparing what the person would probably have earned without the injury against what they actually earned or were capable of earning during the relevant period.
Employment records, payslips, tax returns, business records, and medical evidence may be relevant to this assessment.
What is future economic loss?
Future economic loss concerns the financial consequences of an injury on a person’s ability to earn income after the date damages are assessed.
An injury may affect future earning capacity in different ways. A person may be unable to return to their previous occupation, may need to work fewer hours, or may face restrictions that limit their employment opportunities.
The assessment involves considering what the person may reasonably have earned without the injury and how their earning capacity has been affected.
Because future events cannot be known with certainty, an assessment may also account for contingencies, including the possibility of changes in employment, health, and other circumstances unrelated to the injury.
What is the difference between lost earnings and loss of earning capacity?
Lost earnings and loss of earning capacity are closely related, but they are not identical.
Lost earnings
Income that a person would otherwise have received but did not earn because of the injury.
Loss of earning capacity
A reduction in a person’s ability to earn income through employment or other work, whether or not that reduction has already produced an identifiable loss of earnings.
Continuing employment
A person may continue earning income after an injury but have reduced capacity to perform particular duties, work additional hours, or pursue other employment opportunities.
Financial consequences
A reduction in earning capacity must be considered in terms of its actual or probable financial consequences when assessing damages.
A person does not necessarily need to be completely unable to work to have a reduced earning capacity. However, reduced physical or psychological capacity does not automatically establish a particular amount of economic loss. The financial consequences must also be assessed.
Can economic loss arise if a person is still working?
Yes. Continuing to work does not necessarily mean that an injury has had no effect on earning capacity.
For example, a person may return to employment but be restricted to lighter duties, reduced hours, or work that pays less than their previous occupation.
In some circumstances, a person may maintain their existing earnings while having reduced capacity to compete for other employment or pursue future opportunities.
Whether those circumstances support an award of economic loss depends on the evidence and the applicable legal principles.
How is economic loss assessed?
The assessment of economic loss involves considering the effect of the injury on the person’s ability to earn income.
Relevant considerations may include their employment history, qualifications, skills, pre-injury earnings, medical restrictions, likely career progression, and future employment prospects.
Where sufficient evidence is available, economic loss may be assessed by reference to identifiable earnings and likely future income.
Where the financial consequences cannot be calculated precisely, the court may need to make an assessment based on the available evidence and the applicable legal principles.
Queensland legislation also contains rules affecting the calculation of economic loss, including limits and adjustments that may apply in particular types of personal injury claims.
Examples of economic loss
Examples only
- A worker loses income while recovering from an injury and being unable to perform their usual duties.
- An injured person returns to work on reduced hours and earns less than before the injury.
- A tradesperson can no longer perform physically demanding work and moves into lower-paid employment.
- A person experiences ongoing restrictions that reduce their ability to pursue future employment opportunities.
- A self-employed person experiences reduced business income attributable to injury-related incapacity.
These examples illustrate circumstances in which economic loss may arise. Whether a loss is recoverable, and how it is assessed, depends on the evidence and applicable law.
What evidence may be relevant to economic loss?
Evidence relevant to economic loss may concern both the person’s financial circumstances and their ability to work.
- Payslips and employment records;
- Tax returns and income statements;
- Superannuation contribution records;
- Business and accounting records, where relevant;
- Medical records and specialist reports;
- Evidence concerning work restrictions and functional capacity;
- Employment contracts and information about working hours;
- Qualifications, training, and employment history;
- Vocational assessments or labour market evidence; and
- Other evidence relevant to past earnings and future earning capacity.
The evidence required will depend on the nature of the employment, the injury, and the issues in dispute.
What is the difference between economic loss and general damages?
Economic loss and general damages address different consequences of an injury.
Economic loss concerns financial consequences, particularly lost earnings and reduced earning capacity.
General damages concern recognised non-economic consequences, including pain and suffering and loss of amenities of life.
For example, a person may experience ongoing pain that affects their enjoyment of recreational activities. Those consequences may be relevant to general damages. If the same injury also prevents them from working or reduces their future earning capacity, that may be relevant to economic loss.
Both categories may form part of the assessment of damages arising from the same injury.
Relevant Queensland legislation
Economic loss in Queensland personal injury matters is assessed under the legal framework applicable to the particular claim.
Contains provisions governing the assessment of damages in many Queensland personal injury claims, including rules relevant to past and future economic loss.
Governs Queensland’s compulsory third party motor accident insurance scheme and contains provisions relevant to damages arising from motor vehicle accidents.
Governs Queensland workplace common law damages claims and contains specific rules affecting the assessment and recovery of economic loss.
The applicable rules may affect how past and future economic loss is calculated, including the treatment of earnings, future contingencies, and other relevant financial matters.
Frequently asked questions
What is economic loss in a personal injury claim?
What is the difference between past and future economic loss?
Can someone claim economic loss if they are still working?
Is loss of earning capacity the same as lost wages?
How is future economic loss calculated?
Are superannuation losses included in economic loss?
This article forms part of the YCL Compensation Law Dictionary, a collection of plain-English resources explaining legal concepts commonly encountered in Queensland compensation matters.
The dictionary is intended to help readers understand terminology used in workplace injury, motor vehicle accident, public liability, and medical negligence matters.