Maximize Your Economic Recovery

Loss of Income and Loss of Competitive Advantage Claims

The terms future loss of income/earnings and loss of competitive advantage (“LOCA”) have often been used interchangeably. LOCA is a vague term and has often been mischaracterized as a loss of future income, and vice versa. Both relate to a Plaintiff’s potential economic loss caused by their injuries. However, they are distinct terms with different evidentiary requirements.  It is important for Plaintiff’s Counsel to accurately advance the proper economic loss theory applicable to their case, as each will have different evidentiary requirements and may also impact recovery during settlement negotiations. Failing to accurately identify the correct income loss theory may result in the income claim not being left with the jury (aka… dismissed).

The purpose of this article is to define a loss of future income and LOCA and discuss the evidentiary requirements for each theory.   

Loss of Future Income versus Loss of Competitive Advantage

Loss of Future Income

The loss of future income claim typically arises when an individual has not returned to work because of her injuries caused by the defendant’s negligence. The future loss of income is often able to be calculated.

For example, consider a 30-year-old individual earning $45,000 a year with plans to retire at the age of 65 who is injured as a result of the defendant’s negligence. If that individual retires at the age of 30 on account of her injuries, then she will experience a loss of those earnings ($45,000), adjusted for inflation, to the age of 65.

Another example is an individual who was working full-time hours and is reduced to working part-time hours for the foreseeable future because of an injury. This individual would experience a loss of future income due to working less hours over his working life.

The future income loss claim is calculated by determining the Plaintiff’s average annual loss multiplied by the number of years the Plaintiff will experience the annual loss. Using the first example above, if a jury finds that the 30-year-old individual earning $45,000 per year would have worked to age 65 but will be unable to return to work because of her injuries, then the calculation is simple: 35 x 45,000 = 1,575,000. Using the second example above, if a 30-year-old Plaintiff can only work reduced hours due to his injuries and is expected to earn $10,000 less per annum until retirement at age 65, then the calculation is equally simple: 35 x 10,000 = $350,000.

However, additional factors must be considered. A jury or judge will also need to consider the present value of future losses and reduce the future loss accordingly. After all, money received as a lump-sum now is more valuable than money earned over the course of one’s lifetime (aka. “the time value of money”).

Additionally, a jury or judge will also need to consider other negative or positive contingencies, which are non-accident-related factors that might have impacted upon the Plaintiff’s employment and ability to earn income regardless of being injured.

Negative contingencies/factors reduce the future income loss calculation and may include the Plaintiff’s pre-accident health and how it might have negatively impacted the Plaintiff’s earnings regardless of the accident, or that the Plaintiff may have been prone to job loss in any event due to layoffs.

Positive contingencies increase the value of the future income loss and include wage increases or raises, increases in productivity and additional income earned from overtime.

Expert accountants will make factual assumptions to support their calculations such as the following: (i) the Plaintiff would have retired at age 65 but for the accident; (ii) the Plaintiff will not return to work and experience annual losses as a result of the accident to age 65. The assumptions and calculations will vary on case by case basis. It is the job of Plaintiff's counsel to gather and present evidence that support these assumptions including but not limited to medical evidence, vocational expert evidence, a functional abilities evaluation.

Key takeaways:

• Future income loss claims typically arise when the Plaintiff has not returned to work after being injured or is earning less income due to being injured.

• Damages for a loss of future income can typically be calculated by determining the Plaintiff’s annual loss calculated over the course of their expected working life but for her injuries, adjusted for present value and positive and negative contingencies.  

• Calculations rely on factual assumptions and Plaintiff's counsel should call evidence to support or establish these factual assumptions.

  
  

Loss of Competitive Advantage (LOCA)

By contrast, in most claims involving a loss competitive advantage, the injured Plaintiff has returned to their pre-accident level of work earning their pre-accident income despite being injured. The LOCA claim accounts for the risk that the Plaintiff will at some point in the future earn less or become unemployed because of his/her injuries. The LOCA claim is premised on the theory that the Plaintiff’s position in the labour market has been compromised because of his/her injuries (Ali v. Irfan, 2023, ONSC 3239):

“An award for loss of competitive advantage is usually awarded in circumstances where an injured party returns to her pre-accident level of income and receives compensation based on evidence that the plaintiff has a higher risk of being unemployed in the future as a result of the accident …” (Mundinger v. Ashton, 2019 ONSC 7161).

For example, consider a Plaintiff who worked as a mechanic and becomes injured in an accident but is able to return to work shortly after the accident earning their pre-accident levels of income. However, the Plaintiff is unable to bend and requires frequent breaks because of her injuries and her injuries may develop osteoarthritis in the future such that she may require reduced hours earning less.  The LOCA claim is meant to account for the future contingency that the Plaintiff will at some point experience diminished income due to her injury even if she is currently earning the same income before being injured.

A court may consider the following factors in determining whether there is a loss of competitive advantage:

1.      The plaintiff has been rendered less capable overall from earning income from all types of employment;

2.      The plaintiff is less marketable or attractive as an employee to potential employers;

3.      The plaintiff has lost the ability to take advantage of all job opportunities which might otherwise have been open to him, had he not been injured; and

4.      The plaintiff is less valuable to himself as a person capable of earning income in a competitive labour market (Conforti RE, 2012 ONSC 199 cited in Ali v. Irfan, 2023 ONSC 3239).

The Plaintiff may also advance a LOCA claim in addition to a future income loss claim. This may occur where the Plaintiff is currently earning less income because of his injuries and is expected to do so in the future (future income loss) AND there is also a risk that the Plaintiff will become unemployed or work less hours and earn even less in the future (LOCA).

Valuing the LOCA claim is usually a much less precise process than calculating the loss of future income claim. In some cases where the loss of competitive advantage claim is not amenable to calculation, a trial judge or jury may simply award a lump-sum figure that is “fair and reasonable” based on all the evidence. The figure must have an air of reality having regard to all the evidence (Earl v Lang, 1999 CanLII 18660 (ONCA)). In Earl v Lang, the trial judge awarded a lump sum of $50,000 for LOCA to account for the risk that the Plaintiff would lose income in the future because of his injuries.

However, in some cases, the LOCA claim may be amenable to calculation and Plaintiff’s counsel should obtain expert evidence. In certain circumstances, it may be helpful to retain an accountant who may reference StatsCan studies to support the argument that an injured Plaintiff will experience a reduction in future earnings compared to a non-injured worker and provide calculations.

In Mundinger v. Ashton (2019 ONSC 7161) the Plaintiff’s accounting expert provided evidence that an injured worker is more likely to experience decreased earnings than a non-injured worker and calculated a loss of competitive advantage based on a 10% reduction in annual earnings over the course of the Plaintiff’s working life. This LOCA claim was being advanced in addition to a loss of future income claim.   The trial judge allowed the Plaintiff’s claim for a loss of competitive advantage noting that the Plaintiff’s expert witness accountant “did not simply pull the 10% number out of his hat. The figure was based on the Statistics Canada Canadian Survey on Disability.”  

The LOCA claim is often controversial and divisive. Insurers and defence counsel are resistant to compensating Plaintiffs for a loss of competitive advantage because the claim is based on a contingency (future diminished earnings) that may never occur. Where the Plaintiff has returned to his pre-accident levels of work and earns his pre-accident levels of income, it is typical for the defence to dismiss a claim for future economic losses.

However, such a position will unfairly prejudice the plaintiff with injuries that are likely to worsen over time and may impact the Plaintiff’s future employability. Further, such a position is undermined by judicial decisions such as Gilbert v. South (2014), where the Plaintiff returned to work after an accident and did not suffer any reduced earnings at the time of trial but was nevertheless awarded $250,000 for a loss of competitive advantage to reflect the risk that the Plaintiff might be unemployed or earn less in the future. In another case, a judge awarded $400,000 for a LOCA (St. Prix-Alexander v. Home Depot of Canada Inc.), however such an award is rare for LOCA.

As such, it is important for Plaintiff’s counsel to identify and vigorously pursue all potential claims for future economic losses that are available to their client. Failing to do so will result in their client being undercompensated.

Key Takeaways:

• A LOCA claim is typically advanced where a Plaintiff has returned to work after being injured and is earning an amount similar to their pre-injury income.

• A LOCA claim is based on the theory that the Plaintiff’s position in the labour market has been compromised because of his/her injuries.

• A LOCA claim is intended to address the future risk/contingency that a Plaintiff may become unemployed or less employable and earn a diminished income.

• A LOCA claim can be claimed in addition to a loss of future income claim.

• A LOCA claim may be awarded as a “lump-sum” without resort to calculations, but such an award must be supported by the evidence. A LOCA claim may be amenable to calculation in certain circumstances. Calculations will rely on factual assumptions and Plaintiff's counsel should call evidence to support these assumptions.

• Just because a Plaintiff has returned to work and is earning their pre-accident income does not mean they have not sustained an economic loss.

Evidentiary Requirements for Future Income Loss and Loss of Competitive Advantage

First, future losses such as a future loss of income or LOCA are to be proven based on a real and substantial possibility. In other words, a Plaintiff must prove that there is a real and substantial possibility such losses will occur. By contrast, past events and facts must be proven on the more onerous standard of a balance of probabilities (ie… it is likely or more than 50% likely that “x” occurred).

In jury trials, there must be reasonable evidence to allow a claim to be decided by the jury. There must be sufficient evidence such that a properly instructed jury could make a finding on the issue without speculating (Rolfe at para 6). If the lack of evidence to support a claim will require the jury to speculate, then the claim will not be left with the jury and will be dismissed.  A judge presiding over the jury trial will determine if there is sufficient evidence for a claim to be left with the jury.  The judge will not weigh or assess the evidence but will take the Plaintiff’s case at its best and ask whether there is sufficient evidence that will allow the jury to decide on the issue (Ali v Irfan, 2023 ONSC 3239).  

Loss of Future Income - Evidentiary Requirements

While the Plaintiff is not required to produce expert accounting evidence to recover a loss of future income (Fiddler v. Chiavetti, 2010 ONCA 210), it is customary for such expert evidence to be produced in support of a future income loss claim. Further, calling accounting or actuarial expert evidence to calculate future income losses is always recommended. This evidence makes it easier for the trier of fact, whether it be a judge or jury, to assess and calculate the future income loss thereby maximizing the Plaintiff’s chance of recovery.  Accountants will be able to calculate the present value of future losses as well as consider the impact of negative and positive contingencies on those calculations and explain these to the trier of fact. Such evidence is typically obtained in advance of mediation, a process by which the parties attempt to settle the claim through the exchange of offers.

Where the Plaintiff is advancing a claim for a loss future income, Plaintiff’s counsel takes a major risk in not obtaining expert accounting/actuarial evidence.

The Rolfe v. Young decision provides an example of when the lack of evidence relating to a future income loss claim would require the jury to speculate, such that the claim was dismissed.  

The Plaintiff was 10 years old at the time of the accident in 2011 and was 24 at the time of trial, which occurred in 2025. After the accident, he went on to graduate from high school in 2021 and worked part-time during high school. He then began working 20-35 hours per week in restaurants completing food prep. There was some evidence that the Plaintiff had limitations for lifting, bending, standing or sitting for prolonged periods. The Plaintiff also filed his T4 tax returns.

In Rolfe, the Plaintiff claimed a loss of future income on the basis that he may have to take an earlier retirement due to his injuries. Arguably, this claim is better characterized as a LOCA claim.

In dismissing the claim for a future loss of income, the trial judge stated that the jury would have to engage in “pure speculation” to determine the Plaintiff’s loss of future income.

The Plaintiff presented no evidence with respect to his anticipated age of retirement had the accident not occurred. There was no expert accounting evidence, no expert vocational evidence, nor was there a functional abilities evaluation. The Plaintiff provided no evidence of his plans for ongoing education or employment. There was no evidence as to how early the Plaintiff may have to retire due to his injuries. There was no evidence as to what the Plaintiff’s income might be at the time of the alleged early retirement.

The jury would essentially have to guess when the Plaintiff would have retired but for his injuries, at what age he will need to retire on account of his injuries, and his anticipated income at the age of retirement in order to determine the present value of his future income loss based on an alleged early retirement.

Evidence must be led to prove each element of a claim in order for the claim to be left with the jury. With respect to future income loss claims, expert medical evidence, accounting evidence, and in some cases expert vocational evidence should be led to clarify the claim.

Loss of Competitive Advantage Evidentiary Requirements

The evidentiary requirements for the loss of competitive advantage claim to be left with the jury are less stringent than those for a future income loss claim.  

In the Rolfe v. Young case, although the Plaintiff’s loss of future income claim was too speculative to be left with the jury, the trial judge permitted the Plaintiff’s claim for a loss of competitive advantage to be decided by the jury. In permitting the LOCA claim to be left with the jury, the trial judge stated that there was expert evidence that the Plaintiff may have some limitations with respect to lifting, bending, and standing or sitting for prolonged periods. Such evidence was found to be sufficient in proving that the Plaintiff’s position in the labour has been compromised and that he is less valuable and less competitive in the marketplace. The trial judge further noted that the caselaw required a low threshold of evidence to find that a LOCA claim may be left with a jury.

In Ali v. Irfan, the trial judge permitted the LOCA claim to be left with a jury where there was no expert evidence from a medical expert as to how the Plaintiff’s psychological injuries may impact her ability to work, and no evidence from a financial expert as to how to calculate the impact of those injuries on her employability. The only evidence to support the LOCA claim was:

1. The Plaintiff’s evidence, corroborated by the testimony of her father, that she has been having ongoing psychological problems since the accident.

   
   

2. The Plaintiff’s evidence that occasional teachers are paid $125.00 for a half day’s work and $250.00 for a full-day’s work.  LTO’s on the other hand are, on the Plaintiff’s evidence, paid $300-$320 per day.  The principal of Mackville Public School, Robin Perri, testified that LTO’s are also entitled to benefits.

   
   

3. The Plaintiff’s evidence that she was an occasional teacher and she interviewed for the more lucrative LTO position but was not comfortable with the position because of her anxiety as a result of the accident.

   
   

The Plaintiff’s evidence as to her psychological injuries after the accident was actually contradicted by her own family doctor’s clinical notes.

Nevertheless, the trial judge permitted the LOCA claim to be left with the jury and stated: “in this case the evidence to support the Plaintiff’s claim is admittedly very thin. However, it is not my role to weigh the evidence.” Despite the minimal evidence put forward by the Plaintiff, there was sufficient evidence such that a jury could decide upon and make an award for LOCA. This case illustrates that the evidentiary threshold for a LOCA claim to be left with the jury is quite low.

However, just because there is sufficient evidence to leave a LOCA claim or loss of future income claim with the jury does not necessarily mean that the jury will make such an award. The jury may reject certain pieces of evidence and expert evidence. In the Ali v. Irfan case, the jury rejected the Plaintiff’s LOCA claim and awarded $0 for this head of damage, likely because there was little evidence supporting this head of damage.  

For this reason, experienced Plaintiff’s counsel will advance the best possible evidence and case to support a claim for future economic losses, and not just enough evidence to meet the evidentiary threshold permitting such a claim to be left with the jury.

To support the LOCA claim, Plaintiff’s counsel should lead medical expert evidence discussing how the Plaintiff’s injuries will impact the Plaintiff’s employability and should strongly consider accounting evidence where the LOCA claim may be calculable. The burden is on the Plaintiff to prove his/her claims. Plaintiff’s counsel must lead evidence to present the claims as clearly and logically as possible.

Finally, it must be remembered that the Defendant may be entitled to a deduction for any collateral benefits received from other sources such as LTDs, IRBs, CPP disability. This is particularly true with respect to motor vehicle accident cases. These deductions are discussed further in our article: “What if I Cannot Work After a Car Accident? What Benefits Can I receive?” Again, expert accounting evidence is crucial to calculating the loss of future income and applying deductions for other benefits received.

The lawyers at Hillier & Hillier have significant experience gathering and presenting evidence to support and successfully advance claims for a loss of future income and loss of competitive advantage. If you have been injured as a result of someone’s negligence, call Hillier & Hillier at 905 453 8636 for a FREE consultation.