Future Income Loss and Loss of Earning Capacity in Ontario Personal Injury Claims: The Legal Test

In Ontario, a plaintiff claiming future income loss must prove that an injury caused by the defendant creates a real and substantial possibility of future financial loss. The plaintiff does not need to prove that the loss is more likely than not, but the claim must be supported by evidence showing impaired earning capacity, reduced future earnings or a genuine employment disadvantage.

A person does not have to be entirely unable to work in order to have a viable future income loss claim.

A person could have returned to work after an injury but lost earning capacity. A carpenter who returns on lighter duties, a nurse who can no longer manage full shifts, a business owner who gives up the physically demanding part of the operation, or a professional who remains employed but cannot sustain the same pace or advancement path can all have a future economic loss.

Usually, for Ontario personal injury lawyers, the more difficult problem is whether the evidence establishes a real and substantial possibility. In injury litigation, it is common to see medical evidence of ongoing symptoms followed by an assumption that future income loss must follow.

However, the plaintiff will need to connect the injury to a financial consequence: lower earnings, fewer available jobs, loss of overtime, impaired advancement, dependence on accommodation, increased vulnerability if employment ends, or a supported risk of leaving the workforce earlier than would otherwise have occurred.

That is one reason future income loss is such an important area of work for personal injury lawyers in Ontario. Claims needs to be built around the reality of a plaintiff’s working life, not simply appended to a damages calculation.

The claim is for impaired earning capacity

Sometimes the loss is straightforward. A person earned $90,000 per year in a physical job before the injury, cannot return to that work and is now capable only of employment paying $50,000. There could still be disputes over prognosis, residual capacity, retirement age, contingencies and present value, but the primary theory of loss is simple.

Usually cases where insurance companies and plaintiffs are less able to agree on an approach to future income loss involve more nuanced circumstances. Sometimes the income is the same as before, or even higher. But maybe the injury has narrowed the person’s employment future.

A worker might remain at the same salary because an employer has quietly removed heavier duties and demonstrate a degree of benevolence. Someone could be staying employed by refusing overtime, abandoning a promotion path and using all available energy to do the bare minimum to get through the workday. A self-employed person might continue receiving income while relying more heavily on staff or giving up further business expansions. Sometimes, a young person loses access to a career before there is a stable earnings history to compare pre and post accident statuses.

Ontario courts refer to these claims in different ways, including future income loss, loss of earning capacity and loss of competitive advantage. The labels are not particularly important. The focus should be on whether the the injury has reduced the plaintiff’s ability to earn income in the future.

The Supreme Court of Canada recognized this approach in M.B. v. British Columbia. The Court referred to the established principle that earning capacity is an asset. Its value is not abstract; it is assessed through the income that the plaintiff’s capacity would have produced over time.

The test for future income loss

A plaintiff cannot prove the future with the same level of certainty that they can prove wages already missed. No one knows with certainty whether a person will later lose a job, require reduced hours, fail to receive a promotion, leave a business, need retraining or retire early.

In Athey v. Leonati, the Supreme Court of Canada held that future or hypothetical possibilities are considered where they are a real and substantial possibility, rather than mere speculation. Once a future risk crosses that threshold, its value reflects the likelihood of the event and the amount of loss it would cause.

The Ontario Court of Appeal applied that approach to future income loss in Lazare v. Harvey. The trial judge told the jury that Ms. Lazare did not have to prove, on a balance of probabilities, that her earning capacity would be reduced in the future. She had to establish a real and substantial risk or possibility of future income loss arising from her injuries. The Court of Appeal accepted that instruction as correct.

This does not mean any possible loss is compensable. A plaintiff who says, “I might have difficulty working someday,” has not proven a claim. The court needs evidence showing what employment risk has been created and why it is connected to the injury.

Causation is still proven on the ordinary civil standard

Before proceeding to the easier future income loss test, the Plaintiff still must first prove that the defendant caused the relevant injury. That issue is decided on the ordinary civil standard: balance of probabilities.

Only after the accident-caused injury has been established does the court value the possibility of future financial consequences under the real-and-substantial-possibility approach.

A plaintiff cannot use the lower future-loss threshold to avoid proving that the accident caused the impairment relied on for the income claim. If the alleged work restriction is said to arise from a back injury, concussion, psychological condition or chronic pain syndrome, the causal connection between the incident and that condition still needs to be established.

Once that is done, the court asks a different question: what supported financial risk does that impairment create over the plaintiff’s remaining working life?

Lazare v. Harvey: serious injury, no future income award

Lazare v. Harvey remains a warning for plaintiff personal injury lawyers because the plaintiff plainly had a serious injury, yet did not receive future income damages.

Ms. Lazare was struck as a pedestrian and developed permanent lower-leg consequences. The jury awarded substantial damages for pain and suffering and past income loss. It awarded nothing for future income loss.

A majority of the Court of Appeal upheld that result. The jury had evidence that Ms. Lazare returned to work successfully, obtained promotions and was viewed favourably by her employer. The majority held that the jury was entitled to conclude that, despite the seriousness of the injury, employment disadvantage had not been established.

Laskin J.A. disagreed. In dissent, he would have awarded $480,000 for future income loss. That disagreement between top appellate judges highlights the risk to both sides with these claims.

Loss of competitive advantage where the plaintiff is still working

A plaintiff does not always have a future wage shortfall that can be calculated year by year. Sometimes the loss lies in increased vulnerability. A person remains employed but would be at a significant disadvantage if required to find new work. Another person can continue in a current role but has lost access to the physical, cognitive or interpersonal demands required for comparable positions elsewhere.

This is the setting in which a claim for loss of competitive advantage arises. The plaintiff is claiming that the injury has weakened an economic asset: the ability to compete and remain secure in the labour market.

Lyng v. Ontario Place Corporation is a recent Ontario Court of Appeal decision where that claim succeeded. Mr. Lyng sustained a serious knee injury. His orthopedic surgeon gave evidence from which the trial judge could find a supported risk of future complications involving the reconstructed ACL, the genuine possibility of further surgery and consequences for his ability to earn income or return to physically demanding work.

Ontario Place argued that the award was speculative, particularly because Mr. Lyng had moved away from plumbing into largely sales-related work. The Court of Appeal rejected that argument and upheld the award. Mr. Lyng remained a trained plumber, and the future risk to his knee had economic significance because it affected the work he remained qualified to perform.

The case is useful because it shows what is needed. The plaintiff did not have to prove that his future employment loss was certain. He did need evidence identifying the future risk and linking it to work.

A competitive-advantage award cannot duplicate the same income loss

Loss of competitive advantage is a form of future income loss. It is not an additional amount automatically added once a plaintiff has already received compensation for reduced future earnings.

If the evidence supports a direct calculation — for example, the plaintiff is expected to earn $40,000 less per year because they cannot return to their former occupation — the future-income award can account for that loss. This is a simpler scenario.

However, when the plaintiff has no present wage difference but is now less secure in the labour market, a competitive-advantage assessment can address the increased risk that the injury will cause financial loss later.

There can sometimes be cases where both concepts arise, but the losses must be kept separate. A plaintiff expected to earn less in a new occupation can also face an additional, distinct risk of future unemployment because of ongoing restrictions. That second risk cannot simply repeat a contingency already built into the first calculation.

Ali v. Irfan: proof of injury is not proof of employment loss

Ali v. Irfan provides a contrasting example to Lyng. The plaintiff had been injured in a motor vehicle accident. The jury accepted that she continued to suffer from a psychological or physical condition caused or contributed to by the accident. It nevertheless rejected her claim for loss of competitive advantage. The Court of Appeal upheld the verdict.

The Court noted that the jury was entitled to consider her prior medical history, subsequent accidents and the employment evidence. No medical evidence was called at trial, and the employer evidence did not support the claim that her work trajectory had been adversely affected.

The decision does not say that every loss-of-competitive-advantage claim requires a medical expert. The available proof will depend on the case. But it confirms the central problem with a weak future-income claim: proof that the plaintiff remains injured is not enough if the evidence does not show employment disadvantage.

Read together, Lyng and Ali provide a practical contrast. In Lyng, evidence connected a future medical risk to the plaintiff’s capacity for physical work. In Ali, the jury was entitled to find that the employment loss had not been proven, despite accepting ongoing injury.

Returning to work can hide a loss rather than disprove one

A plaintiff who has returned to the same position, performs well, has no accommodation, continues advancing and earns more than before will need strong evidence to establish a future economic loss.

However, plaintiffs will often return to work because they have financial obligations, and are able to avoid heavier tasks, stop taking overtimekept in positions by employers who are unusually supportive, miss time, and unduly rely on co-workers.

A future-income claim in that setting needs to demonstrate what work has been lost? What accommodation is required? What career step was abandoned? What would happen if the existing employment ended? Has attendance become unreliable? Is the plaintiff likely to leave the workforce earlier?

Those questions turn a vague assertion into a claim capable of being assessed.

Building the evidentiary record

The case succeeds or fails on the evidence supporting the income loss assumptions. The plaintiff’s own evidence usually provides the starting point: the work they performed before the injury, the education or training underway, the duties they can no longer complete, the effect of symptoms on attendance and productivity, and the opportunities they have given up.

Evidence from employers and co-workers can be crucial, especially where the plaintiff has returned to work. An employer can speak to altered duties, accommodation, missed shifts, lost overtime, performance concerns, promotion prospects or the fragility of the plaintiff’s current position. In Lazare and Ali, employer evidence was central to the result.

Medical evidence ideally addresses function. A chronic pain diagnosis alone does not explain whether a person can remain in a trade. The useful evidence deals with restrictions and endurance: lifting, standing, travel, concentration, pace, attendance, stress tolerance, memory and the ability to perform work consistently over a full week.

Some cases need vocational evidence. Where the dispute is about remaining occupations, labour-market competitiveness, retraining or employability with restrictions, a vocational assessment can connect the medical restrictions to work options.

Accounting evidence comes later in the analysis. It can quantify a supported scenario, account for contingencies and calculate present value. It cannot create the scenario.

How these claims are tested at discovery

A future income-loss claim is often exposed or strengthened during examination for discovery. Defence counsel will usually ask about work before the injury, earnings, job duties, overtime, promotion plans, education, business activity, prior disability history, return-to-work efforts, accommodations, job applications and the basis for the future-loss claim.

A plaintiff who gives precise evidence — that they returned but cannot perform certain duties, lost overtime, depend on accommodation or face a supported risk if the job ends — presents a much more coherent claim.

The same is true of career advancement claims. A hoped-for promotion is not the same as an established trajectory supported by training, performance history or employer evidence.

For more information on the discovery process, see our article on examination for discovery in Ontario personal injury lawsuits.

Why future-income claims fail

Future-income claims are frequently rejected or substantially reduced because the employment theory is disconnected from the evidence. The real-and-substantial-possibility test is not a licence to speculate. It recognizes that the future cannot be proven with certainty. It does not dispense with proof.

A defensible claim identifies the work-related consequence of the injury, supports it with evidence and then assigns a value to the financial risk it creates.

Positive and negative contingencies

No court assumes that a plaintiff’s career would have unfolded perfectly without injury. A future-income calculation can be reduced for risks that existed regardless of the accident: unemployment, illness, business downturn, career interruption, pre-existing medical limitations or ordinary retirement decisions.

The comparison also has to account for supported opportunities the injury removed. A person with a record of overtime work, a documented promotion path, completed training, a growing business or a clear educational trajectory is not limited to past income if the evidence supports a higher earning path.

The weight attached to those possibilities depends on the proof. Performance records, training documents, business figures and employer testimony carry more weight than a broad assertion that the plaintiff intended to earn more.

Income loss in Ontario motor vehicle claims

Motor vehicle injury claims add a statutory layer to the analysis.

The starting point remains the same: did the collision cause the impairment relied on, and has that impairment resulted in economic loss or created a supported risk of future loss?

For automobile incidents occurring on or after September 1, 2010, section 267.5 of Ontario’s Insurance Act limits claims against protected automobile defendants for income loss and loss of earning capacity during the pre-trial period. There is no recovery for income loss during the first seven days after the incident. For income loss suffered after the first seven days and before trial, recovery is limited to 70 per cent of gross income lost during that period. Pre-trial damages for loss of earning capacity are also limited to 70 per cent of the loss.

The distinction between pre-trial loss and prospective loss is important in serious motor vehicle claims. If damages are assessed at trial, the statutory pre-trial limitations do not simply convert all future loss into a 70 per cent claim. In settlement discussions, the same structure informs the valuation even where the case resolves without a trial.

There is a separate collateral-benefits analysis under section 267.8 of the Insurance Act. Specified payments received or available before trial for income loss or loss of earning capacity reduce the tort award within the corresponding income-loss category. For current automobile claims, that can include statutory accident benefits and CPP disability benefits arising from the incident. Long-term disability benefits require closer examination of the policy and the nature of the payment; depending on the plan, they can fall within the income-continuation category addressed by the legislation and regulation.

Future benefits are treated differently. Where a plaintiff recovers damages for income loss or loss of earning capacity and later receives specified income-replacement benefits arising from the incident, the Act contains trust and assignment provisions dealing with those future payments.

A serious motor vehicle income-loss claim therefore cannot be assessed by calculating gross earnings alone. Counsel has to separate past and future loss, apply the statutory automobile limits, identify collateral benefits and understand whether future benefit rights affect the settlement.

For more information about motor vehicle injury litigation, see our Ontario car accident lawyers page.

Future income loss in a serious injury case

In a serious injury case, the income claim is often the largest components of damages.

A significant orthopedic injury can end a physical trade. A brain injury can undermine memory, planning, processing speed or judgment in a profession where those abilities are essential. Psychological injury can disrupt attendance, concentration and tolerance for ordinary workplace pressure. Some people remain able to earn an income but lose the level, security or duration of work they would otherwise have had.

These claims should be developed around the specific economic consequences. Helpful evidence could potentially include employment records, employer witnesses, medical opinions, functional assessments, vocational analysis, educational records, business records and accounting evidence.

Settlement where future income loss is disputed

Future income loss is often an issue separating parties at mediation and in settlement negotiations.

An insurance company will often accept that the plaintiff was injured while rejecting the earning-capacity claim. The defence position could rely on the plaintiff’s return to work, current earnings, lack of medical restrictions, a speculative career path, unrelated medical history or weaknesses in the accounting assumptions.

A settlement position built on future income loss has to answer those points. Medical restrictions, employment proof and the financial calculation should fit together. Where they do, the income claim can change the value of the case substantially. Where they do not, the insurer has an obvious reason to refuse the projected amount.

An offer to settle a claim with a significant future-income component should therefore be assessed against both the value of the supported loss and the risk that a court will reduce or reject the claim.

Conclusion

Future income loss is not established merely because a plaintiff remains injured.

The plaintiff must prove that the defendant caused the relevant injury. The plaintiff must then establish that the injury creates a real and substantial possibility of financial loss over the working years ahead.

Sometimes that loss is a measurable reduction in future earnings. Sometimes it is impaired earning capacity: the plaintiff remains employed, but has become less secure, less competitive or less capable in the labour market.

The cases show both outcomes. In Lazare, a majority of the Court of Appeal upheld a zero future-income award despite a serious injury because the jury was entitled to find no proven employment disadvantage. In Lyng, the Court upheld a competitive-advantage award because the evidence connected a future knee-related risk to earning capacity. In Ali, the plaintiff proved continuing injury but did not persuade the jury that it had caused employment disadvantage.

Future income loss is therefore an evidence problem more than it is a calculation problem. The claim needs a clear employment theory, proof of the restriction or risk being relied on, and a valuation that does not go beyond what that evidence supports.

About the Author

Lane Foster is an Ontario personal injury lawyer and the founder of Foster Injury Law. He represents injured people in serious personal injury and motor vehicle claims across Ontario, including claims involving future income loss, impaired earning capacity, future care and long-term financial loss arising from injury.

Authorities Referenced

Athey v. Leonati, [1996] 3 S.C.R. 458 — Supreme Court of Canada authority distinguishing proof of causation from the assessment of future or hypothetical contingencies, which are considered where they are real and substantial rather than speculative.

M.B. v. British Columbia, 2003 SCC 53 — Supreme Court of Canada decision recognizing the established principle that loss of earning capacity compensates for impairment of the asset represented by the capacity to earn income, while explaining that the value of that asset is measured through the earnings it would have produced over time.

Lazare v. Harvey, 2008 ONCA 171 — Ontario Court of Appeal decision in which the majority upheld a jury award of zero future income loss where the jury was entitled to find that employment disadvantage was not proven; Laskin J.A. dissented and would have awarded future income loss.

Lyng v. Ontario Place Corporation, 2024 ONCA 23 — Ontario Court of Appeal decision confirming that loss of competitive advantage compensates a component of future income loss and upholding an award supported by evidence of a future knee-related risk affecting earning capacity.

Ali v. Irfan, 2024 ONCA 758 — Ontario Court of Appeal decision upholding a jury verdict that continuing injury did not establish loss of competitive advantage where the jury was entitled to find that employment disadvantage had not been proven.

Ontario Insurance Act, R.S.O. 1990, c. I.8, ss. 267.5 and 267.8, and O. Reg. 312/03 — legislation and regulation addressing automobile income-loss limitations, specified collateral-benefit deductions and the treatment of future collateral benefits in motor vehicle tort claims.