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Economic Loss

Definition - What does Economic Loss mean?

Persons injured by the intentional or unintentional actions of another person or entity are likely to suffer financial loss. Under some conditions, an injured party may file a personal injury claim against the offender and receive compensatory damages to compensate them for their loss or injury. Compensatory damages may include economic and/or non-economic compensation.

Economic losses are those which can be calculated such as medical bills, lost earning capacity, present and future lost income, and property damage. Non-economic damages are those which are real but are more difficult to calculate such as physical or emotional suffering, scarring, disfigurement, embarrassment, humiliation or inconvenience. More generally, non-economic damages can include anything which diminishes the injured party's qualify of life.

Calculating economic loss

Compensation is determined by calculating what amount of money would need to be given to the plaintiff to make them whole following the accident. While this seems like an easy calculation there can be differences of opinions due to different valuation methods, inconsistent data, factual interpretations, and different assumptions.

Certain economic losses, however, are not so difficult to determine. For instance, calculating lost income can be straightforward for some plaintiffs. To determine lost income the plaintiff's W-2 form, tax return, or pay stubs can be reviewed and can provide a pretty definitive amount which the plaintiff has lost.

Calculating an individual's future capacity to earn money, however, can be more difficult. Although a plaintiff is required to mitigate their losses and return to work as soon as possible, if the plaintiff is partially disabled, it can become more difficult to estimate the reasonable post-injury earnings expectation given their current physical or mental limitations.

Another common cost after a personal injury is medical costs. Before determining the economic cost of an injury it is important to calculate not only the significant medical services that have already been received prior to the injury trial but the cost of services which will be needed in the future.

Invoices and medical bills can be used to provide evidence of medical expenses to the court, but it is not unusual for some health care providers to initially charge one amount but to accept as payment in full a completely different amount making medical calculations more complex.

Before calculating the economic costs for medical care all of these issues will need to be considered. Future medical costs will also need to be identified, scheduled and priced.

Talk to an injury lawyer

When calculating economic loss it is important to seek expert help. Experts can help provide loss valuation in a logical fashion using common methods, data, and assumptions. Consider also, economic loss calculations should conform to requirements identified by jurisdiction, type of action, and prevalent financial expert practice.

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