When a child suffers a birth injury due to medical negligence, the consequences can stretch far beyond the immediate physical harm and resulting medical bills. For families, the road ahead is often filled with uncertainty about the childโs cognitive development, physical health, and their capacity to lead a fulfilling and productive life in adulthood. One of the most significant (and contested) components of a birth injury lawsuit is the claim for loss of future earning capacity.
Because birth injury cases involve infants with no work history, this category of damages involves complex forecasting and statistical analysis. It is the job of a birth injury lawyer to ensure the childโs potential is recognized, and the family is compensated well enough for their loss of future earnings. A skilled attorney should be able to calculate these damages accurately, support the claim with data-backed insights, and present a strong case for maximum financial recovery.
Loss of future earning capacity can be one of the most substantial damages in a birth injury lawsuit. Understanding these damages is essential for any family navigating the legality of a catastrophic birth injury. In this article, we explain what loss of earning capacity means, how our lawyers calculate it during litigation, and how tools like special needs trusts can protect and manage a childโs financial recovery over time.
What is Loss of Earning Capacity?
Loss of earning capacity refers to an injured personโs diminished ability to earn income over the course of their lifetime as a result of their injury. In tort law (such as the field of medical malpractice), where a personโs injury is the direct result of another partyโs negligence, plaintiffs can seek financial compensation for this diminished ability. If a person is forced out of their career as a result of a debilitating injury, for example, they can seek damages based on the income they are no longer able to earn, but otherwise would have earned, if not for the other partyโs negligence.
In the context of birth injury cases, this concept takes on a profound new dimension: the child suffers an injury just as their life begins, well before they can demonstrate what their professional future might have held. Even so, families can still seek compensation for their childโs entire lifetime of income, and it is very possible to present a strong case for the future success that an infant would likely have had without their injury. When done strategically, this can account for a significant portion of the final settlement and become a critical factor in the familyโs recovery.
Loss of Earning Capacity vs. Lost Earnings
Itโs important to distinguish loss of earning capacity from lost earnings (also called lost wages). Both of these are categories of damages in medical malpractice and other injury cases, but they are fundamentally different. Lost earnings refer to income someone has already missed out on, e.g., missed paychecks from time off work. Loss of earning capacity looks to the future and asks what the injured person could have earned over the rest of their professional lifetime, compared with what they are likely to earn after their injury.
In a birth injury case, the child may be unable to work at all, or only able to work in limited roles, for fewer hours, and with restricted opportunities to advance. Importantly, earning capacity includes more than just a job and the money it brings in. It also accounts for factors such as the ability to pursue education and training, to consistently maintain employment, to work without frequent interruptions due to medical needs, and to work full-time vs. part-time. Birth injury lawyers consider all of these factors when calculating damages. And because these impacts can last for decades, loss of earning capacity damages can be quite substantial.
Why Loss of Earning Capacity is Central in Birth Injury Claims
The severity of the childโs injury and the extent to which it limits their ability to work independently as an adult will directly influence the value of compensable damages. While some minor injuries may lead to conditions that only inhibit certain working activities (warranting lower overall monetary compensation), many major birth injuries and the disabilities they cause can completely eliminate a personโs ability to support themselves financially. Birth injuries that commonly give rise to medical malpractice lawsuits include HIE (severe oxygen deprivation), cerebral palsy, and traumatic brain injuries caused during delivery.
A serious birth injury can affect all, or any combination of, the following:
- Motor function (movement, coordination, stamina)
- Speech and communication abilities
- Cognitive function and intellectual ability
- Neurological function (epilepsy, seizures)
- Sensory impairments
- Behavioral regulation
- The ability to live independently (daily skills such as feeding, dressing, and bathing)
Even when a child is resilient and retains some functions after an injury, their resulting condition may impose significant limitations that reduce occupational options or make sustained work more difficult. In all cases, it’s crucial to identify the specific faculties the child has lost to determine the difference between their full professional potential and what they may be able to earn with their injury.
After a life-altering birth injury, many children will require ongoing therapies, assistive technologies, or caregiving well into adulthood. While the cost of these requirements influences the potential financial compensation a child can receive, the requirements themselves also directly impact employability and must be accounted for when calculating damages for loss of earning capacity. These damages are often evaluated alongside life care planning, since the childโs medical needs and physical limitations help define what kinds of work may (or may not) be realistic.
How Do You Calculate Loss of Earning Capacity in Birth Injury Claims?
Calculating loss of earning capacity from a birth injury and proving it during settlement negotiations can be one of the most complex tasks of the whole case. Attorneys must rely on a combination of expert testimony, statistical data, and economic modeling to establish the damages.
To determine the value of damages that a child can claim, a legal team will establish a baseline earning capacity (uninjured) and a post-injury earning capacity. The difference between these amounts is the value of damages families should seek for their childโs lost capacity to earn income.
Baseline Income (What would the child likely have earned?)
Birth injury lawyers can use sociological and statistical data to help determine what a child would have earned. They may take into account the parentsโ professional and educational achievements and use their current and past occupations as valid measures of the childโs lost potential. Below are some of the indicators used to establish a baseline income:
- Parents, siblings, or close relatives’ education and earnings (not a standard, but a potential data point)
- Childโs early development trajectory (to the extent that it is available)
- Population and statistical earnings data for comparable cohorts
- Expected educational attainment absent the injury (high school, college, and advanced degrees)
The defense will often argue that these calculations are speculative, but a birth injury lawyer will rely on objective indicators such as those listed above, as well as data published by the U.S. Bureau of Labor Statistics, to counter defenses and support a demand. The goal is not to โguessโ a specific profession based on the parentsโ, but to produce a reasonable earnings range grounded in recognized data.
Assessing Post-Injury Income (What can the child earn now?)
Assessing the childโs potential post-injury income generally begins with a medical prognosis. Birth injury lawyers can recruit medical experts to provide testimony about the nature and permanence of the childโs injury, including the degree to which it will impair cognitive function, physical ability, and social development.
A vocational rehabilitation expert can then assess what kinds of employment, if any, the child might realistically be able to pursue as an adult based on the medical expertโs prognosis. In cases involving severe brain damage or profound intellectual disability, a vocational expert may conclude that the child will be entirely unable to work. In less severe cases, they might identify a limited range of positions accessible to the child, along with corresponding wage ranges.
Calculating the Lifetime Earnings Gap
Once the baseline income and the potential post-injury income range have been established, birth injury lawyers can analyze the figures to determine a total lifetime difference. Lawyers will consider factors such as how many years the person would likely work, the likelihood of employment, wage growth over time, and benefits (and sometimes taxes). The result is usually expressed as a single lifetime figure.
For example, say a child was diagnosed with cerebral palsy and quadriplegia soon after suffering a birth injury, and will require lifetime care without the ability to perform work. A birth injury lawyer will make a strong case for the childโs potential, considering factors such as educational achievement, steady wage growth, and employer-provided benefits like health insurance and retirement contributions.
Based on those factors, assuming a 30-40-year career, modest raises, retirement savings, and adjustments for present value, letโs say the child was expected to earn $5-7 million over their lifetime. Because the child cannot live independently and has no professional outlook, that amount is compared with a post-injury income of $0.
Importantly, before determining a final value, compensation for loss of earning capacity must be adjusted to todayโs dollar value ($6 million over a lifetime of work is not the same as $6 million in a lump sum of todayโs money). Thus, a birth injury attorney may seek $2-3 million in damages for loss of earning capacity after determining $5-7 million to be a reasonable prediction. [Note this is just an example for demonstrative purposes and not based on a particular childโs situation.]
As we can see, in cases like this, damages for loss of earning capacity are critical to the outcome of the lawsuit, potentially contributing seven to eight figures to the familyโs financial compensation. Combined with other damages such as lifelong medical care costs, therapy expenses, adaptive equipment, and non-economic damages like pain and suffering, the total damages in a birth injury case can be very large. This is rightfully so, given the lifetime impact the injury will have on the child and their family.
Special Needs Trusts and Securing Lifelong Care
A large recovery amount from a verdict or settlement after a total loss of earning capacity raises an important question: how can families best preserve and use these funds to support the childโs lifelong needs without jeopardizing their access to essential public benefits? How can the funds be managed most effectively? One answer is by establishing a Special Needs Trust.
A Special Needs Trust is a specialized legal arrangement that holds and protects money for a person with a disability without automatically disqualifying them from certain public benefits, such as Supplemental Security Income (SSI) and Medicaid. Because these programs have strict asset limits, a Special Needs Trust is paramount to the childโs best interests in the context of a severe birth injury case. They will likely need government-supported healthcare, long-term services, and income assistance for many years. Medicaid/Medi-Cal, in particular, is often the primary payer for long-term care services, therapies, and medical equipment for individuals with serious disabilities.
Without a properly structured trust, receiving a large settlement directly will place those important public benefits at risk. A Special Needs Trust solves this problem, allowing families to preserve their childโs benefits by ensuring the government does not count the settlement fund as the childโs personal property. Instead, the settlement is placed under the control of a trustee, who manages and distributes the money for the childโs benefit in accordance with applicable rules.
This way, the child can receive all applicable public benefits, and funds from the Special Needs Trust supplement them, rather than replace them. Families can use the settlement funds to provide a wide range of quality-of-life improvements and disability-related needs that public benefits donโt cover. These improvements can include specialized therapy, certain caregiving services, and recreational or developmental activities that enrich the childโs daily life into adulthood.
The importance of establishing a Special Needs Trust and managing a settlement responsibly is one of many reasons why it is critical to partner with the right birth injury legal team. Aside from fighting the case and successfully claiming damages for loss of earning capacity, a lawyer can guide families in establishing important legal vehicles, such as a Special Needs Trust.
Protect Your Childโs Future With Californiaโs Best Birth Injury Lawyers
No parent should have to face the emotional agony and financial strain of a birth injury claim on their own. If your child has suffered a catastrophic birth injury, the effects can shape every part of your familyโs future. Pursuing a birth injury claim with a qualified attorney is the best way to secure the resources your child needs to live with dignity, safety, and support for years to come.
In addition to loss of future earning capacity, a birth injury lawsuit will also allow you to seek vital compensation for an array of damages, such as:
- Past and future medical expenses
- Physical, behavioral, and speech therapy costs
- Home modifications and accessible transportation needs
- In-home care, attendant care, and other long-term support services
- Assistive devices and adaptive equipment
- Non-economic damages like pain and suffering, emotional distress, and loss of quality of life
At Stalwart Law Group, we understand the overwhelming weight of an unexpected birth injury and all it entails for your family. Our team fights birth injury lawsuits for families across California who have fallen victim to medical negligence, and we vow to pursue settlements that reflect the true scope of need for every impacted child.
If medical negligence caused harm to your child during pregnancy, labor, delivery, or newborn care, contact Stalwart Law Group today to discuss your case and learn how we can help protect your childโs future.
