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Lost Profit Claims

Fairfax Injury Lawyer Brien Roche Explains Lost Profit Claims
Brien Roche

Lost Profit for Contractors

Lost profit claims can be challenging in terms of proof. These types of claims arise most often when the plaintiff is either a small business person or is self-employed.

A good example would be a real estate agent. These agents are associated with a broker. However they are independent contractors. That is, they are self-employed. Their income tends to be erratic. They may have low income one year and high income the next year.

In addition their income is frequently deferred. In other words their labor may be expended at one point in time but they see no income from that labor until months or years later. Furthermore even though they may be disabled for a period of time they can make up for that by working from home or increasing their work hours when they are able. All of this is further complicated by the fact they have expenses associated with running their operation. This makes any income or profit determination tough. Call, or contact us for a free consult.

Lost Profit Claims-Track Record Critical

What is needed in these cases is a track record. In other words has the plaintiff been working in this field for some period of time. In one reported case the plaintiff was a delivery salesman. As a result of the injury he was caused to work more slowly. This resulted in a decrease in income. The Plaintiff was claiming a future income loss. The court held there was enough evidence to allow a jury to decide whether this permanent injury would result in a decrease in income.

In another case a traveling salesman claimed loss of past earnings and future earnings. The evidence showed what his earnings were prior to the injury. There was proof of a decrease after the injury. All of this was admissible in support of the earnings claim.

Lost Profit Claims-Before and After

There is no clear rule as to the amount of time that prior earnings must be established in lost profit claims. The longer the track record the better. Pieces of paper such as W-2s, tax returns and other proof of earnings are important. In a New York case there was an absence of proof of specific losses. The court said the proper measure of lost earnings for the plaintiff salesman would be set by subtracting average net earnings post injury from the pre injury net. This was then multiplied by the time lost.

Small Businesses

This same before and after evidence can be used in obtaining lost income damages for a small business. The threshold question is whether the business is dependent on the effort, personal attention and services of the plaintiff to justify using the lost profit of the business as evidence of the lost income of the plaintiff. There are a number of Virginia Circuit Court decisions that support this theory.  If the business never showed a profit, then proof is more of a challenge.  For instance if the plaintiff is an on owner of an LLC and the LLC has not shown a profit.  If the plaintiff was taking a “draw” or salary and now cannot justify taking the draw, this may be the measure of loss.

The defense will however claim that the profit of the LLC cannot be the measure of loss because the LLC is not a party to the lawsuit.  The retort to that is that the LLC is simply a pass-through for tax purposes.

Where a wrongdoer creates a situation that makes proof of the exact amount of damages difficult juries should be allowed to act upon probable and inferential evidence. Direct and positive proof is always better. Virginia code section 8.01-221.1 allows damages for lost profits of new or recently established businesses. There must be proper proof. However this statute does not apply in personal injury or wrongful death cases.

Call, or contact us for a free consult. For more information on lost profit claims and damage claims see the other pages on the site and also see the pages on Wikipedia


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