Glossary of personal-injury damages terms

Plain-language definitions of the terms that come up when valuing a personal-injury claim in Canada. Each is written for a non-specialist. For the full method, see How present-value damages are calculated in Canada.

Core concepts

Present value. What a future amount of money is worth in today's dollars, once you account for the fact that a dollar paid years from now is worth less than one paid today. Future losses are converted to present value so they can be awarded as a single lump sum.

Discount rate. The yearly percentage used to convert future dollars into present value. A lower rate produces a higher present value, because future dollars are discounted less.

Ontario Rule 53.09. The rule in Ontario's Rules of Civil Procedure that sets the prescribed discount rate for future pecuniary damages (a market-linked rate for the first 15 years, then a fixed 2.5%) and requires a tax gross-up. See Ontario Rule 53.09 and the prescribed discount rate.

Valuation date. The single date every past and future figure is brought back to, so all amounts are stated at one consistent point in time. It is a date you choose, for example a mediation or trial date.

Incident date. The date of the accident or event giving rise to the claim. It marks the start of the past-loss period.

Loss of income

Without-incident income. What the plaintiff would have earned each year had the incident never happened. The baseline the loss is measured against. See How loss of income is calculated.

Past loss. The income shortfall from the incident to the valuation date. A historical figure: indexed for inflation and netted against actual earnings, not discounted for survival.

Future loss. The income shortfall from the valuation date to retirement. Projected, brought to present value, and weighted for survival.

Residual earning capacity. Income the plaintiff can still earn after the incident. It is subtracted from the without-incident income, so only the net shortfall is claimed.

Retirement age. The age at which the future income loss is assumed to end.

CPI (Consumer Price Index). A measure of inflation used to index the without-incident income across the past period.

Future cost of care

Life-care plan. A professional estimate, usually by an occupational therapist or physician, of the plaintiff's future care needs and their costs, listed item by item. See Present value of future cost of care.

Future cost of care. The present value of those future care needs, with each item valued over its own schedule and weighted for survival.

Mortality

Mortality basis. The life-expectancy assumption used to weight future years for the chance the plaintiff is alive to receive them. See Mortality and life expectancy in damages.

Life expectancy. The expected remaining years of life for a person of a given age and sex, drawn from actuarial life tables. The same assumption as the mortality basis, not a separate one.

Life table. A published actuarial table (for example, Statistics Canada life tables) giving the probability of surviving from each age to each later age.

Reduced life expectancy. A shortened life expectancy applied where the medical evidence supports it, which lowers the present value of long-dated future losses.

Lost years. Where the injury shortens the plaintiff's life expectancy, the earnings of the working years they would otherwise have had. Future income loss is valued on both the before-incident and the after-incident life expectancy, and the plaintiff recovers the difference less a personal-consumption allowance for the years they will not live.

Adjustments

Contingency. An optional, file-specific reduction to the future income stream for real-world risks. A disability contingency reflects the chance of leaving the workforce due to disability before retirement; a termination or unemployment contingency reflects periods out of work from job loss. Both are off unless selected.

Collateral benefits. Payments the plaintiff receives because of the injury (for example EI, CPP-D, or long-term disability) that may offset the loss so damages are not double-recovered. Whether a given benefit is deductible is a legal question for the file.

Gross-up. An increase to the award for the income tax the plaintiff will pay on the returns earned by the invested lump sum, so the after-tax return still funds the future losses. Required by Rule 53.09 in Ontario.

A note on the tool

DamageIQ is a calculator: it applies these concepts to the inputs and assumptions you enter and shows a transparent figure. It is not an expert opinion. For how a calculator and a retained actuary differ, see What a calculator does, and what a retained actuary adds.

By Mike Austin, FCIA, FSA. Fellow of the Canadian Institute of Actuaries and the Society of Actuaries.