Glossary of personal-injury damages terms

The terms that come up when valuing a personal-injury claim in Canada, defined for a non-specialist. For the full method, see How present-value damages are calculated in Canada. These are background definitions, not legal or actuarial advice for a specific file.

Core concepts

Present value. What a future amount of money is worth in today's dollars. A dollar paid years from now is worth less than one paid today, because a dollar today can be invested in the meantime, so a future loss is reduced to the smaller sum that would grow into it. Future losses are converted this way so they can be awarded as a single lump sum.

Discount rate. The yearly percentage used to convert future dollars into present value. It is a real rate, net of inflation: the return the invested award is assumed to earn above price inflation, which is why amounts can be projected in today's dollars. A lower rate produces a higher present value, because future dollars are discounted less.

Pecuniary damages. Losses measured in money, such as loss of income and the future cost of care, as distinct from heads like pain and suffering that are not.

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 after trial begins, then a fixed 2.5%). See Ontario Rule 53.09 and the prescribed discount rate.

Stream. A payment that repeats over time rather than happening once: a yearly wage, or a care item needed every year for life. Almost every head of future damages is a stream, and each year in it is valued separately before the results are added together.

Valuation date. The single date every past and future figure is stated at, so all amounts sit at one consistent point in time. It is a date you choose, for example a mediation or trial date. In Ontario the prescribed discount rate is keyed to the year the trial begins, and the calculator takes that year from the valuation 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, established on the evidence in the same way as the without-incident income. It is subtracted from that baseline, and the net shortfall is what is valued.

Earner basis. Which group of workers a census average is drawn from. An all earners average covers everyone with employment income that year, including those who worked only part of it. A full-year full-time average covers only those who worked the whole year at full-time hours, and is usually the highest of the bases. The choice matters because an average that already includes people out of work for part of the year has that experience inside it.

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. An estimate of the plaintiff's future care needs and their costs, listed item by item, prepared by a qualified professional such as an occupational therapist. 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. On the standard basis it follows from the table chosen. Where a reduced life expectancy is used it runs the other way: a target age from the medical evidence is the input, and the table's mortality rates are adjusted to match it.

Survival weighting. Reducing each future year by the probability the plaintiff is alive to receive it, so a payment far in the future counts for less than its face amount before any discounting.

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. On an income claim, lost years may restore part of what it removes.

Lost years. Where the injury shortens the plaintiff's life expectancy, the earnings of the working years they would otherwise have had. Whether such a claim is available, and how the deduction is measured, is a legal question for the file. Where it is made, future income loss is valued on both the before-incident and the after-incident life expectancy, and the plaintiff recovers the before-incident value less a deduction taken on the difference between the two, a personal-consumption allowance for the years they will not live. DamageIQ applies that deduction at a fixed 50%, stated on the exported report and not adjustable on a file.

Adjustments

Contingency. A reason a projected payment would not have been made even had the incident never happened. Mortality applies to every future stream. A disability contingency reflects the chance of leaving the workforce through disability before retirement, and a termination or unemployment contingency reflects periods out of work through job loss; both are file-specific and off unless selected.

Management fees. The cost of professionally administering an award, most often a fund set up to pay future care costs. A separate calculation from the present value of the care itself, and not one DamageIQ performs.

Collateral benefits. Payments the plaintiff receives because of the injury (for example EI, CPP-D, or long-term disability) that may fall to be deducted so the same loss is not compensated twice. Whether a given benefit is deductible is a legal question for the file. Where one is deducted, past benefits are netted against the past loss and a future benefit is entered as a present value and subtracted from the future loss.

A note on the tool

DamageIQ is a calculator. It applies the present-value mechanics above to the inputs and assumptions you enter, and every input is traceable in the figure it returns. It does not compute fund management fees, which are work for a retained actuary. 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.