Partner
Yes. When someone else causes the crash, self-employed Texans can often recover the income they lost because of their injuries, and they can also claim the loss of their future ability to earn. What changes is the proof. With no paycheck or employer letter to point to, you have to show what your business earned before the crash, after expenses, and what you lost while you were hurt. Scott Scherr, a Bryan-College Station car accident attorney at The Payne Law Group, helps contractors, freelancers, and small business owners across Brazos County build that proof.
Two Kinds of Lost Income a Texas Jury Can Award
In the 2002 decision in Strauss v. Continental Airlines, a Houston court of appeals explained that Texas treats lost income as two separate categories of damages. Past lost earnings are the income you actually lost because you could not do your work, counted from the day of the injury to the day of trial. Loss of earning capacity is a separate measure. It looks at the drop in your ability to earn money, in the past or in the future, whether or not you were working at the time.
A self-employed person can have both kinds of loss. A roofer who missed eight weeks of jobs after a collision with a commercial truck has past lost earnings. If a back injury also keeps that roofer off ladders for good, the claim can also cover the drop in what the roofer can earn in the years ahead.
Texas also has a proof rule that applies to every lost income claim. A claim for lost earnings or lost earning capacity must be proved as a net loss after federal income taxes, which means the amount you would have kept after paying those taxes. The judge then tells the jury whether the award is subject to federal or state income taxes.
How Do You Prove Lost Income if You’re Self-Employed?
The jury needs evidence it can turn into a dollar figure for what you could earn before the crash. A bare guess about what you would have earned, with no facts behind it, will not support an award. Records that help prove self-employment income include:
- Federal tax returns for several years before the crash, including Schedule C, the form sole proprietors use to report business income or loss, or the business return and Schedule K-1 if your company is an S corporation or partnership
- Invoices, receipts, and bank statements that show money coming in and going out
- Profit and loss statements prepared by you or your accountant
- Client contracts, bids, and emails showing jobs you had lined up
- Calendars and booking records showing the work you had to cancel
- Medical records and written work restrictions from your doctor
Scott Scherr compares these records line by line so the numbers he presents to the insurer tell one consistent story. Consistency matters as much as the totals. When your tax returns, bank deposits, and invoices report the same numbers, an insurance adjuster has fewer grounds to challenge them.
Why the Claim Starts With Net Earnings
The same Houston case shows what happens when the numbers do not hold up. A self-employed trial lawyer hurt while boarding a flight won a jury award of $1,024,000 for past lost earning capacity. The trial court set that part of the verdict aside, and the court of appeals agreed. Among other problems, he had built his figures on gross fees without subtracting the costs of running his practice, and his tax records showed completely different figures for the same years.
The lesson applies to any business owner. Evidence of your lost income starts with what you kept after business expenses, and Texas then requires the figure to be stated after federal income taxes. For example, a painter who billed $120,000 in a year but spent $40,000 on paint, supplies, and fuel earned $80,000 before taxes, and that lower number is where the calculation begins.
The court also pointed out that business profits are not always the owner’s personal earnings. When a company has employees or expensive equipment, part of the profit comes from the workers and the machinery. For an owner with a crew, the claim measures the value of the owner’s personal work.
Can You Recover Future Lost Income or Lost Earning Capacity?
Yes, when the injury reduces what you can earn going forward. The Houston court noted that proof of future earning capacity is always uncertain, so the jury has wide discretion in setting the amount. Even so, the jury still needs evidence of what you could earn before the crash.
Two points from the same opinion help self-employed claimants.
First, earning as much or more after the crash does not bar a claim for lost earning capacity. The court also described earlier Texas cases in which commission salesmen who could no longer work the same hours, or who had to hire help, still recovered.
Second, a doctor’s percentage estimate of lost physical function does not automatically convert into a lost income percentage. Whether a physical limitation cuts your earnings depends on the injury and on the work you do.
When the claim rests on projections, testimony from an accountant or economist, based on your actual records, can explain the numbers to an insurer or a Brazos County jury.
What Mistakes Can Affect a Lost Income Claim?
Self-employed claimants can weaken a strong claim with avoidable errors, including:
- Reporting gross sales as lost income instead of net profit
- Not checking your own auto policy for personal injury protection (PIP), which can replace some lost income no matter who caused the crash
- Giving figures that do not match the tax returns you filed
- Failing to keep a written log of the jobs, clients, and bookings you lost while you recovered
- Skipping follow-up medical care, which leaves no record of why you could not work
- Accepting an insurer’s early estimate before anyone knows your full economic loss, including the effect on your future work
Timing matters too. Texas law sets a two-year deadline, counted from the day the claim arises, to file a personal injury lawsuit. If a city, county, or state vehicle was involved, a written notice of the claim may be due within six months, and some cities require it even sooner. Business records are also easier to gather while they are recent, so start collecting them now.
How Scott Scherr at The Payne Law Group Helps Self-Employed Crash Victims in Bryan-College Station
Scott Scherr, the Bryan-College Station personal injury attorney at The Payne Law Group, is Board-Certified in Personal Injury Trial Law by the Texas Board of Legal Specialization, a credential held by fewer than 2% of Texas lawyers. He gathers the evidence for your income claim, including your tax returns and business records, and works with financial experts when needed to calculate what the crash cost your business, now and in the future. He also handles communication with the insurance company for you. Contact us for a free consultation, available 24/7/365.