Disclaimer: This is general information and education about Kentucky law. It is not legal advice. For advice about your specific situation, consult a licensed Kentucky attorney.
Detailed Answer — How a self-employed person can prove lost wages after an accident in Kentucky
If an accident caused you to lose income from your own business or freelance work, a court or insurer will ask you to prove the amount and timing of those losses. Kentucky law allows recovery for past and future lost earnings as part of an injury claim, but you must present reliable, documented evidence that ties the lost income to the accident and shows how you reached your figures.
1. Identify the type of loss you are claiming
- Lost net business profits: This is the most common claim for sole proprietors and many self-employed people. Courts usually look at net profit (gross receipts minus ordinary, necessary business expenses), not gross receipts alone.
- Lost personal wages/earning capacity: If you pay yourself a salary from an incorporated business, you may claim the salary you could not take.
- Future lost earnings: If the injury causes a long-term reduction in your ability to earn, you can claim expected future losses. These require stronger proof and expert support.
2. Core documents and records to gather
Good documentation makes or breaks a lost-wages claim. Collect as many of the following as possible:
- Tax returns (personal and business) for several years before the accident (Schedule C, Forms 1099, K-1s, corporate returns as applicable).
- Profit & loss statements and balance sheets for the relevant periods.
- Bank and merchant account statements showing deposits and payments tied to business activity.
- Client invoices, contracts, purchase orders, and correspondence showing work that was scheduled, canceled, or delayed because of the injury.
- Time logs, calendars, appointment books, timesheets or digital records showing hours worked and hours missed.
- Receipts for business expenses and payroll records (if you had employees).
- Advertising, proposal, or bid histories that show lost opportunities.
- Medical records linking the injury to the period you could not work.
- Photographs or other proof of property damage or physical limitation when relevant.
3. How to calculate lost wages for a self-employed person
Most courts and insurers expect you to start from pre-accident earnings patterns and show what changed because of the accident.
- Establish your baseline: compute average net income for a representative period before the accident (often 2–3 years). Use tax returns and P&L statements.
- Compare actual post-accident income to the baseline. The difference is your past lost income.
- For future losses, show why the business will produce less going forward and quantify the annual shortfall. Multiply by a reasonable period and apply a discount rate if appropriate. Expect opposing parties to challenge assumptions, so document them.
4. Use expert help when needed
Forensic accountants or economic experts often prepare or review lost-income calculations. They can:
- Prepare a reliable profit analysis, adjust for nonrecurring items, and separate personal and business income.
- Explain reasonable projections for future losses and prepare a present-value calculation.
- Prepare exhibits and testify in court or at deposition to support your figure.
5. Establish causation and the time frame
You must link the loss to the accident. Medical records that show you were incapacitated during a specific period help establish causation. Client communications and cancelled contracts also show the immediate effect. If other factors affected income (market changes, seasonal swings, business restructuring), document and explain them so a trier of fact can separate accident-related loss from ordinary business variation.
6. Mitigation and duty to try to work
Kentucky law expects injured parties to mitigate damages where reasonable. If you could have performed some work or adapted your business but chose not to, the defendant may argue you failed to mitigate. Keep records of efforts to obtain modified duties, temporary help, or alternative income sources.
7. Tax consequences and net recovery
Money recovered for lost profits or lost wages may have tax implications. Keep your tax returns and consult an accountant about how a recovery will be reported. Trials and settlements often consider pre-tax net income, but planning with a tax professional matters for personal decisions.
8. Deadlines to file a claim in Kentucky
Personal injury claims in Kentucky are subject to statutory deadlines. For most injury claims, Kentucky’s statute of limitations requires filing within two years. See Kentucky Revised Statutes for details and any exceptions. You can browse the Kentucky Revised Statutes at the Kentucky Legislature website: https://apps.legislature.ky.gov/statutes/ (see KRS related to limitations on actions).
9. Practical steps to take right after the accident
- Seek prompt medical care and keep thorough medical records.
- Tell clients/customers promptly about cancellations and preserve communications showing they were unable to perform the work because of your injury.
- Preserve all business records and bank statements; make digital backups.
- Start contemporaneous logs of what you could and could not do, the hours missed, and the reasons.
- Get estimates or records showing replacement costs for any physical damage that affected your ability to work.
- Contact an attorney early to preserve evidence and meet procedural deadlines.
10. If the insurer disputes your figure
Expect insurers to request supporting documents, ask for audited financials, or retain experts to dispute your calculations. Respond with organized records, a clear calculation sheet, and an expert report if possible. If negotiations fail, you may need to file suit and present the evidence at trial.
For Kentucky statutes and rules that may affect deadlines and procedure, consult the Kentucky Revised Statutes and the Kentucky court rules at the Kentucky Legislature site: https://apps.legislature.ky.gov/statutes/.
Helpful Hints
- Start documenting losses immediately. Contemporaneous records carry more weight than recreations months later.
- Keep business and personal finances separate. Mixing them weakens your proof.
- Use multiple document types to corroborate the same fact (e.g., invoice + bank deposit + calendar entry).
- Keep pre-accident records for at least three years; insurers and courts will want a multi-year baseline.
- If you do hire an accountant or expert, ask for a written report that explains the methodology in simple terms.
- Be ready to explain seasonal or one-off variations in income. Provide context (contracts, market changes) so a judge or adjuster sees why your baseline is reasonable.
- Talk to a Kentucky attorney early if losses are large or the other side denies responsibility. Early counsel can preserve evidence and advise about deadlines under state law.
If you want, I can give a checklist tailored to your type of self-employment (sole proprietor, LLC owner, contractor, gig worker) or a sample document list you can print and use while you gather records.