Quick summary: If you run your own business and cannot work after an accident, the strongest lost-wage claims rely on contemporaneous business records, tax returns, client communications, and expert analysis. Different rules apply depending on whether the accident gives rise to a third-party tort claim (auto, premises, etc.) or a workers’ compensation claim. This article explains what judges, insurers, and claims adjusters expect to see under Rhode Island law and how to prepare.
Disclaimer: This is educational information, not legal advice. For advice about your situation, consult a Rhode Island attorney.
Detailed Answer
Which legal path applies in Rhode Island?
Two common paths for recovering lost earnings after an accident are:
- Third-party tort claim (negligence suit or insurance claim against the person whose conduct caused the accident).
- Workers’ compensation claim if the accident happened in the course of your work and you are covered as an employee (self-employed people are sometimes excluded unless they elected coverage).
Each path has different rules for what counts as recoverable lost wages, how you prove them, and where to file. For workers’ compensation information in Rhode Island, see the Department of Labor and Training: https://dlt.ri.gov/workers-compensation. For state statutes governing workers’ compensation, consult Title 28 of the Rhode Island General Laws: https://webserver.rilegislature.gov/Statutes/TITLE28/.
Time limits to keep in mind (statute of limitations)
Rhode Island generally gives three years to bring a personal-injury action. See R.I. Gen. Laws § 9-1-14 for limits on civil actions: https://webserver.rilegislature.gov/Statutes/TITLE9/9-1/9-1-14.htm. Different deadlines apply for wrongful death and some administrative claims. Start preserving evidence and consult counsel promptly.
Basic proof elements for self-employed lost earnings (third-party claims)
To establish lost earnings you must typically show:
- That you actually lost the ability to work because of the accident (medical records, doctor notes, work restrictions).
- The amount of your lost income with reasonable certainty (documentary proof and a reliable method of calculation).
- That you attempted to mitigate losses (evidence you tried to work or reschedule clients when possible).
Documents and records that prove earnings and lost income
Collect and organize these items. They are the most persuasive evidence for a self-employed claimant:
- Federal tax returns for the last 2–3 years, including Schedule C (profit or loss from business). Tax returns show historically reported income and are highly persuasive.
- 1099 forms (1099-NEC, 1099-MISC) and W-2s for any employee income.
- Profit-and-loss statements, spreadsheet summaries, or bookkeeping reports (QuickBooks, Wave, Xero exports) showing gross receipts and expenses.
- Bank statements and merchant-account deposit records that match invoices and deposits.
- Client invoices, unpaid invoices, cancelled booking records, and statements from clients confirming lost jobs or cancellations because of the injury.
- Contracts, purchase orders, or job estimates that were delayed or lost.
- Electronic calendars, scheduling apps, email threads or text messages where clients confirm work dates and cancellations.
- Contemporaneous notes or a daily log documenting your work capacity, missed appointments, and communications with clients.
- Receipts for business expenses that allow calculation of net profit (since many courts allow recovery of net lost earnings rather than gross revenue).
- Medical documentation connecting your injury to your inability to work (doctor notes, restrictions, prognosis).
How to calculate lost income in practice
Common, defensible methods include:
- Average-method: Take net business income (after ordinary business expenses) from tax returns for the last 2–3 years and compute an average monthly or weekly net profit. Multiply by the period you could not work.
- Job-specific method: When the lost earnings are tied to specific jobs or contracts, use the contract value or invoices less the costs to complete the job to show lost profit.
- Hybrid method: Combine the average historical income approach for ongoing earnings with job-specific proof for canceled contracts.
Adjust your figures for reasonable growth or decline in business volume when supported by records (e.g., year-over-year revenue trends). Deduct expenses that would have been saved (if any) and account for mitigation (work you did manage to perform, alternative income, partial returns to work). For claims involving multi-year future losses, courts or insurers expect discounted present-value calculations, usually prepared by an economist or forensic accountant.
Experts and third-party help
If your bookkeeping is informal or damages are large, hire a forensic accountant or economic expert to:
- Reconstruct income using bank deposits, invoices, and tax returns.
- Prepare a clear lost-earnings schedule and methodology for court or insurer review.
- Provide expert testimony on lost profits versus personal wages and how you measured them.
Accountants add credibility and can translate business records into a format judges or adjusters understand.
Workers’ compensation considerations for self-employed people in Rhode Island
If the injury happened while performing work for an employer who controls the workplace, you may be eligible for workers’ compensation benefits. If you are truly self-employed (sole proprietor, independent contractor), coverage depends on your employment status and whether you elected optional coverage. Consult the Rhode Island Department of Labor and Training for rules on eligibility and filing a claim: https://dlt.ri.gov/workers-compensation. For statutory rules, see Title 28 of the Rhode Island General Laws: https://webserver.rilegislature.gov/Statutes/TITLE28/.
Practical example (hypothetical)
Jane is a freelance photographer. Before an accident, her Schedule C shows net profits averaging $3,600 per month over the last three years. After the accident, she missed four months of work and lost two contracted weddings worth $6,000 in revenue and $1,500 in out-of-pocket costs to hire replacements. To prove her loss, Jane provides:
- Three years of tax returns and Schedule Cs.
- Invoices and signed contracts for the two weddings and email cancellations from clients.
- Bank deposits and QuickBooks reports showing the lost job payments would have been recorded as income.
- Medical notes specifying her restrictions for four months.
A forensic accountant prepares a calculation: monthly lost net profit ($3,600 x 4 = $14,400) + lost net profit from weddings (contract value minus replacement costs = $4,500). Jane submits this package to the insurer and uses the accountant’s report at settlement negotiations.
Common disputes and how to avoid them
- Dispute: Insurance or defendant argues you didn’t actually lose work. Fix: produce calendars, client cancellations, and contemporaneous notes.
- Dispute: Claimant inflates income. Fix: rely on tax returns and bank records—these are the most credible sources.
- Dispute: Difficulty proving future loss. Fix: use expert testimony and conservative, documented growth assumptions.
Helpful Hints
- Start collecting records immediately. Contemporaneous documents are far more persuasive than reconstructed notes made months later.
- Keep copies of tax returns, bookkeeping exports, bank and payment-processor statements (Stripe, PayPal, Square), and invoices.
- Keep a daily log of symptoms, work capacity, missed appointments, and client communications.
- Notify insurers and relevant parties early; make sure you understand any claim-filing deadlines or notice requirements.
- Get a medical provider to link your inability to work directly to the accident—clear medical causation matters.
- Consider a forensic accountant for complex records or when lost profits are significant.
- Be conservative and transparent in your calculations; courts and adjusters respect reasoned, documented methods.
- If the accident occurred during work, immediately check workers’ compensation eligibility and file with Rhode Island DLT if appropriate: https://dlt.ri.gov/workers-compensation.
- Consult a Rhode Island attorney experienced with business-damage claims or personal injury to review your records and advise on filing and negotiation strategy.
Final note: Demonstrating lost wages as a self-employed person often requires more documentation than for a salaried worker, but robust tax records, bookkeeping, client records, and expert analysis will make your claim credible and defensible.