What is Loss of Competitive Advantage?

In Mundinger v. Ashton, 2019 ONSC 7161, one of the issues addressed was the definition of loss of competitive advantage and its relationship with loss of future income.

Justice Charney noted that an award for loss of competitive advantage is expressed as damages in recognition of the fact that a plaintiff’s competitive position in the open labour market has been compromised as a result of the plaintiff’s injuries in an accident.

An award for loss of competitive advantage constitutes compensation for a component of lost future income. Both loss of competitive advantage and loss of future income are addressed in the calculation of an injured party’s loss of future earnings, or diminished earning capacity, but in different ways.

Loss of future income is typically calculated as the difference between the net present value of probable earnings before the accident and the net present value of probable earnings after the accident.

An award for loss of competitive advantage is usually awarded in circumstances where the plaintiff returns to his or her pre-accident level of income, but has a higher risk of being unemployed in the future as a result of the accident.

A plaintiff may receive compensation for both a lower income and a higher risk of being unemployed. This can occur when the court finds that, not only has there been a probable loss of future earnings, but that the plaintiff has also suffered an increased likelihood of being unemployed in the future as a result of his or her injuries (that is, a decrease in marketability).

To the extent the court concludes that a party’s post-accident income will, on a balance of probabilities, be reduced to a specific level, the calculation of the present value of the loss of earning capacity is to be undertaken without regard to any loss of competitive advantage.

A further contingency factor to address a loss of competitive advantage should only be introduced if the risk that the plaintiff will fail to earn income at that post-accident level is increased by the plaintiff’s injuries.

Justice Charney also indicated that a loss of competitive advantage is a pecuniary loss and must have some basis in empirical evidence, such as Statistics Canada data. In the absence of such empirical evidence, the court is being asked to speculate and pull a dollar figure out of thin air.