One of our leading personal injury solicitors has had his say on the way damages are awarded for people who face long term financial losses as a result of serious injuries, and has influenced a Ministry of Justice consultation on the subject.
Philip Edwards, partner in our Birmingham office, welcomed the recent announcement by the Lord Chancellor, Liz Truss, of the change in the Discount Rate – the mechanism which sets the way damages for future losses, such as loss of earnings or provision of care, are awarded.
The rate had been set at 2.5% since 2001 but following a review which considered evidence about, the Lord Chancellor announced that the rate would be changed to -0.75%, meaning that damages awarded as a lump sum would be increased.
However, the insurance industry immediately reacted, claiming that people with life changing injuries would be over compensated and that premiums would have to rise. As a result, the Lord Chancellor has called for a consultation to consider the Discount Rate, its methodology and a wide ranging review of how damages should be calculated.
Philip raised concerns about a potentially misleading question in the Ministry of Justice request for responses in the consultation which has led to changes in the wording.
Philip said: “The announcement by the Lord Chancellor was welcomed by myself and many other lawyers and claimants as long overdue.
“The claims by insurance companies are hotly contested especially considering the failure of insurance companies to reduce premiums despite many steps being taken to curtail legal costs and combat fraud over the last few years as well as the high profits made by a number of leading insurers and indeed the fact that the role of an insurer should be to properly and fairly compensate injured people.
“I believe the evidence shows that until the recent change in the rate the Discount Rate did not reflect prevailing conditions, meaning that injured people were at risk of being seriously undercompensated. The effects of this could mean that people who required vital care and support would run out of money to pay for it long before their need for care ended.
“The principle of the law of compensation for people who have been seriously injured through someone else’s fault is that they should receive damages that put them, as far as money can, in the position they would have been in had they never been injured.
“This “compensatory” principle means that the injured victim will get no more and no less than what is needed to provide for their lifetime losses, and is in stark contrast to other jurisdictions where damages can be massively inflated as a way of punishing the wrongdoer.”
As an expert in the field, Philip began to respond to the consultation and provide evidence of the impact of the Discount Rate to his clients. In doing so he noticed that one of the questions stated: “Please provide evidence as to how the application of the discount rate creates over compensation and the reasons it does so.”
He continued: “I was shocked and concerned for my client group when I read the way in which the question had been put. The question, as framed, seemed to have reached a conclusion and was calling for evidence to support it, when of course the process should be the other way round.
“This is quite apart from the fact that not only is that statement disputed, those of us who represent claimants consider that the evidence shows that for many years injured people have been undercompensated and not received fair and proportionate damages to enable them to meet their needs.”
Philip raised his concerns with the Ministry of Justice who responded by saying it was an inadvertent error and they have now corrected the question on their website to read: “Please provide evidence as to how the application of the discount rate creates under or over-compensation and the reasons it does so.”
He went on to say: “I am of course pleased that the Ministry of Justice have responded to me to confirm they have corrected the error. Whilst many of us representing those with life changing injuries believe the evidence shows the new Discount Rate means that people will be fairly compensated, if there is to be a further consultation and review, it is vital that it is fair, open and evidence-based and the overriding principle must be to ensure that people injured through the fault of others are fully and fairly compensated.”