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Increased Compensation for Personal Injury Claims

Claimants who sustain serious injuries will be able to obtain more compensation after March 2017 

If you are unfortunate enough to have sustained injuries in an accident you may need to recover compensation for future loss of earnings and future care for a considerable period of time (sometimes the whole of your life).  When this occurs the Court will calculate the amount of money you will require each year and then use actuarial tables to calculate the amount of money required over the person’s lifetime (this takes into account issues such as mortality rates, the fact the money will be invested (the discount rate) and other criteria.

The Lord Chancellor has just announced an important change to personal injury compensation payments.  The Chancellor has lowered the discount rate from 2.5% to – 0.75%.  This new rate will apply from 20 March 2017. The court will apply a discount rate which links the damages award to returns on low risk investments – typically indexed linked gilts i.e. it is assumed that the monies will be invested by the Claimant in a low risk investment to gain an investment in return.

Low risk investment returns are now very low (and have been for a considerable time) but cost are increasing significantly.  It is a reality that 2.5% return on net investment return is unrealistic.  In reality the Claimant would not gain that type of return and this means that the money awarded may be insufficient to cover the whole of the person’s life.

This decision by the Lord Chancellor will see damages awards in the most serious cases, rise significantly which will have an inevitable impact on the insurance industry with increased premiums and the NHS with increased funding required.

Bill Braithwaite QC, who specialises in medical negligence and personal injury claims says “This is hugely significant. It could double some damages awards….For someone in their late 20’s, lump sum damages could change from £4.8m to £11m and for someone in their 60’s, where the decision impacts less, lump sum damages awards could change from £3.8m to £6.5m”

From the prospective of the British Insurers the decision is “crazy”.  Insurers consider this will lead to soaring claims costs and an increase in insurance premiums.  However, the Association of Personal Injury Lawyers state that insurance companies have “saved millions of pounds in unpaid compensation and have been aware that the decision to change the discount rate has been on the cards for 6 years”.

Rutherfords LLP Partner, Steve Wengraf, who represents many Claimants with significant traumatic injuries, says “I consider that the Lord Chancellor’s decision to decrease the discount rate was an inevitable and fair decision and will result in injured persons recovering the compensation they deserve  and require in the most serious cases”. 

From the prospective of Rutherfords LLP’s clients it has been historically frustrating that clients who sustain very significant injuries often obtain less compensation than they should because the returns the Court assumes the client will recover are not actually recovered. Therefore the damages recovered, although large, are not sufficient to pay for the care and loss of earnings that person will require for the whole of their life.

For further information please speak to Steve Wengraf.


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