Compensation – How is it assessed
Basis of compensation
The principle behind any award of Compensation (damages) is to put the injured person (the Claimant) back in the financial position he would have been in, had the injury not occurred.
Main elements of compensation
There are two main elements in any award of damages for personal injury, namely:
- compensation for the effects of the injury (such as pain and suffering)
- compensation for financial loss incurred.
The various component parts that may make up an award of compensation are referred to as "Heads of Damage".
Pain, suffering and loss of amenity
Compensation for the effects of the injury is reflected in an award for “Pain, suffering and loss of amenity”. This head of damage is intended to compensate the Claimant not only for the pain and suffering caused by the injury but also for the impact of the injury on the Claimant’s enjoyment of life.
The term "loss of amenity" is the legal term used to describe the impact of the injury on the Claimant’s enjoyment of life. It might, for instance, cover compensation for being confined in hospital or being left with a disability that stops the Claimant from engaging in activities such as playing sport or leisure walking.
No monetary award can, in any real sense, compensate for pain, suffering and loss of amenity. Consequently damages under this head cannot be assessed by a process of calculation. However, while no two cases are ever precisely the same, the law aims to achieve consistency between awards. When assessing damages for pain, suffering and loss of amenity the Courts have therefore used the amount of damages awarded in reported cases as guidelines or markers and sought to slot a particular case into the framework provided.
When assessing damages for pain, suffering and loss of amenity further assistance we may need to research similar decided cases. We can also look at the Judicial College’s (formerly Judicial Studies Board) Guidelines. These guidelines are intended to distil the best information contained in reported cases and to present the result in a convenient, logical and coherent form. The guidelines set out possible ranges of compensation appropriate to particular types of injury. However many injuries do not fit neatly within the categories set out in the guidelines and particular care must be taken when looking at claims involving multiple injuries Furthermore the guidelines are not intended to represent a 'ready reckoner' or restrict the individual judgment that must be applied in each particular case.
Financial loss incurred to date or in the future by the Claimant which is directly attributable to the injury can generally be included in the claim for compensation.
This loss might include relatively modest expense such as the cost of clothing damaged at the time of the injury or it might include additional travelling expenses getting to hospital appointments. In other cases the loss may be more substantial such as loss of earnings during a period off work pending recovery. In other cases very substantial loss may be incurred where for instance the injuries permanently compromise the Claimant’s ability to work.
Again there are generally two elements in any award of damages for financial loss. These are past financial loss and future financial loss.
Future financial loss - Multipliers and multiplicands
The traditional approach adopted by the courts when calculating a claim for future loss is to assess what lump sum is needed to compensate the claimant for the future loss.
The starting point in this calculation will be to determine what annual net loss the Claimant will incur in the future (the "multiplicand"). In a claim for future loss of earnings, this would be the annual loss of earnings. The multiplicand will then be multiplied by a “multiplier".
The multiplier is assessed having regard to the number of years between the date of the settlement and the date when the loss stops. In a claim for future loss of earnings, this may be the date when the Claimant would, but for the injury, have retired. In a claim for the future cost of providing care for a seriously disabled person the multiplier might be based on the Claimant’s life expectancy.
The multiplier will also take into account factors such as:
- The Claimant will (if damages are paid by a lump sum) receive an early capital sum to compensate their loss when in fact the loss (such as loss of earnings) may be incurred over an extended period. As the capital sum can be invested to produce an income, an adjustment is needed to take account of the benefit arising from accelerated receipt;
- In a claim for loss of earnings there is a risk that even if the injuries had not been sustained, the Claimant's career might have been interrupted as a result of the normal risks of life; and
- In a claim for loss of earnings any continuing disability may impact upon the proportion of the Claimant’s working career in which the Claimant can now expect to be employed.
Actuarial tables known as the “Ogden Tables” are used to determine the appropriate multiplier.
Future financial loss - Lump sums and periodical payments
Until relatively recently the only option available to the Court when awarding damages for future loss was to award a lump sum calculated using the multiplicand and multiplier approach. In appropriate cases the Court now has powers to order that the whole or part of the award should be paid by way of periodical payments rather than a lump sum.
In those cases the Court will determine the likely level of the Claimant’s future annual loss and order the Defendant to make annual periodical payments (uprated to account for inflation) to compensate for that loss. This approach is likely only to be appropriate in relation to larger awards
There can be disadvantages as well as advantages associated with periodical payments and often the balance between any lump sum element of the award and periodical payments may be crucial. In appropriate cases, it may be necessary to obtain expert financial advice on best balance between a lump sum and periodical payments.
Experience in weighing up the sometimes difficult and complex issues to determine the appropriate balance between any lump sum and any periodical payments can be particularly important in cases involving brain and other catastrophic injuries.
Loss of earnings
Where an injury causes a Claimant to be unable to work then they are entitled to recover the loss sustained during the period of absence. Where the Claimant has been able to return to work, prior to settlement of the case, it is usually possible to make a reasonably straightforward assessment of the loss by working out the average weekly net earnings prior to the accident and multiplying this figure by the number of weeks the Claimant was absent.
In some cases, the Claimant will not have returned to work by the time the case is settled or comes to trial and so, in those circumstances, the Court will need to assess what future loss of earnings the Claimant will incur. In other cases the Claimant may have been able to return to work following the accident but
- their injuries may deteriorate so that at a future date he will have to give up his work; or
- their injuries may be such that his earning capacity may have been reduced
In either case, the Claimant can pursue a claim for future loss of earnings.
Loss of congenial employment
In certain circumstances, where a Claimant has to give up a career as a result of the injury sustained, it may be possible to obtain a sum of money to compensate the Claimant for the loss of job satisfaction and fulfilment arising from the loss of career. This compensation is referred to as damages for loss of congenial employment and can be claimed in addition to the financial loss arising from the fact that the Claimant's career has been curtailed.
Cost of nursing care
In some cases, the impact of an injury is such that the Claimant requires professional nursing care and this loss can be included in the claim. In claims arising from severe brain injury this may be the biggest element of the claim.
Claims for nursing care can also include claims in respect of the value of nursing care provided without charge by family members (often described as “gratuitous care”).
Keeping a diary to record progress and expenses
It is worthwhile keeping a diary to record key stages in recovery from an injury such as the points when the injured person:
- no longer needed assistance with bathing or dressing
- no longer needed to use crutches
- was able to manage normal domestic chores
- was able to drive
- was able to return to work
The diary may also be useful as a record of trips to the hospital for medical appointments/ physiotherapy etc and to record expenses such as rail and taxi fares, car mileage, parking costs etc. Please also keep any receipts for expenses incurred.
The diary may be a useful aide-memoire if later we need to prepare a statement from the injured person dealing with the progress and recovery from their injury. We can also go through the diary and any other records or receipts to assess what losses are properly recoverable from the Defendant and if appropriate seek interim payments to cover those expenses during the course of the claim.
Please contact us if you would like any further details of the assistance we can offer.