Increase in the value of claims with future losses – An explanation for our clients

There are several elements to calculating the right level of compensation. It is usually made up of awards for:

  • Pain, suffering and loss of amenity

Your injuries and their effect on you

  • Financial expenses incurred.

Anything you have bought or paid for as a direct result of the negligence, for example prescription or medication charges, travel expenses and loss of earnings.

  • Future anticipated losses.

These are any losses you will likely suffer in future as a result of the negligence such as ongoing medication charges, regular private treatment, annual fees for something you require or ongoing loss of earnings. They can also be one off future losses or losses recurring every 10 years in the future.

To calculate the future losses there are set formulas that all lawyers use. For future losses you take the likely future expense and multiply it by a figure known as the “multiplier”.  All lawyers use actuarial tables known as the “Ogden Tables” to work out the “multiplier” as you cannot simply use the amount of years the loss is expected. There are many different types of tables and of future loss but if we look below in general terms at a recurring loss for a set period you will see how the situation has changed in March in favour of the person claiming compensation.

When compensation is paid at trial you would receive “in your hand” the future financial cost of the expense, therefore if you were to suffer, for example, an annual medication cost of £100 for the next 34 years the calculation should not be £100 x 34 years = £3,400. The reason for this is that if you were to get £3,400 now you could in theory invest this and end up with more than the loss would have been at the end of the 34 years. The purpose of compensation is to put you back to where you would have been had it not been for the accident/incident/negligence therefore having more than your loss at the end of 34 years would be considered a windfall and against this principle. For this reason the figure of 34 is discounted to allow for the fact you could invest it and it could grow.

As mentioned above these discounted figures are set out in the Ogden Tables used by solicitors to calculate the position correctly. From 2001 until 19th March 2017 all “years of loss”,for example, were discounted by 2.5% to provide the correct “multiplier” or figure to times the ongoing or future loss by.

From 20th March 2017 the figure to use to discount the future loss has changed. Now instead of discounting by 2.5% in the above 34 year example it will be discounted by -0.75%. This is an incredible change and significantly increases the total figure. 34 years annual loss in this situation which at 2.5% discount was 23.01 years totalled £2,301. This becomes 38.75 years at -0.75% discount totalling £3,875. This is more than the anticipated loss at £100 per year for 34 years. Any claim with future losses has now increased in value. In some claims the increase is dramatic by hundreds of thousands of pounds.

Understandably this has not been popular with Defendants and we all accept that this is likely to alter again. The likelihood is that it will change to something which will still potentially mean a discount to the years claimed but one more likely to be balanced by investing the money and returning you to the position you would have been in, had the negligence never occurred.

This is a complicated issue but our solicitors always aim to explain in detail why and how they are claiming losses for you. If you think you may have a claim for compensation and in particular for future loss do not hesitate to call us and speak to one of our specialist clinical negligence solicitors on a free, no obligation, basis.

Joanne Dennison – March 2017