This is the second of three articles recently written by Thompsons Solicitors for the Society of Labour Lawyers' publication Justice for All. If you would like to contribute an article analysing or commenting on a legal development from a left-wing point of view, please send submissions to firstname.lastname@example.org
Draft legislation on the discount rate is another attack on personal injury claimants
By Gerard Stilliard, Head of Personal Injury Strategy at Thompsons Solicitors
Recently the government continued their attack on those injured through no fault of their own with their draft legislation on the personal injury discount rate. There are significant shortcomings in the proposals, as discussed in the evidence we submitted to the Justice Select Committee.
The discount rate relates to the assumed rate of return which those receiving damages from a serious, long-term personal injury will be able to earn on their lump sum award. The rate determines whether victims receive the correct level of damages over the duration of their disability.
The (now twice-!, Ed) previous Lord Chancellor made an inevitable and long-overdue decision in March 2017 to amend the discount rate to ensure it was lawful. Until the recent correction, the discount rate had been far too high for many years, meaning that insurers were able to conclude injury claims based on an assumption of a return on compensation that bore no relation to the reality of the returns people were getting on their savings. Injury victims were getting short changed by insurers for years and there is nothing that those of us who represent the injured could do about it, because the rate was fixed.
Since March 2017 and under pressure from the insurer lobby, the government has acted in unseemly haste to introduce this draft legislation, which could be used to push the rate back up at the expense of seriously injured people.
The proposed legislation will mean that, in many cases, those with life-changing injuries will have to take greater risks with their investment and will be less likely to receive sufficient money to pay for the many years of healthcare, income support, rehabilitation and housing adaptations which their injuries have made necessary.
This is not acceptable. It undermines the fundamental and longstanding principle that those who are innocent victims of injury should receive full compensation for their losses. The government should look carefully at how seriously injured people in practice invest their damages. In our experience, those who come into funds after a traumatic injury are understandably cautious. Often they would prefer the security of a Periodical Payments Order (PPO), an annuity paid by the defendant/insurer – but insurers often refuse to make such payments, choosing to have the injured person bear the risks of investment.
Our evidence to the Justice Committee explained that the government’s approach to the discount rate is informed by the false assumption that the seriously injured are often ‘overcompensated’ for their injuries. In our extensive experience, this is a phenomenon which hardly ever occurs. We believe the losses suffered by injured people in the proposed changes will simply mean extra profit for insurers, and that is wrong. Any changes to existing legislation must always place the needs of the victims of injury at the heart of the assessment of damages.
Our three key messages to the Justice Committee were:
- Those investing a lump sum award of damages should not be expected to take any more than a minimal risk.
- The Lord Chancellor should continue to be responsible for reviewing the rate of return, but should do so on a more regular basis in order to be able to respond to significant changes in market conditions.
- Injured people who receive lump sum payments in damages must always be provided with the best investment advice. Mechanisms should be put in place to make sure no one is left to be captured by commercially motivated and loosely regulated financial advisors, whose best interests may not always be the same as their clients.
The bottom line for the select committee and the government must be to develop legislation that is appropriate for the victims of personal injury – those who have been injured, often catastrophically, through no fault of their own.