In the last ten years or so my specialist team and I have secured around one hundred million pounds (£100,000,000) of compensation for clients who have suffered spinal cord or other life changing injuries.
That sum is a lump sum equivalent value. A lump sum equivalent value means that whilst the client will usually have received a substantial part of their compensation as a lump sum, a part of their award might also have been or is being paid to them on a periodical payment order (‘PPO’) basis. By working out what the periodic payment is over the anticipated or agreed life expectancy you arrive at a sum that can then be used to calculate the lump sum equivalent sum. A note of caution might be added here: it is often said that the only certainty about predicted life expectancy is that it will almost certainly be wrong. No doctor or expert can say with certainty on what date a life will end.
That ‘part lump sum and PPO’ based award tended to be preferred by Claimants more often some years ago and prior to changes made to the way compensation lump sums were ‘discounted’ to mitigate against the rather fanciful risk of overcompensating claimants. Most claimants faced with having to take their chances in investing their then more heavily discounted compensation lump sum preferred an annually calculated sum designed to keep track of carer wages for at least part of their award.
PPOs were at first seemingly not liked by Defendants who wanted the case off their books; some Claimants also resented the need to be in lifelong touch with the Defendant even after the case had settled. Later, it seemed some Defendants did not mind managing the commitment to PPOs since it may mean less outlay than a lump sum and frequently the recipient passed away much sooner than expected. That meant the paying party's commitment to making annual payments for as long as the Claimant lived ended much sooner than anticipated. There was (is) also the annual navigation of what by any measure is a complex calculation to adjust the annual sum that the paying party needs to pay (and checking it is correct).
The preference of many Claimants for a lump sum-based award is now more apparent given that lump sums are now less discounted than they had previously been because of a levelling up exercise that was implemented a few years ago. Successful claimants still need to navigate the financial markets, but their predicament is a little better than it had previously been. Then the risk of overcompensation was nothing compared to the reality of most claimants finding that they were under compensated when subjected to the vicissitudes of investing their compensation – fearing risking spending the compensation they had received too quickly or troubled by spending it on things that were needed in case it did not last.
The amount of compensation paid will be the sum reflecting the loss endured because of the Defendant’s negligence. The sum will either be assessed by the Trial Judge based on evidence put before the Judge at a Trial or, more commonly, it will be a sum that has been agreed between the parties at a mediation or joint settlement meeting at which both parties will have compromised to reach an acceptable resolution of the claim.
Each party will advance assertions about what they say the value of claim should be. That will factor in an amount based on the medical evidence in respect of pain suffering and loss of amenity (typically a modest six figure sum of itself) based on previous awards made by the Courts in respect of similar injuries.
There is also likely to be a sizeable element of the total sum in respect of past losses that will incorporate the income lost and expenditure incurred because of the injury from the date of the injury to the date the compensation falls due to be paid.
By far the largest part of the compensation sum in most spinal cord injuries case will be the sum awarded in respect of ongoing and future losses. That will combine the Claimant’s life expectancy at the date the award is made, with what they will lose as income (or revenue) because of the injury and what they will incur as expenditure for such periods as may be applicable if not for the rest of their life entirely.
These ongoing future losses are calculated with reference to expert medical and non-medical evidence covering (but not necessarily limited to) the Claimant’s medical needs, psychological care, lost earnings and pension loss, care and case management, physiotherapy, occupational therapy, assistive technology, and accommodation needs. The solicitor must identify from the experts’ reports what the Claimant’s reasonable needs are, what they cost to meet initially and where applicable what they cost to replace and at what intervals over what length of time for each element of the loss in issue. Annual sums are then assessed using actuarial tables that then provide a sum discounted (to avoid overcompensation by advanced receipt of sums that if invested immediately would accrue to risk the Defendant overcompensating the Claimant).
Adding in interest where appropriate and then combining the various total under each ‘head’ of loss reveals the lump sum equivalent figure each party hopes to persuade the other and ultimately the Trial Judge to accept (or order is paid).
It should be relatively easy to see how two people who have the same level of spinal cord injury may end up with vastly different lump sum equivalent awards. The younger person with a high-level cervical injury and a long lifetime of future losses may well need an eight-figure lump sum.
The same injury suffered by a person closer to the other end of life expectation may well have similar pain suffering and loss of amenity, and perhaps not dissimilar past losses; but their relative shorter life expectancy would tend towards a seven or possibly even six figure compensation sums depending on the issues at stake on liability.
To read more about Brethertons Spinal Cord Injuries Team - https://www.brethertons.co.uk/site/services/life-changing-injury-solicitors/spinal-injury-solicitors/
To follow us on Twitter - @neurolawyer
To contact us – telephone 01788 557617, or email jonrees@brethertons.co.uk or sianbuxton@brethertons.co.uk or allisonfitchett@brethertons.co.uk.
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