Payouts for serious injury ‘in danger of running out early’
YOUNG people who suffer debilitating injuries in serious accidents could run out of money for care by the time they reach their 50s, lawyers warned yesterday.
They believe that judges are too optimistic about the amount of interest people will receive on lump sum pay-outs.
In a test case, Stephen Tortolano, 23, is seeking compensation after suffering serious brain injuries in a four-metre fall from a cherry-picker while working in Stirling in November 2009.
Now unable to work and needing medical care for the rest of his life, he is likely to receive a multi-million-pound settlement. However, lawyers from the Digby Brown firm argue that he should receive about £600,000 more.
Lord Brodie, sitting at the Court of Session in Edinburgh, ruled against them, with his reasons due to be published tomorrow. The amount awarded to Mr Tortolano will be decided later. Digby Brown plans to appeal.
At present, when estimating compensation, judges use a complicated formula with factors including a claimant’s needs, loss of earnings and life expectancy.
They also use a 2.5 per cent above-inflation figure, relating to interest on an index-linked government stock, known as the discount rate.
That rate was set by the Lord Chancellor in 2001, when the economy was healthy, and Digby Brown argued it was unfair to use the same figure today. “Back in 2001, a claimant could reasonably expect to achieve 2.5 per cent,” said Moira Kay, partner in serious injury at Digby Brown, outside court. “It was seen to be a safe investment.
“In August 2012, government stocks returned a rate of zero.”
Mr Tortolano lives with his parents. They are concerned about how he will manage when they are no longer around to care for him. Ms Kay said: “That’s a huge worry. As long as they [his parents] are around, they will be there to support him. But what happens when he does not have that support?”
Digby Brown has about 80 cases that will be affected by the ruling. Ms Kay said: “For any young person who has to claim, if their investments are not producing a 2.5 per cent rate of return… by the time they are in their 50s or 60s, it will have run out.”
The Ministry of Justice and the Scottish Government are consulting on whether the discount rate should be cut.
A spokeswoman for the Association of British Insurers said: “Insurers are committed to paying fair compensation as quickly and efficiently as possible and the industry will engage with government on developing the right methodology for setting the discount rate.”
A Scottish Government spokeswoman added: “Returns on investments have been declining for some time and there is a risk that the present discount rate may be too high.”
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