Thursday, February 21, 2013

Inner House decision in discount rate appeal “deeply disappointing”

Digby Brown have described today’s (Thursday) Inner House decision to deny them the opportunity to present evidence on the discount rate applied to personal injury damages in Scotland as “deeply disappointing” and one which will disadvantage people across Scotland who have suffered serious injury through no fault of their own. 

Currently, a discount rate of 2.5% is applied to personal injury damages based on a 2001 calculation of the rate of return individuals could achieve from investing in low-risk government bonds. Such investments do not currently achieve this level of return. The result is that victims of accidents who have suffered severe and life changing injuries are left hundreds of thousands of pounds short of what they need to live independently.  Their only option is to take risks with their investments if they are to avoid their damages running out early.  

Digby Brown sought to lead evidence on the case for applying a different discount rate when Anthony Stephen Tortolano v Ogilvie Construction Ltd was heard by the Court of Session. Following an Opinion by Lord Brodie in October 2012 that such evidence could not be heard unless the circumstances were exceptional, the firm appealed to the Inner House. 

The firm has expressed their frustration that the court has not allowed the evidence to be led, which comes at a time when government policy in this area appears increasingly to be designed for the benefit of insurance companies and not accident victims.

Moira Kay, Partner in Digby Brown’s serious injury department said:

“This is a deeply disappointing decision the consequences of which will only be to further disadvantage people across Scotland who suffered serious injury after being the victim of an accident.

“The current discount rate of 2.5% was set in 2001 and has not been reviewed since. To say the economic climate has changed since then is an understatement.  Low-risk investments simply do not generate a 2.5% level of return at this time.  This means those receiving compensation have to either accept not receiving the sum of damages needed to allow them to live independently of statutory services, or, like a normal stock market investor, take risks with their money.

“In making our original submission and in this appeal, we sought the opportunity to present this reality in court and make a case for how the court could proactively remedy the injustice through the application of a more appropriate discount rate. “

Moira Kay also expressed concern at the decision in the context of wider government policy. Last week the Ministry of Justice in England the Scottish Government and the Northern Irish Department for Justice jointly published a consultation on the discount rate. Moira Kay said:

“It is depressingly clear from the content and tone of the consultation published last week that the UK Government is seeking to raise not lower the discount rate, a move which would only benefit insurance companies and their shareholders while disadvantaging people who require fair and adequate compensation to allow them to live with dignity and independence following a serious injury.

“The insurance lobby has sought to characterise personal injury damages, the discount rate and the independence and dignity their proper application give to people who have suffered serious injuries, as somehow “too expensive”.  If this is going to be the basis of the government’s policy in this area, it is even more frustrating that we have been denied the opportunity to present a case on behalf of those directly affected by the issue before the courts."

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Friday, February 15, 2013

Leading debate on the discount rate

Digby Brown is leading the debate on the discount rate applied to personal injury damages. 

The UK Government launched a consultation on the issue earlier this week and Digby Brown expressed our concern that the proposals in the consultation would further disadvantage those who have suffered injury and merit an award which properly reflects the costs of not being able to work or requiring care for the rest of their lives. Read our full response to the launch of the consultation earlier this week. 

The article below was written by Gareth Rose and published in The Scotsman newspaper on Thursday 14th February 2013. 

Moira Kay is a partner in Digby Brown's Serious Injury department. 

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Lawyers hit out at ‘pay-out cash threat’

VICTIMS of the most serious injuries stand to lose millions of pounds in compensation under changes being considered by governments, lawyers have warned.

A consultation exercise launched by both the Ministry of Justice and the Scottish Government suggests victims currently receive too much.

Scottish lawyers fear more people will be pushed into making riskier investments in an eff-ort to ensure their money lasts.

They have accused the governments of kowtowing to the insurance lobby and trying to protect public health organisations.

The review focuses on the discount rate, which is used to calculate the total payment. The rate is based on how much interest victims can expect to claim on their payout – the higher the rate, the less they receive.

At present it is set at 2.5 per cent, on the understanding people will invest in index-linked government stocks, although even this is optimistic.

Without stating what the rate should be, the consultation suggests it is currently too low.

“There is evidence that recipients of these lump sums do not invest in the cautious way that is envisaged by the guidelines,” it says. “Instead, the initial evidence indicates they seem to invest in mixed portfolios, including higher-risk investments.”
Moira Kay, partner in serious injury at Digby Brown, said: “To me the consultation document indicates the discount rate is seen as too expensive in relation to clinical negligence cases and to the insurance industry. It seems the government is being driven by the insurance lobby.

“It means victims of accidents will be forced to take the same position as an investor in the stock market.”

A Ministry of Justice spokeswoman said: “We are consulting on options for the process of how compensation payments are made in personal injury cases to ensure it remains fair for all parties.”

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Thursday, February 14, 2013

Response to insurance industry road traffic accident claims proposal

Why "Cutting out the middle man" means cutting out fairness and access to Justice

Digby Brown have responded to proposals from insurer Aviva that call for a radical change to the way road traffic insurance claims are dealt with in the UK, arguing they mean insurers both operating and administrating a claims system, an unfair situation which would deny thousands of road traffic accident victims access to justice and proper compensation.

The Aviva proposals call for a change in the law to compel all road traffic accident victims to notify insurers (whose drivers are responsible for the accident and injury) first, in order to allow those insurers to deal with the claims directly, and without the involvement of “middle men”, including lawyers. The insurer claims this would save the industry money and mean lower motor insurance premiums.

Responding, Brian Castle, Digby Brown Partner, said:

“At first glance, these proposals sound attractive. After all, who doesn’t want lower car insurance premiums? It’s when we look at the detail of the proposals that the major flaw and injustice at their heart becomes obvious.

“Central to Aviva’s proposal is the assumption that you can trust an insurer to be impartial and just in ensuring fair and proper compensation is paid to injured car accident victims and their families. Well, actually you can’t.  Aviva and other insurers have a fundamental conflict in seeking to maximise shareholder profits and settling liability claims at the lowest figure they can. That cannot square with properly looking after the interests of the injured party to ensure they obtain proper redress.

“At Digby Brown we have seen a long and continuing list of examples where insurers have tried to settle claims directly with injured parties and have either deliberately or negligently sought to undersettle these claims for a fraction of their proper worth. We have statistics, collated over several years and involving thousands of Scottish cases, that tell us  that where we have had to litigate on behalf injured clients, we receive more than three times the average settlement figure in damages compared to the settlement offered by an insurance company prior to litigation.  That reaffirms our view that insurers cannot be trusted to deal such with claims themselves.

“An award of compensation is designed to put an accident victim back into the pre-accident position and is made of up components such as repayment for loss of earnings; costs of past and continuing care, as well as an award for injury.  It is important that an accident victim is properly advised by a solicitor acting in their best interest and fighting their corner. It seems the insurers want the benefit of a captive market - taking out a road traffic insurance policy is compulsory in law for all of us - without meeting the costs, from their profits, a system with proper safeguards involves.

“Where insurers are concerned about the escalating costs of claims, perhaps they would do well to engage with road traffic accident victims and their solicitors and make genuine efforts to settle cases at their proper value earlier in the process. They could also commit to avoid the increasingly prevalent industry practice of making offers to injured claimants before medical reports have been commissioned, a practice which cannot pretend to assess the proper value of a claim and  which also makes it easier for fraudulent claims to proceed, something all of us wish to eradicate. They cannot, however, be permitted to operate and administer a claims system themselves without significant detriment to road traffic accident victims injured through the fault of others. “

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