The rising cost of personal injury damages

Catastrophic injury leads to £37 million damages against the NHS, the highest award in a clinical negligence case

Executive summary

It has been reported in the press that a six year old boy has been awarded in excess of £37 million in compensation from the NHS after contracting a virus in hospital which lead to catastrophic brain damage. The boy contracted the Herpes Simplex virus which later developed into a devastating brain fever following his birth at Watford General Hospital. Press reports indicate that the hospital did not detect the infection quickly enough, citing a two day treatment delay which resulted in severe brain damage. West Hertfordshire Hospital NHS Trust agreed terms of settlement which were approved by the court.

The damages will be paid by way of lump sum in addition to a Periodical Payment Order to cover the cost of the 24 hour care he will need for life. The capitalised value of the settlement exceeds £37 million. Full details are not yet available but the award is likely to include, in addition to care and case management, loss of earnings, carer accommodation, aids and equipment, therapies and any specialised transport needs together with costs of administering the fund comprising Court of Protection fees and deputy’s charges.

We are told that this is the highest award of damages in a clinical negligence claim against the NHS. The fact that compensation payments for the most severely injured claimants have reached such high levels is worrying news given the likely impact on insurance premiums.

There are a number of reasons why the cost of individual claims has risen so dramatically in recent years:

  1. The reduction in the discount rate. Although only a small percentage of cases involve future pecuniary loss, these claims are responsible for a significant proportion of the overall damages bill. The rate makes allowance for the investment return upon lump sum damages. In 2017 the Lord Chancellor used her power to reduce the rate to -0.75%. As a result of that change, the Association of British Insurers estimates that a UK motorist can now expect to pay on average a total of £31,650 on motor insurance during their driving lifetime. This is up 5% on 2014. It equates to more than the price of the average new car or the average UK salary.
  2. The decision in Heil v Rankin increased damages for non-pecuniary loss in order to bring such awards in line with inflation. The effect was to increase the highest level of awards for pain and suffering by one third from £150,000 to £200,000 (the Department of Health at that stage estimated that, because of the disproportionate number of high value claims brought against the NHS, the judgment would cost it £74 million in future liabilities).
  3. The index linking (to earnings rather than prices) of annual payments to cover care.
  4. Legislation meaning that all social security benefits have to be repaid irrespective of the level of damages awarded.

Conclusion

Some will argue that the increase in damages is the inevitable result of closer adherence to the principle of full restitution. On a human level one can only feel sympathy for the claimant and his family whose lives have been devastated by this incident. However, any award has to be fair to both claimants and defendants. Is an award of £37 million justice or excessive?

Whatever your view, awards at this level are going to have a significant impact on insurance premiums. Following the reduction in the discount rate to –0.75% representations were made by insurers to the Chancellor, Phillip Hammond. Those representations will inevitably continue and there will be pressure to revisit this issue.

If you have any questions or would like to know more about our legal update, please contact Dave Cottam, Partner, or Rebecca Blythe, Partner. 

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