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The law on damages - the government's response
6 July 2009
The government released its long awaited response to the
consultation ‘The Law on Damages’ this week.
Having taken two years to compile the response, the government
is disappointingly non-committal in relation to many of the key
areas addressed in the consultation, including mesothelioma claims,
assessment of accommodation costs and the interface between damages
and the availability of statutory care.
Collateral benefits and double recovery
A significant theme of the consultation was double recovery. The
government’s aim was stated to be that a claimant should be
‘compensated for his or her losses, but only once’. However,
despite consulting in detail on the extent to which courts should
take into account collateral benefits, the government does not
intend to take further steps to ensure double recovery is
avoided.
The government does propose to introduce a personal obligation
on the claimant to account to a care provider in relation to
damages for gratuitous care, in place of the trust approach,
currently adopted by the courts. However, it is difficult to see
that this will give rise to any significant practical benefits.
Ten pages of the consultation paper dealt with the cost of
private care and section 2(4) of the Law Reform (Personal Injuries)
Act 1948. It is clear that a number of respondents provided
detailed submissions, but the government’s conclusions on the
subject are limited to 2 paragraphs, indicating that the topic will
be given further consideration.
Section 2(4) provides that in assessing damages for care and
treatment, the possibility of using NHS facilities is to be
disregarded. However, this legislation is a product of its time and
subsequent studies and reports, including the Chief Medical
Officer’s 2003 report “Making Amends”[1], have recommended that the
section be repealed.
It is disappointing that approximately half of respondents
opposed repeal of section 2(4). Many of these were claimant
representatives, who may have a vested interest in the section
being retained. However, another quarter of respondents suggested
further research into double recovery was required before a
decision was taken.
It appears that many of those responding have misunderstood the
issues involved. Section 2(4), in conjunction with the NHS
philosophy of providing services free at the point of delivery,
means that there is no mechanism to prevent a claimant from seeking
damages for treatment, and then securing the same treatment, at no
cost to himself, from the NHS.
Further research in relation to the extent of double recovery
will not resolve this debate. The fact that the law permits such
double recovery (whether or not it is prevalent) is
unacceptable.
Fatal accidents
The government intends to take forward a number of proposals in
relation to the law on fatal accidents. In particular, categories
of claimants entitled to recover under the Fatal Accidents Act
(FAA) will be extended to include ‘any person who was being wholly
or partly maintained by the deceased immediately before death’.
There will be no qualifying period (such as the two years
cohabitation currently required) for claimants to satisfy the
test.
Though the government has taken a liberal approach in
determining who may bring a dependency claim, the same flexibility
is not reflected in relation to the circumstances the court may
take into account in determining damages. Courts will not be
permitted to consider the prospects of re-marriage or of further
relationships of dependency but, will be limited to taking into
account the fact of marriage or of cohabitation for a period of two
years.
Similarly, the only circumstances to which courts will be
permitted to have regard in considering whether dependency was
likely to continue, will be a petition for divorce (or equivalent)
or evidence that a couple no longer cohabited.
There is a definite discrepancy between the approach adopted in
relation to the dependant’s relationship with the deceased (which
will generally be treated as lifelong and secure) and subsequent
relationships (which are assumed to be transient and to offer
inadequate financial protection unless they have been ongoing for
two years or have led to marriage).
While it is undoubtedly important that dependants are not
undercompensated, the government’s proposals are likely to lead to
overcompensation and double recovery in many cases. They do not
meet the government’s own standard that claimants should be
compensated for losses, but only once.
Bereavement damages
The government also intends to extend the categories of
claimants entitled to bereavement damages. These will include
unmarried fathers with parental responsibilities, children of the
deceased under 18 years of age and cohabitees of two years. The
possibility of including step parents, siblings and engaged couples
has been rejected.
Bereavement damages were increased to £11,800 from January 2008,
and will remain at this level for most categories of claimants,
with children of the deceased receiving £5,900 per child. The
government intends to uplift the figures in line with RPI every
three years. There will be no cap on total bereavement damages.
While the basic level of bereavement damages have not been
increased by the consultation, the broadening of the categories of
claimants who can recover will significantly increase damages in
many claims. For the average family, bereavement damages for loss
of one parent will double and in many instances the increase will
be greater.
In consulting upon bereavement damages, the government asked
whether awards should be reduced for contributory negligence – the
majority of responses agreed this, and it seems the government will
include relevant provisions in legislation. Some respondents have
suggested that contributory negligence should not apply to children
under 14, a position they argue is already established by caselaw.
Those submissions are wrong, and it is to be hoped that the
government will not impose an arbitrary age limit in relation to
contributory negligence in this context.
The cost of reform
While the government has refused to take forward proposals in a
number of key areas, the significance of the changes it intends to
introduce, and their likely cost, should not be underestimated.
The risk assessment which accompanies the response suggests
additional cost to compensators in the region of £5,500,000 per
annum. However, on closer scrutiny it appears that this figure is
too low. It is based upon calculations in relation to bereavement
claims only and relies on conservative estimates of the number of
potential claims. For example, the calculation assumes that only
50% of deaths caused in motor accidents or the work place will give
rise to a potential claim.
More fundamentally, the calculation deals with damages only and
fails to take into account the additional legal costs of the
further claims that will be brought in relation to bereavement. In
light of the statistics, on costs of claims at this level, it would
not be surprising if this increased the overall additional cost to
defendants by 50 to 100%.
The summary also excludes estimated costs of additional
liabilities under the FAA, which come to £5,560,000 on the
government’s figures. Again, this may be an underestimate. A broad
brush reduction of 50% is applied to baseline figures, with limited
justification, and it is not made clear whether these figures are
intended to include legal costs incurred in dealing with claims. In
any event, the figures are old, dating to 2001.
The amendments to the FAA are likely to have a particularly
marked effect on defendants’ liabilities under the Act. The types
of relationships which they will permit to form the basis of a
claim (unmarried and not cohabiting) are likely to be particularly
common between younger individuals. The additional liability
imposed will be high as:
Fatal road traffic accidents are particularly common among young
drivers – many more of these may now give rise to dependency
claims
Damages awarded to this new class of claimant are likely to be
substantial, being assessed on the basis of dependency continuing
over many years or decades
These factors are not adequately considered in the government’s
analysis.
The FAA amendments are also likely to lead to increased
prospects of double recovery, which is already a significant
concern in this area. Statistically, many of those who bring claims
under the FAA at present will go on to form new relationships. The
issue will only be compounded if a broader range of relationships
are permitted to form the basis of claims, while the scope for
defendants to limit damages remains narrow.
In its cost-benefit analysis, the government assumes that the
benefits will be equal to cost – after all, money is simply being
transferred from defendants to claimants. However, this fails to
recognise the drain upon public bodies, insurers and ultimately the
general public, which is caused by claim costs. It also neglects
the potential for money to be ‘lost’ to double recovery.
Conclusion
In all, the response is something of a disappointment. A review
which set out to tackle some of the most thorny issues of damages
has resulted in a few unimaginative amendments the Fatal Accidents
Act and (contrary to its aim) is likely to increase the problem of
double recovery.
It is to be hoped that the government, or its successor, will
follow up on submissions in relation to the remaining areas
considered in the paper, and that we will see further proposals for
reform in the near future.
[1] Making Amends - A consultation paper setting out
proposals for reforming the approach to clinical negligence in the
NHS
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