A family from Blackburn, Lancashire, have become the first in the UK to benefit from a larger pay-out under the new personal injury compensation rules which came into force on March 20.
The family were awarded £9.29million compensation for their young daughter who was born with cerebral palsy, following complications and negligence during her birth at the Royal Blackburn Hospital.
Medical negligence solicitors originally secured a £1.32m lump sum plus annual payments of £50,000 for the rest of her life. However, due to the new changes, the lump sum has been increased to £2.21m.
The annual payments of £50,000 will be payed until the girl reaches 19 years-of-age and then they will increase to £73,500 for the rest of her natural life.
The £9.29million was negotiated by her lawyers on the assumption that her lifespan does not exceed 101 years. The compensation package was increased by over £5.5m, following the change to the discount rate applied to personal injury compensation.
Although a settlement figure had been previously negotiated, it was revised once Lord Chancellor Elizabeth Truss announced the new rate in February.
Changes to the Personal Injury Discount Rate
Under the new personal injury compensation rules, on a typical lump sum payment of £1,000, insurers will now pay closer to £1007.50, compared to £975 under the old system.
Miss Truss altered how lump sum compensation payments are calculated for serious injuries — reducing the rate from 2.5 per cent to -0.75 per cent — because of falling index-linked gilt yields, which are used to determine serious injury compensation payments.
Before introducing the changes to the discount rate, known as the Ogden rate, the UK Government predicted it could send shock waves throughout the UK insurance industry and have a knock-on effect on public services with large personal injury liabilities.
After the announcement, shares across the insurance sector dropped by as much as 7 per cent.
Inevitable increase in insurance premiums
While claimants stand to gain from the reduced discount rate, the Government warned of the potential impact it would have on the insurance industry, possibly driving up premiums for everything from home and motor insurance to GP indemnity.
Although promises were made to financially protect the National Health Service (NHS) and the NHS Litigation Authority with billions of pounds, the knock-on effect on public services with large personal injury liabilities cannot be underestimated.
The Association of Personal Injury Lawyers (APIL) said victims of life-changing injuries can now feel assured their compensation amount has been calculated correctly and is in line with what they need to fund lifetime care.
The organisation even went on to say insurers have had plenty of time to get their heads around a new method.
An APIL spokesperson added: “It is what they [claimants] need and deserve. People already coping with the most severe injuries have been deprived of the help and care they need for years.
“Meanwhile insurance companies, which have saved millions of pounds in unpaid compensation, have been aware a decision to change the discount rate has been on the cards for six years, since APIL first began judicial review proceedings on the issue.
“We hope this decision marks a long overdue turning point towards treating injured people fairly and with understanding. It is not only the right thing to do, it takes the cost of caring for people away from the taxpayer and puts it squarely where it should be — with the person who caused the needless injury.”
Until May 11, the Ministry of Justice (MoJ) and the Scottish Government is holding a joint consultation to ensure the discount rate remains ‘fit for purpose’.
It will also examine how the rate should be set, how frequently it should be reviewed, who should set it and also look at how periodical payment orders are currently used.
The consultation may not totally satisfy the naysayers but the consensus is there is still a lot more to discuss to, as Miss Truss says, benefit all parties.