How Solicitors Calculate Future Compensation After Death (Part 1)
Generally it is relatively easy to calculate the compensation awards to dependants of the deceased prior to trial or settlement of the claim. This is because what has happened in the past can be evaluated with precision. There is no assumptions or what ifs?
Some complex calculations for fatal accident compensation which arise when the claims comes to be settled can give rise to uncertainty.
Some examples where uncertainly will arise and difficult questions have to be determined by the Courts and the solicitors acting in the compensation claim for a fatal accident:
- The deceased had recently started his own business (so there is no past record on how well the business would have done).
- The deceased was only 16 years old so there is little work experience or examination results to establish a clear future career path.
- The deceased was destined to be a sporting great…but for the fatal accident.
There are many other examples where a future calculation for possible fatal accident compensation awards can give rise to difficult assessments and calculations. The fatal accident compensation solicitor will have to consider all the evidence and present the best possible case to the Courts. Once this evidence has been produced the Solicitors dealing with the fatal injury claim will then use what is called ‘The Ogden Tables‘ to consider the future calculation of compensation awarded.
Calculation of Future Fatal Accident Compensation – Ogden Tables
The Ogden Tables are designed not by solicitors as such but by accountants or actuaries who use various data such as age, discounts rates, life tables etc to establish how much a lump sum compensation award for a fatal accident would be worth if the dependent a received all the money ‘today’ at once rather than over a period of years had the deceased lived. This is important as the dependants of the deceased should not be ‘over-compensated’ and importantly ‘under-compensated.’
So if, say, the dependants of the deceased had a future award of compensation for a fatal accident of a loved one assessed at £100,000 and that amount is the equivalent of say 10 years future award. If the dependant received £100,000 today rather than over a period of 10 years, the law of compensation (the Defendant insurance company) would be up in arms as the dependants would have been over-compensated. Why? Fatal accident solicitors call this ‘accelerated payment’ the dependants have received all the money in advance in one lump sum rather than over the 10 year period. Therefore that £100,000 could be invested in stock and shares or put in a bank account gaining interest and any investment returns would result in an additional award to the dependants which is prohibited i.e. the dependants have been over-compensated.
Therefore what the courts will do is apply a discount to the compensation so that the dependants are not over-compensated. Therefore rather than receive £100,000 today, the compensation will be reduced by a complex calculation so that the award may be £95,000 or £90,000 and so on. The longer the award in years terms into the future, the greater the compensation discount.
The actual scheme and philosophy of making dependants of the deceased who receive compensation for a fatal accident claim has been under attack by many fatal accident solicitors and personal injury practitioners well before the stock-market crash of 2007. This is because the dependants or the injured victim is forced to invest the compensation in stock and shares or if the dependants or injured victim are more risk adverse, to keep the compensation in a bank account.
However, as all savers are aware, the interest on bank accounts are quite pitiful and in some cases we here are of negative benefit. The compensation award is there for a purpose and should not be put at risk in stocks and shares. Further the discount applied to the future awards are still very high meaning that in real terms the compensation for fatal accident claims and personal injury claims are consistently over many years under valued. The fault of the to Government once again slow to react help victims but quick to protect insurance companies.
Posted: April 18, 2016 at 1:00 pm