Special Damages
Special Damages in Personal Injury Cases
Where the claimant has suffered serious personal injuries, it may affect his capacity for work leading to loss of earnings to date, future loss of earnings and loss of other employment-related benefits. There may be a reduction in his life expectancy which may reduce his expected working life.
There may be a substantial claim for the cost of future care, in particular for medical and nursing care. Most of the largest personal injury awards and settlements arise where there have been serious injuries, which require long-term or permanent nursing and medical care.
Damages in personal injuries cases will typically include several of the following categories of employment-related loss.
- of earnings past and future;
- loss of employment benefits in kind past and future share;
- loss of earnings and fringe benefits arising from higher periods of unemployment
- loss of earnings based on the reduction in earning capacity arising from the injuries;
- loss of pension contributions and accrual;
- loss of benefits from a promotion;
- loss of future social security or pension benefits.
The above losses may be reduced by earnings actually received or anticipated to be received, social welfare benefits and income tax savings.
The calculation of damages is based in the first instance on earnings to date. They are assumed to grow in accordance with the projected growth rates. Future earnings are discounted down to a present day value, which reflects their immediate receipt.
Loss of Earnings I
Notwithstanding the difficulty in calculating future loss of earnings, it is necessary to determine the natural and probable financial loss caused by the injury. This is the difference between what the claimant would have earned, but for the accident and what he is likely to earn in the future. It involves issues of probably future quantum and probabilities of future scenarios such, for example, as future possibilities of employment and notional calculations regarding taxes and fringe benefits.
Expert evidence may be offered by the parties to assist the court in making a determination about the future probabilities, in order to reduce the future losses to a present sum. The court must consider the quantum and probabilities of future events. The Irish courts have held that the present value of future losses of earnings using actuarial techniques and best estimate should factor in by reduction, and allowance for uncertainly to factors such as unemployment and other contingencies.
Loss of earnings are expressed in present values arising from the employee’s inability or reduced ability to work. There the difference between earnings that should have been earned but for the accident and projected future earnings.
Earnings should be reduced by taxation and social welfare benefits and by Adverse contingencies that might have reduced earnings pre-trial and post-trial are factored in costs incurred in making the earnings, such as travel and like costs.
Loss of Earnings II
Past and future lost earnings may include increases that would have been granted. These may be measured by reference to employees in the same position as the claimant. Future losses are based on earnings at the date of trial without allowance for inflation. An allowance is made for assumed future increases and earnings, discounted using annuity tables to present value.
Earnings will be based on basic salaries plus bonuses, fringe benefits, deferred benefits, premiums et cetera. The claimant’s earning history will usually be the basis of assessment. Earnings may increase because of the claimant’s career path and promotion, even if the prospects of promotion are uncertain.
The assessment may be based on evidence from the industry statistics, historical data and CSO statistics. Average earnings for the occupation may be used as the measure, if no other adequate data are available.
It may be more difficult to predict future income for persons who are self-employed. Income may be from trading / professional income or as a return from investment in the business. In the case of a self-employed person, it may be appropriate in some cases to consider what a replacement person must be paid to undertake the work concerned as a manager.
In strict terms, it is the loss of earning’s capacity and not the loss of earnings that is the subject of compensation.
Loss of earnings will also be calculated for a person who has not yet entered the workplace, such for examples in the case of a child.
Reductions in Earnings
A person’s earnings may be reduced to reflect the fact that he does not make social insurance contributions. However, the social welfare benefits thereby lost may be claimed for. Similarly, if a person loses the benefit of pension contributions which may have been made on his behalf, thereby yielding pension income, this loss is also allowed. An actuary may Calculate the present value of the losses of pension from the date of retirement.
The claimant must take reasonable steps to minimise their loss. If he can find alternative employment, he must take or risk the reduction in damages. It he has taken alternative employment by the time of the hearing, then the amount of such earnings may be known and clear. If unreasonably refuses to do so, then there may be a deduction for the employment income he would otherwise receive, past and future, if he had mitigated his loss.
Statutory sick pay and redundancy payments should be taken into account. Savings on living expenses and tax saved must be deducted from lost earnings.
Lost Years
If the claimant’s life expectancy has been shortened, he may recover loss of earnings and other benefits in respect of the lost years. They are calculated by reference to likely life expectancy but for the accident and life expectancy after the accident. If the life expectancy causes the person to die before normal retirement age, damages will be allowed for what he would have earned before retirement.
There are a number of bases for calculation of “lost years” damages. They include the reduction in income by the sums absolutely necessary for the maintenance of life. Other approaches reduce income to a greater extent.. Other monetary benefits during the lost years may also be claimed. The measurement of living expenses may be on the basis of a notional after tax basis
Future Costs and Losses
Future costs must be directly related to the injury / accident and be reasonable in amount. Reasonable expenses which are incurred by reason of the injury may be recovered. This may compromise rehabilitation costs, medical expenses, healthcare expenses, present and future special education and retraining. There may also be loss arising from future recurrent costs for equipment, household services and other expenses.
On the case of very severe injuries, the annual loss may include annual nursing and medical costs incurred. In the case of hypothetical hospital stay, normal living and lodging costs are deducted as they would otherwise have been incurred.
Multipliers may be used in relation to future expenses. Recovery will not be allowed for the lost years.
Where the claimant is unable to provide household services for himself, the future costs of providing those services is allowed, measure by the reference to the cost of employing a person to do so. If there is impairment in undertaking household tasks, the cost may be added to the damages for pain and suffering.
The discount factor used to reduce future losses to a present day sum will based on an assumed rate of returns on investments. If the investment returns as assumed, include amounts to compensate for inflation, then it is not necessary to factor inflation into the discount. However, this can be artificial and for many years investment returns can fall well short of inflation.
Wage inflation and investment rates have diferred considerably over time. The English Courts have favoured a lower discount linked to safer investment returns, than average equity returns.
There is an artificiality, as the same investment rate would not be appropriate for all persons. However, it is generally more prudent to use a relatively lower returns based on less risky returns.