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The law relating to the amount of compensation that a severely injured person can claim for the extra cost of buying a home suitable for their disability has changed.
The Court of Appeal has ruled that claimants whose injuries leave them with special accommodation needs over a predicted long life span can now claim the extra capital cost of buying a more suitable property.
It is the first time since the change to the negative discount rate that the law has allowed recovery of a sum towards the purchase of a property. In many cases a small sum will still need to be met from compensation allocated to other losses, such as general damages.
Why has the law changed?
The change in the law follows a judgment by the Court of Appeal in the recent case of Swift v Carpenter. The claimant in that case suffered severe injuries, including an amputation, in an accident caused by the driver of the car in which she was a passenger. She made a claim and received substantial compensation, but the trial judge decided that she was bound by existing law to reject the claim for the increased costs of buying a home which was more suitable for her disability. The judge gave her permission to appeal against that judgment so that the Court of Appeal could review the law. On appeal, the Court of Appeal ruled that the traditional Roberts v Johnstone method for calculating claims for additional capital costs of accommodation in injury cases is unfair to claimants, given the changes in interest rates and the personal injury discount rate since 1989 when that case was decided.
The Court of Appeal set out a new method for calculating the claimant’s additional capital accommodation costs and advised that this method be regarded as standard for this type of claim where the claimant has additional accommodation needs and a long life expectation.
What has changed?
The Roberts v Johnstone calculation for additional capital costs of accommodation provided the injured claimant with a small contribution towards the purchase price of a new home. At the time of that case, the economic climate was very different. Claimants could invest their compensation and receive a good return on their investment because interest rates were high. The Roberts v Johnstone method protected defendants by guarding against over-compensating the claimant using a formula which multiplied an annual cost figure by the discount rate. The problem for claimants was that by the time their accommodation claim had been discounted in this way, they did not cover the costs of buying the house. Claimants were expected to use money which had been allocated to meet other needs to meet their immediate need to buy a suitable house.
Since 1989 interest rates have dropped dramatically and we now have a negative personal injury discount rate. This helps claimants, who can no longer expect a high rate of interest from investing their compensation money, by increasing their claim for long term costs, such as therapies and loss or earnings, but had the opposite effect when used with the Roberts v Johnstone accommodation costs calculation, which produced a theoretical negative claim for accommodation.
The Court of Appeal’s decision in the Swift v Carpenter case means that many severely injured claimants now have a new way of calculating their claim for the extra costs of buying a suitable home. Put simply, it allows them to claim the entire difference between the value of their pre-injury home and the purchase price of a more suitable home. That sum is then discounted to acknowledge a ‘notional reversionary interest’, based on the claimant’s life expectation and a fixed discount rate of 5%, to protect the defendant from paying for the family or estate’s enhanced housing when no longer needed by the claimant after his or her death. The Court of Appeal anticipated that this reduction should be relatively small in the context of the whole claim, so that the claimant is not prevented from buying a suitable home.
Does Swift v Carpenter apply for accommodation claims for claimants with short life expectation?
The Court of Appeal’s judgment in Swift v Carpenter was intended to apply to severely injured claimants with a predicted long life span, like the claimant in that case. The Court of Appeal did not set out guidance for changing capital accommodation claims relating to claimants with short life expectations. The new method does not work for those claims because the ‘reversionary interest’ would be disproportionately high, leaving the claimant without sufficient funds to buy a suitable home.
Boyes Turner’s specialist cerebral palsy and serious injury lawyers are acclaimed for our experience in helping severely injured clients claim, recover and maximise the benefit of their compensation. We are now working to update our current clients’ claims to provide them with the best possible benefit from the change in the law. We will continue to negotiate and structure each settlement to ensure that each client’s needs are met in the best way possible from their claim, whatever their circumstances or life expectation.
If you are caring for a family member who has suffered a severe injury from medical negligence and would like to find out more about making a claim, contact us by email at email@example.com
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