By David Withers of Irwin Mitchell LLP.
In personal injury cases, lawyers use “The Actuarial Tables with explanatory notes for use in Personal Injury and Fatal Accident Cases”, otherwise known as the “Ogden Tables”.
The tables can be found at: https://www.gov.uk/government/publications/ogden-tables-actuarial-compensation-tables-for-injury-and-death.
The Ogden tables help actuaries, lawyers and others calculate the lump sum compensation due in personal injury and fatal accident cases.
The methodology is long-established: multipliers are applied to the present-day value of a future annual loss (net of tax in the case of a loss of earnings and pension) with the aim of producing a lump sum equivalent to the capitalised value of the future losses.
In essence, the multiplier is the figure by which an annual loss is multiplied in order to calculate a capitalised sum, taking into account accelerated receipt (getting the money before the loss is actually incurred), mortality risks and, in relation to claims for loss of earnings and pension, discounts for contingencies other than mortality.
Multipliers are calculated by reference to an annual assumed interest rate after tax and inflation, known as the discount rate.
The seventh edition had been published in 2011 and the life expectancy data used in the tables was significantly out of date. Multipliers published in the 7th edition of the Ogden Tables were calculated using mortality rates from the 2008-based projections; the 8th edition provides multipliers based on mortality rates from the most recent, 2018-based, projections (published at the end of 2019).
The most significant change is that the expectations of life (and hence the multipliers derived from them at all discount rates and ages) in this edition of the Tables are lower than in the 7th edition of the Tables.
This reflects both the lower decreases in mortality than previously projected between 2008 and 2018 and more pessimistic assumptions adopted by the Office of National Statistics (“ONS”) ONS regarding the future rates of improvement of mortality at some ages over the next few years, but especially at older ages.
The mortality projections do not include any allowance for the possible effects of the COVID-19 pandemic on future mortality, as the projections used were published before the outbreak.
It is likely that Defendants will increasingly raise challenges based upon Covid related factors (whether adverse implications for future employment, which will impact pension loss and/or life expectancy).
There has also been an important shift in the recommended approach to future loss of earnings claim. The definition of “disability” for the application of the tables has been changed. It is more restrictive.
The Claimant must qualify under the definition contained within the Disability Discrimination Act 1995 and for the disability to affect either the type or amount of work they can do.
The definition of disabled under the Equality Act 2010 is no longer applicable.
The definition of a “disabled person” as far as the application of the tables is concerned is as follows:
A person is classified as being disabled if all three of the following conditions in relation to ill-health or disability are met:
- The person has an illness or a disability which has or is expected to last for over a year or is a progressive illness; and
- The Disability Discrimination Act 1995 definition is satisfied in that the impact of the disability has a substantial adverse effect on the person’s ability to carry out normal day to day activities; and
- The effects of the impairment limit either the kind or the amount of paid work he/she can do.
If a person does not meet this definition, they are to be considered “not disabled”.
This is an important change for Claimants who have some residual earnings capacity but less so than they would have had but for the negligence.
In summary, when quantifying what the earnings would have been but for the negligence, the likely annual sum is multiplied by the relevant multiplier.
The multiplier takes into account the risk of non-negligent mortality (i.e. mortality that could have arisen even had the negligence not arisen). The sum is then multiplied by a discount factor taken from Tables A to D.
Tables A and B are for males; Tables C and D are for females. The same calculation is then undertaken for the residual earnings claim.
The Claimant then seeks to recover the difference between the calculations. Tables A to D take into account factors such as disability, age, and educational attainment.
Given the narrowing of which Claimants are classed as “disabled”, this means that proving that, despite there being a residual earnings claim, there will still be a loss of earnings will be more challenging.
If a Claimant is not “disabled” within the meaning of the Disability Discrimination Act 1995, the discount will be the same as the discount used to work out the earnings but for the negligence.
The Claimant will have to increasingly focus on providing that the amount per year will reduce and / or that their retirement age will be sooner because of their injuries. However, these will be difficult aspects to prove if the starting position is that they are not deemed to be disabled.
David Withers is a partner and solicitor-advocate at Irwin Mitchell LLP, leading a team specialising in neuro-trauma and other serious injuries such as amputations or significant poly-trauma.
