BC DISEASE NEWS

BC DISEASE NEWS

A WEEKLY DISEASE UPDATE

16 December 2016 Edition 168

PAGE | 2

CONTENTS

PAGE 2

Welcome

PAGE 3

SRA PI Survey

PAGE 5

Vicarious Liability and

Christmas Parties: Bellman v

Northampton Recruitment

Limited [2016] EWHC 3104

PAGE 6

Defendants Seek Guidance

on Obtaining Medical

Evidence From Court of

Appeal

PAGE 8

PI Firm In Administration

Research Suggests Long Use

of Painkillers Can Cause

Deafness

PAGE 9

Feature

The Ogden Discount Rate

And Its Impact On Asbestos

Related Mesothelioma

Claims

Welcome

Welcome to this week’s edition of BC Disease News - the last of 2016.

In the last week, a US study has suggested a correlation between the duration of

Paracetamol or Ibuprofen use and the risk of hearing loss in women over 60.

Elsewhere, the High Court has ruled that an employer was not vicariously liable

for an assault which took place between two employees at a Christmas ‘after

party’.

Following last week’s announcement by the MoJ that it will finally report back on

its consultations on the Ogden discount rate by the end of January 2017 we look

at how any changes might impact on the valuation of asbestos mesothelioma

claims. Readers can use a simple ready reckoner table and also on-line tool to

carry out their own quantum assessments applying differing discount rates. We

have also developed a simple tool to look at potential reserve requirements

across large books of mesothelioma and lung cancer claims.

Finally we wish all our readers a wonderful Christmas and New Year and we will

be back on 6th January 2017.

Any comments or feedback can be sent to Boris Cetnik or Charlotte Owen.

As always, warmest regards to all.

SUBJECTS

SRA PI Survey – Vicarious Liability and Christmas Parties – Defendants Leap Frog

NIHL Appeal – Prolegal In Administration – Painkillers and Deafness - The Ogden

Discount Rate And Its Impact On Asbestos Related Mesothelioma Claims

PAGE | 3

SRA PI Survey

The Solicitors Regulation Authority (SRA) has

produced a report assessing PI legal

services in order to provide a detailed

understanding of how the market is

functioning following the introduction of

legislative reforms under the Legal Aid,

Sentencing and Punishment of Offenders

Act 2012 (LASPO). The motivation behind

the report has come from organisations

such as the NHS Litigation Authority, the

Association of British Insurers, the

Association of Personal Injury Lawyers and

the Motor Accident Solicitors Society,

raising concerns regarding solicitor

competence, behaviour and practices

since the reforms were implemented.

Solicitor Competence

Specifically, the report states that there are

concerns that firms diversifying into

different areas of PI, including NIHL,

occupational disease and catastrophic

injury claims, lack the competence and

expertise required to take on cases.

Specific examples of poor solicitor

competence include poor case selection

and triage, inadequate supervision of staff,

failure to obtain relevant evidence and

information to build a strong case for court

proceedings and a lack of legal and case

knowledge specific to PI.

Indeed, several of those interviewed stated

that firms are using less experienced

solicitors and paralegals to prepare cases

in order to make cost savings. As a result,

cases are being inadequately assessed

and incorrectly valued. NIHL and clinical

negligence were flagged as particular

areas in which a comparative skills gap

exists. The report states:

‘A lack of specific knowledge in these legal

areas prevent the identification and

application of legal principles to factual

issues’.

This, it says, is combined with some firms taking on too much work, leading to errors and

slower processing.

Concerns regarding the use and quality of medical evidence were also prominent in the

survey’s findings. More than a quarter believed that poor quality medical reporting

occurred regularly in cases and as many as 76% stated that poor quality medical reports

were having a detrimental impact on the rule of law and proper administration of justice.

Judges concurred with this criticism and went further by pointing out the deterioration in

the quality of general materials produced for court cases over the past ten years.

Behaviours and Practices

Alongside this, the report highlighted concerns regarding the behaviours and practices of

solicitors, for example, the government has repeatedly indicated its concern about the

number of fraudulent cases and grossly exaggerated personal injury claims. This coincided

with a general acceptance amongst those surveyed that frivolous cases were often

accepted by solicitors, but that this practice had decreased since the reforms. However,

there were differing views on this issue between claimant and defendant firms, with

claimants believing they are bringing genuine cases as it is in their financial interest to do

so and defendant firms feeling that frivolous cases are still pursued.

Claimant solicitors also raised concerns regarding pre-med offers of settlement made by

defendant firms when, they say, the claimant is not in a position to value their injuries. They

argued that this could mean that clients are at risk of receiving inappropriate

compensation owing to an ‘inflated perception of litigation risk’.

PAGE | 4

Infrastructural and Organisational Changes

The report highlights the following main changes which had the most significant impact on the PI sector:

No win, no fee

Referral Fee Ban

After the event (ATE) insurance

Reforms to Part 36

QOCS

Overall, the survey found that the referral fee ban has been understood and accepted but there is a view that the ban is not as effective

as it aimed to be, with a suggestion that ABSs and joint ventures are being established as a means to circumvent the ban. It was also

suggested that the ban had encouraged firms to invest in new techniques to attract clients:

The ban has contributed to some significant changes within the PI market, such as the reduction in the number of CMCs which has halved

since 2009/10, although the turnover of CMCs has increased by 30% to £310 million in the 12 months leading to March 2015. Those

interviewed and surveyed were also asked about the MedCo system and only 24% believed that MedCo had achieved independence

between Medical Reporting Organisations (MROs) and firms, with 38% disagreeing with this assertion. Over 68% thought that the quality

of reports for consumers had not improved as a result of MedCo.

PAGE | 5

The SRA survey identifies a changing

structure in the PI industry with a growing

gap between the smaller practices and

larger firms with small firms still dominating

in numerical terms but a growth in the

number of larger firms alongside significant

market consolidation. ABSs are more

prevalent and although originally these

were solicitor firms changing their business

structures they have increasingly been new

entrants from firms that are new to the

market, for example, Co-Op, BT, Sage and

Tesco Law.

There were areas identified within the

research that fell outside the scope of the

review and as such would need further

research. These included, a sampling of

case files to provide data on under

settlements and the methods used for

gauging claims, a more in depth study on

the quality standards employed by a

sample of firms looking at the training

given to staff and the appropriateness of

the levels of staff used and finally a study

based on the client/customer’s perspective

of the PI industry.

The full survey results can be accessed

here.

Vicarious Liability and

Christmas Parties:

Bellman v Northampton

Recruitment Limited

[2016] EWHC 3104

The High Court has recently considered the

application of vicarious liability in the

context of a Christmas ‘after party’.

The facts of this case are as follows, Mr

Bellman, the claimant, was employed by

the defendant company. Mr Major was the

Managing Director and shareholder of the

defendant company. The company

organised a Christmas party at a Golf Club

to which employees and their partners

were invited. Alcohol was consumed at the

party and when it had finished, roughly half

the guests continued drinking at a local

hotel where many of them were staying

(paid for by the defendant). Both the

claimant and Mr Major attended this ‘after

party’ and were involved in a group

conversation which eventually turned to

work topics and the recruitment and

deployment of staff. The claimant, in a

non-aggressive manner, challenged Mr

Major on a comment relating to the

deployment of a particular member of

staff. In response, Mr Major, feeling that his

authority had been challenged, lost his

temper and punched the claimant

resulting in the claimant falling to the floor.

When the claimant stood back up, Mr

Major then punched him again and it was

at this point that the claimant fell back to

the ground and hit his head on a marble

floor causing him to sustain a head injury

which resulted in brain damage with

reduced cognitive function such that he

lacked capacity and was a protected

party for the purposes of the proceedings.

Mr Major was initially sued but as he was

unlikely to be able to satisfy any judgment,

the defendant company for which the

claimant worked was sued instead under

the principle of vicarious liability.

It was not disputed that Mr Major had

assaulted Mr Bellman. The question in

dispute was whether the employer should

be vicariously liable for the attack. The

Court considered whether the actions of Mr

Major were in the course of his

employment, applying the established test

of whether there was sufficient closeness

between Mr Major’s duties as an employee

of the Company and his wrongdoing to

make it right for the Company to be held

liable for his actions.

HHJ Cotter, firstly considered the relevant

principles taken from all the relevant

authorities. These were outlined as:

i) An employer is not liable for

an assault by his employee

merely because it occurred

during working hours

(e.g. Wilson-v

Excel and Graham –v-

Commercial Bodyworks) and

not free from liability because

it occurred outside normal

working hours and/or the

workplace ( e.g. Bernard –v-

AG of Jamacia; Mattis –v-

Pollock ).

ii) There are two questions to be

considered

a. Firstly looking at matters

in the round , what were

the functions or what was

the field of activities

entrusted by the

employer to the relevant

employee i.e. what was

the nature of his job?;

b. Secondly, was there was

sufficient connection

between the position in

which he was employed

and his wrongful

conduct to make it right

for the employer to be

held liable under the

principle of social

justice?

iii) The test is inevitably imprecise

given the nature of the issues.

So whilst consideration of past

cases shows that certain

specific factors have been

considered central, if not

determinative, it remains very

much a fact specific

evaluation having regard to

the full circumstances of the

employment and the tort.

iv) Whilst consideration of the

time and place at which the

relevant act occurred will

always be relevant, it may not

be conclusive. There must be

some greater connection

than the mere opportunity to

commit the act provided by

being in a certain place at a

certain time.

Applying these principles to the claim

before him, HHJ Cotter noted that Mr Major

clearly saw himself as in overall charge of

all aspects of the defendant’s activity, the

other directors seemed to have played

little part in the day to day running of the

defendant and Mr Major was authorised to

act on behalf of the company with a wide

remit.

PAGE | 6

In relation to the Christmas party, the judge

noted that Mr Major was able to take

decisions as to company expenditure and

concluded that the party was arranged

and paid for by the defendant along with

payment for the drinks, hotel

accommodation and the taxis to and from

the venue. As a result, he said;

‘In my judgment Mr Major would have seen

it as part of his job to oversee the smooth

running of the Christmas party. He was not

just an attendee’.

However, HHJ Cotter did not agree that Mr

Major could always be considered to be

on duty solely because he was in the

company of other employees regardless

of the circumstances.

Turning to the connection between Mr

Major’s employment and his wrongful

conduct he considered the following

factors;

i) The assault was committed

after and not during an

organised work social event

(although he did accept that

Christmas parties were far

more closely connected or

incidental to their

employment than activities

such as playing for an

employee based sports

team)

ii) The expectation or obligation

on any employee to

participate had ended when

the event at the Golf Club

had ended and as such a

line could be drawn under

the evening’s event. There

was not only a temporal but a

substantive difference

between the Christmas party

at the Golf Club and the

drinks at the local hotel.

Although the taxis back to the

hotel were organised and

paid for by the defendant,

this was the expectation all

along and so was no more

than part and parcel of the

obligations arising from the

Christmas party.

iii) The ‘impromptu drink’ at the

hotel could not be seen as a

seamless extension of the

Christmas party as argued by

the claimant.

v) The fact that work was

discussed at these drinks must

have limited effect. For a

significant period of time the

conversation was about

social topics and not about

work, it was only after the

group narrowed that the

conversation turned to work.

HHJ Cotter did not agree that

merely raising something that

relates to duties at work has

the effect of itself of changing

a conversation or interaction

between fellow workers into

something in the course of

employment, regardless of

the surrounding

circumstances.

As such HHJ Cotter concluded:

‘Standing back and considering matters

broadly, what was taking place at 3.00

a.m. at the hotel was a drunken discussion

that rose after a personal choice to have

yet further alcohol long after a works event

had ended. Given the time and place,

when the conversation was, as it was for a

significant time, on social or sporting

topics, no objective observer would have

seen any connection at all with the jobs of

those employees of the Defendant

present. That it then veered into a

discussion about work cannot provide a

sufficient connection to support a finding

of vicarious liability against the company

that employed them. It was, or without any

doubt became, an entirely independent,

voluntary, and discreet early hours drinking

session of a very different nature to the

Christmas party and unconnected with the

Defendant's business’.

While this case is a useful example of the

distinction between organised work events

which are connected to employment and

purely voluntary social activities, it is clear

that these decisions will turn on their own

facts and the limits of vicarious liability can

still be difficult to identify.

The full judgment can be accessed here.

Defendants Seek

Guidance on

Obtaining Medical

Evidence From Court of

Appeal

We have previously discussed the issue of

defendants obtaining their own medical

evidence in NIHL claims in several editions

of BC Disease News. In the case of David

Springham v CNH Industrial NV (Leeds

County Court, Wednesday 12 October

2016), the defendant attempted to transfer

an appeal from a case management

decision refusing them permission to

obtain its own medical evidence, to the

Court of Appeal.

This is the first time that a defendant has

sought guidance from the Court of Appeal

on this topic and the case was heard by

HHJ Gosnell, sitting in the County Court at

Leeds. The authority for the transfer of the

appeal comes from Civil Procedure Rule

52.14(1)(a) but requires there to be an

important point of principle or practice.

The defendant put forward two points in

relation to defendant’s own medical

evidence:

1. There are a significant number of

NIHL claims being litigated and as

there is a lack of guidance given

at a level which is binding on

District Judges, there are

inevitably contested directions

hearings, which, in the vast

majority of cases, may take up to

an hour. This could be avoided if

there were proper guidance

which would enable agreement.

The lack of binding guidance is

causing costs to be expended on

both sides repeatedly for the

same issue.

PAGE | 7

2. There have been seven appeals

on the same or broadly the same

issue. In six of these the District

Judge had refused to allow a

defendant to obtain its own

medical evidence in an NIHL

claim and the other decision was

about the refusal of a District

Judge to allow a repeat

audiogram of the claimant. All

these appeals resulted in the

defendants having permission to

either get their own expert or

repeat audiogram. The lack of

binding guidance is causing

these appeals and even though

they are defendant favourable

they are costly.

The defendant submitted further that

claimant solicitors often argue that the

guidance given by Designated Civil

Judges and Circuit Judges on appeal are

not technically binding on the District

Judges below and so they can be safely

ignored. However, if the Court of Appeal

gave the necessary guidance this would

be binding on District Judges which the

defendant said would result in the first

hearing either not taking place or taking

place in a much more limited fashion.

The claimant however, argued that there is

sufficient guidance on this issue in the CPR

and District Judges are regularly making

these decisions and if they get them wrong

they can be corrected on appeal.

HHJ Gosnell agreed with the claimants on

this point and held that:

‘In my assessment, this is a balancing

exercise that the District Judges are and

should be used to. If the defendant raises

an issue on causation, in my view there is

not a particularly high threshold, the District

Judge should consider whether to grant

permission for a second expert. He or she

then has to balance fairness to both parties

with the need to conduct litigation at

proportionate costs and I accept the

argument that that is a weapon that the

claimants use and one which tends to

inure to the detriment of the defendant,

but, again, I think the District Judges should

be aware and should guard against that’.

So whilst he agreed that there was no need

for the Court of Appeal to hear the appeal

and provide guidance he did point out

that he concurred with the authorities on

the issue i.e. that where causation is in issue

the defendant should not be refused

permission to rely on his own medical

evidence in the name of proportionality. At

para 13 of the judgment he predicted that

were the Court of Appeal to hear this

appeal they would have provided

guidance much like that given by HHJ

Hughes in para 56 of Walton v United

Utilities Limited (Carlisle County Court, May

11 2016):

‘From my own experience and that of my

colleagues as cited above, I think that it is

possible to glean a number of guiding

principles:-

a) Unless the audiology is accepted

to be reliable and

uncomplicated, the defendant

should not be required to accept

the expert selected by the

claimant as the sole expert;

b) The claimant’s report should

include details of when, where

and in what conditions the

examination and audiological

assessment took place. The

claimant’s expert should also

provide details not only of his or

her experience in medico-legal

work but of the proportion of this

which is for claimants and

defendants.

c) Part 35 questions have only a

limited role to play. They should

be used only for clarification as

the rule stipulates. An appropriate

use, for example, is by

defendants, at an early stage,

after initial receipt of the report to

clarify the conditions in which the

audiograms were conducted and

to establish whether there is likely

to be any challenge to their

accuracy and reliability;

d) Especially where the claimant’s

audiological examination has

taken place in less than ideal

conditions, as for example at a

‘claim clinic’ held in a hotel or

village hall, consideration ought

to be given to refusing the

claimant permission to rely on the

report and directing that the

claimant is examined by a single

jointly instructed expert;

e) Where the audiology is not

straightforward and significant

issues as to interpretation are to

be expected, the parties should

be allowed to have their own

experts;

f) The decision as to what order to

make in respect of expert

medical evidence is not

necessarily determinative of the

question as to the track in which

to list the case for trial. Where

there is a single jointly instructed

expert the case is likely to remain

in the fast track and the expert will

only be called at trial to give oral

evidence where this can be

demonstrated to be necessary.

Where both sides have their own

experts, decisions as to whether to

give permission for the experts to

give oral evidence at trial are best

made only after they have met

and identified the points on which

they disagree. It is at that stage

that the court can best judge

whether the case needs to go into

the multitrack list. There will be

cases where, with robust case

management at trial, the case

can still be completed in a day

and hear in the fast track list.

g) It is not sensible for cases to be

listed for case management

conference before deputy district

judges as they are likely to have

little experience of such cases. It

is highly desirable for NIHL cases

to be dealt with by a full-time

judge, and, where possible, a

District Judge at a court centre

who has been designated to case

manage them.

h) The fact that there is such an

imbalance between the value of

claims and the costs of the

proceedings makes it all the more

essential that the parties should

be expected to comply with the

timetable for trial and that judges

should take a robust approach in

cases where this has not

PAGE | 8

happened. The primary onus is on

the claimant’s solicitors to ensure

that the case is trial ready. They

must be pro-active in ensuring

that the timetable for trial is

complied with. Failure which

makes it impossible for the trial to

proceed as listed is liable to result

in the claim being struck out.’

Further to this he provided the following

useful comments regarding the binding

nature of guidance given by Designated

Civil Judges on District Judges:

‘In my view, the only occasions when a

District Judge is likely to ignore guidance

given by Designated Civil Judges is where

the Court of Appeal have provided

contrary guidance’.

As such, it is clear that, the absence of

contrary Court of Appeal guidance, that

District Judges should be following the

authorities in the decisions of Smith v

Atkinson Holdings Ltd, Daglish v Forest

Gardens (Property) Limited, Sarek Joinery v

Maplesden, Walton v United Utilities

Limited, Langley v Caterham Marble, and

Aspinall & Offermans v BT. Although this

decision was not in favour of the

defendant, it is ultimately further authority

for defendants to obtain their own medical

evidence in NIHL claims. We discussed the

case of Walton in edition 144 of BC Disease

News (here). Other editions where the topic

is discussed include editions 118 (here)

and 149 (here). Our template letters on

obtaining own medical evidence have

been updated.

PI Firm In Administration

We reported in edition 158 of BC Disease

News that the personal injury firm, Prolegal

Solicitors, which handled NIHL claims had

entered administration and was absorbed

by another practice. It has now been

revealed that unsecured creditors of the

firm are likely to recover just 10p in the

pound. Insolvency firm, Quantuma are

handling the administration and has

revealed that the firm owes £1.5m to

unsecured creditors including, Brook Street

Holdings, a pension scheme and £200,000

to HMRC.1

The accounts for the year 2013 show that

turnover had fallen from £4.5m to £3.82m

within 12 months, suggesting that the firm

was struggling to adapt to the referral fee

ban which came into force in April 2013.

Reports of the company being absorbed

by another practice have now been

confirmed. Garrynasillagh, which was

founded in August 2016 and registered as

a non-trading business on Companies

House has bought Prolegal with an initial

£194,000 plus 30% of the proceeds of

Prolegal’s WIP (which has been estimated

at £2.1m) and 40% of other debts

(estimated at £437,500) collected on their

behalf.

Research Suggests

Long Use of Painkillers

Can Cause Deafness

A study carried out by researchers at

Brigham and Women’s Hospital in the

United States suggests a correlation

between the duration of paracetamol or

ibuprofen use and the risk of hearing loss in

women over 60.2

The report notes that aspirin, nonsteroidal

anti-inflammatory drugs (NSAIDs), and

acetaminophen (a pain reliever and fever

reducer) are the most commonly used

medications in the US. Previous studies

carried out by the same authors have

suggested that these drugs may be

ototoxic i.e. toxic to the ear, for younger

women who used them 2 or more days a

week. It is theorized that the damage to

hearing may be caused by several

different mechanisms, including

impairment of outer hair cell function and

reduced vascular supply to the cochlea.

The authors decided to examine whether a

longer duration of regular painkiller use

was associated with the risk of hearing loss

in older women. Given the theorized cause

of hearing loss they hypothesized that

longer duration of exposure would be

more likely to result in hearing loss.

The results showed that increasing duration

of regular NSAID use (for 6 years or more

compared with under 1 year) was

associated with higher risks of hearing loss.

However, increasing duration of aspirin use

was not, for the same duration. The study

noted that longer durations of

acetaminophen and NSAID use were

significantly correlated with increasing

frequency of use and there was a higher

risk of hearing loss among women who

reported regular use of these compared

with women who reported average use of

less than 2 days per week. Regular use of

multiple painkillers was also associated

with higher risk of hearing loss.

Interestingly, aspirin use was not

associated with risk of hearing loss. The

authors suggested that this may be

because those users of aspirin tend to take

it at doses within the recommended daily

range which is much lower than the high

doses previously described to be

associated with hearing loss.

The results of this study suggest that a

substantial proportion of hearing loss

attributable to use of analgesics is

potentially preventable.

PAGE | 9

Feature

The Ogden Discount Rate And Its Impact On Asbestos Related Mesothelioma

Claims

INTRODUCTION

Damages in personal injury claims are designed to provide full compensation to claimants for losses suffered as a result of someone’s

wrongful actions - compensation should neither result in a claimant being over or under-compensated.

The Ogden Tables are designed to assist in the calculation of lump sum damages for future losses in personal injury and fatal accident

claims - losses such as net earnings, cost of medical treatment, care, and pension loss. Multipliers are applied to the present day value of

a future annual loss to produce a lump sum award. Lump sum awards mean that there is accelerated receipt of future losses not yet

incurred and so the lump sum must be adjusted to take into account the interest that can be earned on the lump sum before it needs to

be spent. This adjustment is made by applying a ‘discount rate’. The discount rate reflects the interest that would be earned on the lump

sum payment based on safe investment within Index Linked Government Stock3. The Ogden Tables also take into account mortality risks,

and provide discounts for contingencies to try and ensure a claimant is fully compensated - but not over compensated, nor under

compensated. The tables are currently in their 7th edition and set out different multipliers based on different discount rates ranging between

- 2.0% to +3.0%.

The discount rate is set by the Lord Chancellor under powers provided by s.1 of the Damages Act 1996 (as amended). The current 2.5%

discount rate has been in place in England and Wales since July 2001. The rate represents a rate of return over and above inflation.

It has long been argued by claimant representatives that the current discount rate is out of date and does not reflect the substantial

reduction in interest from Index Linked Government Stock and so its use results in under compensation of claimants.

The converse argument is that claimants do not always invest cautiously in Government Stock and may invest in mixed portfolios, including

higher risk investments. Government Stock does not reflect the reality of how claimants actually invest. Therefore it is argued that the current

rate of 2.5% is still appropriate or alternatively is set too low and results in over compensation of claimants.

The discount rate has long been under Government review. There were two MoJ consultations on the issue in 20124 and 2013

5 to which the

Government never responded. Apparently as a result of the threat of legal action against it by APIL, the Government last week said it will

announce the results of its review by 31 January 2017 - although any change in the rate will require legislative implementation via s. 1 of

the Damages Act.

Applying different discount rates can have a significant impact on the lump sum awards made. The 2013 MoJ consultation provided the

following example of an ongoing future loss of £50,000 p.a. for a male for life. A 10 year old claimant would be awarded £1.7m if the

discount rate were 2.5% compared to £3.2m if the rate were 0.5%. A 60 year old claimant would be awarded £0.9m under a 2.5% rate

compared to £1.2m under a 0.5% rate. The following chart is reproduced from the 2013 MoJ Consultation (page 8).

PAGE | 10

SO WHAT MIGHT A NEW DISCOUNT RATE BE SET AT?

There has been some judicial insight. In Simon v Helmot6 [2012], a Guernsey case to which the Damages Act did not apply, differential

discount rates were set-at 0.5% for non-earnings related losses and 1.5% for earnings-related losses. In Thomson v Thompson [2015]7, in a

judgment given in the Bermuda Supreme Court but with the claimant living in the UK, it was decided, having heard evidence from an

actuary, that the appropriate discount rate in the UK for future losses was -0.5% for heads of damage likely to be affected by price

inflation and -2.5% for heads of damage likely to be affected by real earnings increases-i.e. future loss of earnings.

We predict one of 3 outcomes-the rate will remain the same, or it will go down or it will go up! Whatever happens it is hoped that a single

discount rate will remain rather than several different rates depending on the head of loss considered.

The Government as compensator for bodies such as the NHS will understandably be reluctant to reduce the discount rate.

IMPACT ON MESOTHELIOMA CLAIMS

How will a changed Ogden discount rate impact on quantum in mesothelioma claims?

We look at a worked example below and provide a Fatal Damages Calculator and a simple quantum ready reckoner table to allow you

to carry out your own quantum assessments applying different discount rates.

PAGE | 11

Example of a fatal mesothelioma claim 70 year old deceased male

Let us take as an example a male who dies from asbestos related mesothelioma at age 70. The medical evidence is that the deceased

had a normal life expectancy and would have lived for a further 17 years to age 87 but for the mesothelioma. He was married and a

claim is pursued by his widow on behalf of the estate and as a dependent. She was aged 60 at the time of death and has a normal life

expectancy to age 88. She would therefore have outlived the deceased in any event. Her dependency upon the deceased would have

come to an end on his death when he reached 87.

The widow’s dependency on the deceased’s pension is valued at £10,000 p.a.

There is also a dependency claim on services valued at £1,500 p.a. which would have existed for 10 years up to the deceased reaching

age 80.

An assessment of damages takes place 3 years after death - so the deceased’s assumed age is 73.

The claim is valued at just under £277,000 (ignoring interest) based on the following heads of loss:

HEAD OF LOSS VALUATION

Law Reform Act Claim

General Damages (PSLA) £75,000

Bereavement Award £12,980

Care £15,000

Funeral expenses £4,000

Miscellaneous-medication, travel, appliances and adaptions to

home, additional costs of food & heating etc.

£6,000

Loss of Spouse £5,000

FAA Claim

Dependency on Pension Pre-trial dependency ( 3 years)

3 years x £10,000 x 0.97 Table E discount factor=£29,100

Post-trial dependency (14.9 years)

Ogden Table 28 multiplier 12.48 x £10,000 x 0.93 Table F

discount factor=£116,064

Total pension

dependency=£29,100+£112,320=£145,164

Possible Dependency on Services Pre-trial dependency ( 3 years)

3 years x £1,500 x 0.97 Table E discount factor=£4,365

Post-trial dependency (7 years)

Ogden Table 28 multiplier 6.43 x £1,500 x 0.93 Table F

discount factor=£8,969

Total services dependency=£13,334

TOTAL £276,478

PAGE | 12

How would this valuation change based on differing discount rates? The only affected heads of loss are for dependency on pension -

currently valued at £145,164 - and for dependency on services -currently value at £13,334. The other heads of loss valued at £117,980

(or 43% of the claim overall) remain unaffected.

We show the changes according to different discount rates in the table and figure below:

DISCOUNT RATE PENSION

DEPENDENCY

CHANGE (£ /

%)

SERVICES

DEPENDENCY

CHANGE (£ /

%)

TOTAL TOTAL

CHANGE (£ /

%)

3.0% £141,351 -£3,813 /

2.6%

£13,181 -£153 / £154,532 -£3,966 /

2.5%

2.5% £145,164 - £13,334 - £158,498 -

2.0% £149,256 +£4,092/

2.8%

£13,488 +£154 /

1.1%

£162,744 +£4,246 /

2.7%

1.5% £149,460 +£4,296 /

3.0%

£13,641 +£307 /

2.3%

£163,101 +£4,603 /

2.9%

1.0% £157,998 +£12,834 /

8.8%

£13,795 +£461 /

3.4%

£171,793 +£13,295 /

8.4%

0.5% £162,834 +£17,670 /

12.2%

£14,130 +£796/ 6.0% £176,964 +£13,295 /

11.2%

0% £167,856 +£22,692 /

15.6%

£14,297 +£963 /

7.2%

£182,153 +£23,655 /

11.4%

-0.5% £173,157 +£24,368 /

16.9%

£13,977 +£932 /

7.1%

£182,487 +£25,300 /

16.1%

-1.0% £178,830 £29,798 /

20.6%

£14,478 +£1,107 /

8.5%

£188,092 +£30,905 /

19.7%

-1.5% £184,782 £35,580 /

24.7%

£14,660 +£1,283 /

9.8%

£194,050 +£36,863 /

23.5%

-2.0% £191,013 £41,633 /

28.9%

£14,855 +£1,472 /

11.3%

£200,292 +£43,105 /

27.4%

PAGE | 13

Mesothelioma fatal damages tool

The HSE has reported that the majority of mesothelioma deaths in recent years has been in those aged 75-808. Most fatal mesothelioma

claims arise when the deceased is retired. Ogden Table 28 multipliers are typically used with the ‘but for’ life expectancy or duration of

services dependency based on medical evidence and taken as term certain9. For a full explanation of the methodology for assessment

of damages in fatal claims please see editions 130 of BC Disease News here.

Our mesothelioma fatal damages tool below can be used to carry out your own assessments of quantum in relatively straightforward

cases applying differing discount rates. Just enter some brief factual details of the claim, your financial and services multiplicands and

select your discount rate-the tool will do the rest.

The tool can be accessed here.

Ready Reckoner Table for fatal mesothelioma claims

Based on the same set of facts as our example above, but applying different ages for the deceased at death (5 year brackets between

ages 60-80), we set out below a ready reckoner table showing how quantum changes with differing discount rates.

£0.00 £4,246.00 £4,630.00

£13,295.00 £13,295.00

£23,655.00 £25,300.00

£30,905.00

£36,863.00

£43,105.00

0

2.70% 2.90%

8.40%

11.20% 11.40%

16.10%

19.70%

23.50%

27.40%

0

0.05

0.1

0.15

0.2

0.25

0.3

£0.00

£5,000.00

£10,000.00

£15,000.00

£20,000.00

£25,000.00

£30,000.00

£35,000.00

£40,000.00

£45,000.00

£50,000.00

2.50% 2.00% 1.50% 1.00% 0.50% 0% -0.50% -1.00% -1.50% -2.00%

DISCOUNT RATE V TOTAL CHANGE

Value Change % Change

PAGE | 14

DISCOUNT RATE DECEASED’S AGE ON DEATH

60 65 70 75 80

3.0% £324,096 £300,090 £272,512 £240,944 £213,670

2.5% £332,695 £306,297 £276,478 £243,201 £214,886

2.0% £341,876 £312,695 £280,724 £245,458 £216,102

1.5% £351,930 £319,766 £285,155 £247,980 £217,318

1.0% £362,663 £327,124 £289,773 £250,510 £218,534

0.5% £374,381 £335,169 £294,776 £253,035 £219,845

0.0% £387,069 £343,598 £299, 966 £255,834 £221,240

-0.5% £400,823 £352,602 £305,434 £258,720 £222,634

-1.0% £415,756 £362,486 £311,288 £261,620 £224,041

-1.5% £431,950 £372,849 £317,442 £264,783 £225,531

-2.0% £449,711 £383,994 £323,848 £267,960 £227,033

AVERAGE

+CHANGE £ / %

PER 0.5% INCREASE

IN RATE

£13,001 / 3.9% £8,633 / 2.8% £5,263 / 1.9% £2,750 / 1.1% £1,349 / 0.6%

RANGE OF CHANGE

£ / %

-£8,599-+£117,016

/

-2.6%-+35%

-£6,207-+£77,697 /

-2%-+25%

-£3,966-+£47,370 /

-1.4%-+17%

-£2,257-+£24,759 /

-0.9%-+10%

-£1216-+£12,147 /

0.6%-+5.7%

These changes are also represented in the figure below.

Figure: Varying quantum assessments in fatal mesothelioma aged by age and discount rates

£0.00

£50,000.00

£100,000.00

£150,000.00

£200,000.00

£250,000.00

£300,000.00

£350,000.00

£400,000.00

£450,000.00

£500,000.00

3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% -0.50% -1.00% -1.50% -2.00%

Discount Rate

Illustration of discount rate affect on payouts

DECEASED’S AGE ON DEATH 60

DECEASED’S AGE ON DEATH 65

DECEASED’S AGE ON DEATH 70

DECEASED’S AGE ON DEATH 75

DECEASED’S AGE ON DEATH 80

PAGE | 15

More detailed analysis, including how the value of a typical mesothelioma claim changes with each 0.5% change in the discount rate

by age and the potential overall range of change, can be found here.

IMPACT ON A BOOK OF ASBESTOS CLAIMS

We have built a simple to use tool to help determine how quantum and reserve requirements might alter across a book of asbestos

related mesothelioma and lung cancer claims-living and fatal. For more details please contact Boris Cetnik.

PAGE | 16

References

1 John Hyde, ‘Failed PI Firm Owed More Than £5m When Administrators Were Called In’ (The Law Society Gazette 12 December 2016)<

https://www.lawgazette.co.uk/practice/failed-pi-firm-owed-more-than-5m-when-administrators-were-called-in/5059132.article>

accessed 14 December 2016.

2 Brian M.Lin, Sharon G. Curhan, Molin Wang, Roland Eavey, Konstantina M. Stankovic, and Gary C. Curhan, ‘Duration of Analgesic

Use and Risk of Hearing Loss in Women’. American Journal of Epidemiology December 15, 2016 184 (12).

3 These are Government bonds issued to finance its borrowing requirements and considered to be among the safest assets to hold.

The Government sell bonds with a promise that they will pay back the money invested at a future date at an agreed rate of interest.

These bonds can also be linked to the Retail Price Index (RPI) and payments adjusted in line with changes in the RPI.

4 Damages Act 1996: The Discount Rate-How should it be set? Consultation Paper CP 12/2012 (consultation started 01.08.2012 and

ended 23.10.2012)

5 Damages Act 1996: The Discount Rate-Review of the Legal Framework. Consultation Paper CP 3/2103 (started 12.2.2013 and ended

7.5.2013)

6 [2012] UKPC 5

7 [2015] SC (Bda) 44 Civ (17 July 2015)

8 Health and Safety Executive, ‘Mesothelioma Statistics,

http://www.hse.gov.uk/statistics/causdis/mesothelioma/mesothelioma.pdf?pdf=mesothelioma

9 See Knauer v Ministry of Justice [2016] UKSC9

PAGE | 17

Disclaimer

This newsletter does not present a complete or

comprehensive statement of the law, nor does it

constitute legal advice. It is intended only to provide

an update on issues that may be of interest to those

handling occupational disease claims. Specialist

legal advice should always be sought in any

particular case.

© BC Legal 2016.

BC Legal is a trading name of BC Legal Limited which

is registered in England and Wales under company

number 08963320. We are authorised and regulated

by the Solicitors Regulation Authority. The registered

office is 1 Nelson Mews, Southend-on-Sea, SS1 1AL.

The partners are Boris Cetnik and Charlotte Owen.

More details on the firm can be found at www.bc-

legal.co.uk

PAGE | 18

Directors: B. Cetnik, C. Owen

Registered Office: 1 Nelson Mews, Southend-On-Sea, SS1 1AL

BC Legal is a trading name of BC Legal Limited which is registered in England and Wales under company number 08963320

We are Authorised and Regulated by the Solicitors Regulations Authority (SRA No 617698)