HM Insights

Discount Rate - First Personal Injury case decided using new discount rate

New rules concerning the discount rate applied to serious injury cases came into force on 20 March. The first case to be decided using the new discount rate resulted in a massive increase in the amount of damages paid to a seriously injured girl.

Discount Rate Personal Injury

Background of case

The case is an English case involving East Lancashire Hospital NHS Trust and involves a payout to a 10-year-old girl who was left with cerebral palsy following medical negligence. The new discount rate rules were applied to this case. In January 2017 it was agreed that the 10-year-old would receive a lump sum capitalised at £3.77m.

The application of the new discount rate - what does this mean in practice?

Since the new rules came into force the application of the new discount rate means that the payout that will now be made to the 10-year-old will be £9.3m, nearly tripling the amount of compensation paid by the NHS Trust.

The changes to the Discount Rate

On 27 February 2017 the Lord Chancellor announced changes to the discount rate applied to awards of damages for personal injury. The decision was made to lower the discount rate from 2.5% to minus 0.75%. The previous discount rate of 2.5% remained unchanged since 2001. It was assumed that a seriously injured person could earn 2.5% interest a year on a lump sum payment but the new rules assume the rate to be -0.75% which means that compensation payments will increase for serious injury cases.

Reactions to this case

The outcome of this case has sent shockwaves through the NHS and insurance companies, which have been braced for big increases in claims since the new discount rate was announced last month. Despite intensive lobbying, the new discount rate came into force and this case shows the dramatic effect this can have on damages.

Counsel who represented the girl said: "We welcome the new discount rate, the first change in 17 years, which addresses the actual lack of meaningful return on safe lump- sum investment opportunities."

The current situation

When the government announced the new discount rate it also confirmed that there is a consultation before Easter to review the framework and consider further options for reform.

Why is the discount rate so important for people who are injured?

It is a basic principle of the Scottish legal system that the law will put an injured person back in the position they would have been - insofar as money can do so- but for the harmful act.

It is imperative that people who are seriously injured, require care in the future and/or have limited or no income as a result of not being able to work, are put back in the financial position they were in should the accident not have occurred.

It is important that there is regular review of discount rates and inertia in a volatile financial landscape should not harm those who are reliant on damages to restore their lives in some type of positive way.

Specialist Solicitors

Our Personal Injury team are experienced in representing those injured and will give first class legal representation, support and care to an injured person and their family. We have experience of dealing with high value cases and the application of the discount rate in Scottish Personal Injury cases.

Our solicitors can help you secure the justice and compensation you deserve. Get in touch now for a free chat about your claim.

The small print: This blog is for information purposes only and should not be construed in any way as providing legal advice.