Higher payouts for injury claims, High Court rules in landmark judgment

Insurance premiums are expected to go up following a landmark High Court judgment yesterday that rewrites the formula for how judges calculate compensation for victims of injuries.

Mr Justice Mohan Bharwaney ruled personal injury plaintiffs should receive a higher lump sum payout for future losses. The Court of First Instance judge found a long-held assumption that such claimants could make a 4.5 per cent return - over inflation - on payouts that were invested was no longer valid.

The assumption, dating to a 1979 English precedent, had led the courts to deduct the expected return from the amount of compensation to avoid overpayment. The assumption was upheld by the Court of Appeal in 1996.

Bharwaney decided the 4.5 per cent rate should be lowered to reflect the downturn in the economic landscape over the past decade, where investment returns were lower and inflation was higher.

But he noted: "There is no denying that the costs of insurance will go up as a result of this judgment."

The revised formula applies only to calculation of damages for future losses, which cover loss of earning capacity and medical expenses.