Calculating future losses in Fatal Accidents Act claims: From the date of death, or the date of trial?
Published 1 February 2016
Knauer v Ministry of Justice
As a result of the Supreme Court’s decision in the case of Knauer v Ministry of Justice claims brought under the Fatal Accidents Act 1976 for loss of income or services dependency will attract higher awards of compensation.
Between 1997 and 2007, Sally Knauer worked as an administrator at Guy’s Marsh Prison, in Dorset. While working at the prison she was exposed to asbestos. In March 2009, Mrs Knauer was diagnosed with malignant mesothelioma and she died on 28 August 2009 aged 49. Mrs Knauer is survived by her husband and three children (aged 22, 20 and 16).
Claims were made by Mrs Knauer’s estate and by her dependents in respect of the lost value of the income and services that she would have provided had she not developed mesothelioma. The usual method for calculating such claims is to quantify the annual value of the loss, and apply to this a multiplier which is set with reference to the Ogden tables and reflects the Deceased’s life expectancy.
Prior to the Supreme Court’s decision, the multiplier was calculated from the date of death and not from the date of trial. The multiplier would have deducted from it the number of years passing between death and trial, as well as a small discount for contingencies other than death. The remainder of the multiplier would be used to calculate future losses.
As a result of the Supreme Court’s decision, the multiplier is calculated from the date of trial and not from the date of death. It has deducted from it a small discount to reflect the risk that the deceased would not have survived to the date of trial. The effect of this change in the law is illustrated in the following simplified example.
A woman aged 54 dies. She would otherwise have had a normal life expectancy. The claim goes to trial 5 years later. The value of the income and services dependency claim is assessed at £10,000 per year until the end of the Deceased’s normal life expectancy.
Using the old method the calculation would be:
- Multiplier: 22.50 (less a small figure for contingencies other than death)
- Value of the claim from death until trial: 5 years at £10,000, or £50,000 in all
- Value of the claim from trial onwards: 22.50 – 5 (years) = 17.50 x £10,000 = £175,000
- Total value of the claim: £50,000 + £175,000 = £225,000
Using the new method, the calculation will be:
- Multiplier: 20.30 (less than that above, because it is assessed from trial when the Deceased would have been aged 59)
- Discount for risk of death: c.0.97, reducing the multiplier to 19.69
- Value of the claim from death until trial: 5 years x £10,000 = £50,000
- Value of the claim from trial onwards: 19.69 x £10,000 = £196,900
- Total value of the claim: £50,000 + £196,900 = £246,900
In Sally Knauer's claim, the difference in approach will increase the damages ordered by about £51,500 taking the total award to about £695,000. More generally, the change in approach will increase awards for future loss of income and services dependency by about 10% depending on the circumstances of the case.
The Judgment has retrospective effect and therefore affects all outstanding Fatal Accident claims. Reserves on all such cases will need review if the risk inherent in this case has not already been allowed for.