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Mar 15, 2017

Mesothelioma Compensation: Lump Sum Reinvestment Amount Reduced

 
 
 

Mesothelioma victims or others who sufferer with asbestosis diseases are in line to receive more from a lump sum payment awarded in mesothelioma compensation. Asbestos victim support groups and asbestosis lawyers will welcome the recent government decision, even though the amounts involved may ultimately be swallowed up by rising inflation affecting the cost of living.

On 27th February, the Secretary of State for Justice and Lord Chancellor Liz Truss, announced that there would be a reduction in the amount, which is used for reinvestment whenever a claimant chooses to accept a lump sum awarded for life-changing injuries or disease. Known as the Discount Rate, the actual award is adjusted according to the percentage amount of future interest a claimant can expect to receive from the extra income, often for the rest of their life.

The Discount Rate, which has remained unchanged since it was set at 2.5 per cent in 2001 is now due to be reduced to minus 0.75 per cent on 20th March 2017.

Unlikely to ever regain their former financial position

Following the global financial crisis in October 2008, the Bank of England interest rate began to significantly decline from 4.5 per cent and remained at an historic low of 0.5 per ever since March 2009. Currently the rate is just 0.25 per cent. According to the Ministry of Justice (MoJ), the aim of a compensation award based upon an amount used for earning interest is to put the claimant “in the same financial position had they not been injured, including loss of future earnings and care costs”. However, over the last ten years, a claimant would be increasingly unlikely to ever come anywhere near to regaining their former financial position.

Although the Discount Rate is linked, by law, to returns on the lowest risk investments, such as Index-Linked Gilts or Government bonds, the yield on these types of investments has dropped dramatically, and the decision by the government to relook at the Discount Rate is long overdue. Liz Truss, who only became the first ever female Lord Chancellor in October 2016, said that the law required of her to “make sure the right rate is set to compensate claimants”.

Change to the rate is unlikely to make a real difference

The MoJ has also stated that “claimants must be treated as risk averse investors” and recognises that they are “financially dependent” on the lump sum awarded, often for long periods or the duration of their life”. While any positive news for claimants is welcomed, apart from the most serious cases or those involving future risks, the change to the rate is unlikely to make a real difference in helping those struggling to live with non-fatal diseases or injuries.

The outlook is not favourable. The UK inflation rate is expected to rise to 2.7 per cent over the next 12 months, according to the Office for National Statistics.

Many mesothelioma claimants may only survive for between 2 and 12 months following a confirmed diagnosis. While an interim payment can be awarded to immediately help victims and their families with the cost of special treatments, care and equipment, almost always a major consideration of the victim is the future financial security of their spouse and any dependents.

More changes could yet be applied, which may even reverse the modest gains recently announced.

Mesothelioma sufferers no strangers to disappointment

The government is to start a consultation in the coming weeks to consider “whether there is a better or fairer framework for claimants and defendants”. Among the options for consideration, the committee will ask whether the rate should in future be set by an independent body or if more frequent reviews would improve predictability and certainty for all parties. In response, the government may even bring forward any necessary legislation at an early stage.

Sufferers of mesothelioma and asbestos-related conditions are no strangers to disappointment when government announcements are made which appear to improve their lives. The introduction of the Diffuse Mesothelioma Payment Scheme (DMPS) in July 2014, aimed to offer a fast track solution for around 3,500 mesothelioma victims who every year are unable to trace their original employer or insurer. However, the scheme was to only apply to those diagnosed with the fatal cancer after 25th July 2012. Those who suffer with asbestosis disease, such as pleural thickening, were also excluded.

A further disappointment was the 80 per cent limit imposed on the average equivalent civil compensation payment. The amount was eventually changed to 100 per cent in February 2015 after MPs, victim support groups and legal representatives repeatedly argued that mesothelioma claim victims and their families would suffer significant financial difficulties.

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