The Swift v Carpenter ruling set the bar for accommodation costs in personal injury cases involving a long life expectancy and low interest rates, but what is the financial domino effect on insurers? Insurance Times takes a closer look

On 9 October 2020, the Court of Appeal issued its ruling in the Swift v Carpenter case, which discussed the recovery of accommodation costs for severely injured claimants.

Kennedys associate Kim Boland described the legal action as “the leading case on accommodation claims” as well as “the leading case on quantifying amputation claims”, with a result that “is not a favourable one for defendant insurers”.

The case concerned Charlotte Swift, who suffered a below the knee amputation on her left leg and significant injury to her right leg following a motorway road traffic accident in 2013.

Despite being awarded more than £3.8m in compensation in 2018, this payment was designed to cover the costs of prosthetic limbs, care and equipment, such as a wheelchair, but did not include additional costs to help attain suitable housing to meet her new lifestyle needs.

The Court of Appeal ruled in favour of Swift and deemed that previously used case law Roberts v Johnstone “no longer achieved fair and reasonable compensation”.

Boland emphasised that “insurers need to be aware of this decision because it could significantly add to the cost of a claim where the claimant has suffered severe injuries”.

She continued: “Claimants who suffer amputations require accommodation that is all on one level, such as a bungalow, which might be readily available in more rural areas but in cities such as London, accommodation like that is hard to come by so the claimant may need to purchase a flat on the ground floor, or a flat with a lift.

“Claimants who suffer severe brain injuries or spinal injuries and need 24-hour care and assistance may need larger properties so their carers can live in. Again, depending on the area the claimant lives in, the additional capital cost of the property could be significant.

“If you take Ms Swift for example, her accommodation claim alone amounted to over £800,000, so this is a decision all insurers should be alive to and they will have to adjust their reserves accordingly.

“The judgment is particularly detailed on how to quantify amputation claims and should be used as a starting point for any insurer when attempting to set a reserve for an amputation claim.”

Sam Elsby, president of the Association of Personal Injury Lawyers (APIL), raised another financial red flag for insurers following the ruling – namely “the cost in the future of putting a property back into a saleable condition”.

He explained: “Say, for example, a property has had a lot of adaptations for a wheelchair. Most people wanting to buy the property probably don’t need those. So, door frames putting back to normal size, or [having] ramps removed. Those costs need to be projected for the future as well.”

Also, “there’s been talk of insurers buying the property and then essentially it being transferred back to them on the death of the claimant,” Elsby added.

“Whether that might come to the fore in short life expectancy cases, I don’t know. Obviously, it’s a bit complicated, there’s admin – do insurance companies really want those long-term issues?” he mused.

Insurer reaction

Insurers have recognised that the ruling will hit them financially for future personal injury claims of this ilk.

A spokesperson at the ABI told Insurance Times: “This judgment, while providing some clarity, is likely to add further to the cost of claims for insurers and therefore add to the pressure on premiums.”

Robin Challand, claims director at Ageas UK, added: “Clearly, it will have an impact in terms of those very significant claims. It will have an impact on the reserving process, it will have an impact on the end settlement.

“As an industry, we’ve got to understand what that means. [It will impact the spectrum of the process from] the initial assessment of the claim through to the reserving process, through to reinsurance and beyond.”

Zurich said it will “consider Swift when reserving in the same way we always used to consider the old way of calculation, on a Roberts v Johnstone basis”.

Its claims spokesperson continued: “Our reserving is dynamic in that as soon as a new piece of information is received, we review our reserves. Therefore, as and when we receive details of [the] accommodation required, we will review and reserve accordingly as per the current law.”

More of the same?

However, Rob Treen, a senior consultant at Willis Towers Watson, does not believe the Court of Appeal ruling will greatly affect insurers’ financials.

He explained: “Insurance companies will now have to include accommodation costs within their case reserves where they believe the claimant’s current property is inadequate for their ongoing care needs. However, we would not expect this to be a major change for insurers given that a provision for this was required when the Ogden rate was at 2.5% [compared to the current - 0.75%].

“The impact on individual claims of the ruling can be material. In Swift v Carpenter, the claimant’s award was increased by around £800,000, or 20% of the award, excluding accommodation costs.

“However, this impact is likely to be at the upper end of increases due to the high level of additional accommodation costs in the case. We believe a more typical figure would be in the range of £300,000, which is the difference on average between a five-bedroom house and the average house in the UK.

“We estimate that the overall increase on a diverse portfolio of claims in excess of £100,000 will only be around 1%. This increase will also be mitigated by the recent release of the 8th Ogden tables, which generally have a reduction in life expectancies compared to the 7th version.”

Jonathan Bamforth, principal solicitor for brain and spinal cord injury at Minster Law, thinks that prior to the ruling, many insurers were already factoring in the extra purchase costs for accommodation when settling claims, meaning that reserving practices post-Swift v Carpenter shouldn’t be vastly different.

“From my perspective, insurance companies must already have been reserving on the basis that they were going to pay compensation for that extra purchase cost, almost anticipating that the law would change and that it was an unsustainable position at that time,” he told Insurance Times.

“From an insurer’s perspective, I’m not sure their reserving behaviours will change that much because they were already anticipating that change and it was already being factored into collaborative settlements agreed with claimants like ourselves.”

Boland agreed that the financial impact on insurers could be “subtle”. She said: “Realistically, I suspect the majority of increases will be quite subtle and therefore the overall impact to insurers will be more subtle. Far less so than the negative discount rate had on insurers.”

Applying flexibility


Despite the Swift v Carpenter ruling providing “a level of certainty” for severe personal injury cases, the Court of Appeal was keen to emphasise that its guidance “is really only suitable in cases when interest rates are low, as they are now, and the claimant has a long life expectancy”, said Sam Elsby, president of the Association of Personal Injury Lawyers.

There is, therefore, a degree of flexibility in cases where claimants have a shorter life expectancy, or if the interest rates were to rise, as the Swift v Carpenter formula may not be equally applicable or fair in these cases due to the differing circumstances.

Elsby believes this is “broadly sensible” and “a neat approach”.

Zurich noted that solutions for short life expectancy cases are still unclear, however a claims spokesperson said: “Swift does provide finality in terms of long life expectancy accommodation claims, but is not clear on the short life expectancy. We will continue to reserve on the current law, not on the theoretical litigation that could follow.”