Lord Hunt asks if an end to the lump sum damages lottery is in sight
At last the lottery involved in lump sum damages seems likely to end. In calculating future losses, very few systems get it right. In Wells v Wells in 1998, Lord Steyn identified what is for many of us a major inequity in the present system.
Where there are serious injuries, judges often have to resort to guesswork. Lord Steyn criticised what he described as "a wasteful system", with the courts compelled to award large sums that turn out not to be needed.
My optimism comes as a result of a recent statement by the Master of the Rolls, Lord Phillips of Worth Matravers. Lord Phillips voiced his concern that the present system is unfair. He identified the circumstances in which accident victims receive multi-million pound compensation and can then live much longer than expected and suffer a shortfall, or die prematurely so relations inherit a substantial windfall.
When the House of Lords recently debated damages, there was unanimity over the need for reform of the system of compensation for future losses. Lord Brennan, a respected personal injury specialist, made a strong and urgent request for certainty and an end to the heartache and the waste of time spent in trying to calculate a lifetime sum.
We all called for a much more satisfactory system under which the decision would be "how much do you need" rather than some artificial guess, which is usually wrong.
The good news is that there is momentum in favour of giving the courts the power to award structured settlements rather than leaving this exclusively to the agreement of the parties. I warmly applaud the very constructive response of the Association of British Insurers (ABI) and the key insurers to the need for innovative products, which are necessary to meet the demand.
Lord Phillips has set up a working party and the Lord Chancellor recently indicated that he was looking favourably on such a development.
Simply increasing lump sum damages is not the answer. Indeed the continuing calls by campaigners from various professions for tinkering with the system for calculating future losses risks, removes the certainty and clarity that claimants need as much as insurers.
There is a mood for serious and fundamental reform. Recent developments in other areas give us good cause for optimism.
Despite the recent rise in the cap on the NHS contribution in road traffic cases, there is increasing recognition of the need to avoid retrospective increases in damages. It is also good to know that the call by many of us for fixed costs has met with an equally positive response from the Master of the Rolls.
The insurance industry has always called for clarity and certainty. Perhaps at last that call is being heeded with the much needed stability in insurance premiums which will result.
u Lord Hunt of Wirral is senior partner of law firm Beachcroft Wansbroughs.
