Discount rate change leads to £13.7m award for cyclist and sends shockwaves through industry
AXA has warned that insurers could be left hundreds of millions of pounds out of pocket if UK courts change the way they calculate compensation in line with last week’s record payout to a permanently disabled cyclist in Guernsey. Managing director of claims, David Williams, said insurers would fight any such change in the courts.
His comments follow the Guernsey’s Court of Appeal record compensation award of £13.75m to former professional cyclist Manny Helmot. It is understood to be the biggest personal injury payout ever awarded to an individual in Britain.
Helmot, who represented Guernsey for cycling in the 1998 Commonwealth Games, was permanently disabled after a training ride crash in 1998. Still partially blind and brain-injured, with no use of his right arm, Helmot needs 24-hour care.
He was awarded £9m by the Royal Court of Guernsey earlier this year. This was increased to £13.75m following an appeal.
The compensation is to be paid by Helmot’s insurer Tradex, their reinsurers and Dylan Simon, the driver of the vehicle involved. The money will be paid as a lump sum, as is standard in Guernsey, rather than via a staged payment protection order.
The court arrived at the new figure after recalculating the compensation discount rate to a figure of minus 1.5%.
The decision effectively assumes that the returns on investments over Helmot’s lifetime will be outstripped by inflation, meaning that he will need greater compensation to cover his care costs.The decision reflects the changed economic climate and could open the door to similar rulings.
Speaking at the Insurance Times claims optimisation clinic earlier this week, Williams said the decision to set the discount rate at minus 1.5% had lifted the payout from approximately £9m.
He expressed concern that claimant lawyers would use the Guernsey judgment to challenge the guideline discount rate in mainland UK courts, with cost implications for both insurers and the NHS. He said: “The potential implications of this are absolutely scary.”
He added that it would put insurers off writing business in Guernsey and that any similar rulings in the UK would be challenged by insurers.
Williams said: “It would cost the NHS hundreds of millions of pounds if the discount rate were lowered.”
Commenting on the case itself, Tradex claims director Bob Still said: “We and the reinsurers are considering the judgment that has been given, and its implications.
“There is another appeal procedure available and that is part of the consideration that’s being given at this moment in time.”
Swiss Re has a 50% quota-share arrangement with Tradex, which did not come into force until 2001.
In 1998, Swiss Re was a participant in Tradex’s excess of loss programme.