How will the ‘Covid-Economy’ affect personal injury litigation?

Tue, 26 May 2020

Personal injury and clinical negligence practices, as with much of life, are undergoing sudden and profound changes during this Covid-19 pandemic and the current ‘lockdown’. There are obvious effects, such as the adjournment of trials ‘en masse’ and the embracing of digital platforms. Implementation of the governments’ whiplash reforms has been put back until April 2021 and the much-awaited appeal in Swift v Carpenter was delayed once again. But the economic consequences of the pandemic will also influence PI and CN litigation, in some subtle but important ways.

The extent of the economic disruption caused by the pandemic cannot yet be fully quantified, but it will clearly be profound. Some are forecasting that over two million people will become unemployed and we will likely be facing the biggest peace time recession ever seen, with lasting impacts upon both income and employment levels. Those macroeconomic changes will have – indeed, are having – an impact upon the microeconomics of our everyday lives and, as this article will explore, the quantum of personal injury and clinical negligence claims.

According to the Office for National Statistics, over a quarter of the UK’s workforce is currently furloughed, with the scheme set to continue for over 6 months, until 31 October. The vast majority of those furloughed will accordingly have encountered a real reduction in their income over a sustained period. There are daily news reports of impending mass redundancies and fears for the survival of up to one third of the UK’s small businesses.

Accordingly, many individuals will suffer a substantial reduction in earnings, if not complete loss of employment, during this crisis period and for an as-yet unknown period of further economic decline. Plainly the longer the ‘lockdown’ and any economic down-turn continues, the more pronounced the effect will be.

This inevitably translates to a need to re-evaluate claims for future lost earnings in PI/CN cases, particularly so in fatal claims or those where the claimant’s ability to work is reduced or removed. It is now open to a defendant to contend that the claimant’s income would have shrunk, or disappeared entirely, over this ‘covid’ period. In those cases, the value of future loss of income over the short – medium term will need to be adjusted downwards. 

Another possible consequence of the pandemic will be an increase in the cost of commercial care in the relatively near future. It seems likely that the government and society will face pressure to reward the contribution made by those in the nursing and care sector by raising basic hourly rates of carers and nurses. Allied with a potential decline in the availability of foreign workers following Brexit in January 2021, an uplift in the real cost of care seems probable. Even a modest uplift in the basic hourly rate for commercial carers could significantly increase the value of serious injury claims.

The Lord Chancellor announced a discount rate of -0.25% in July 2019 and under the Civil Liability Act 2018 the rate must be reviewed “within 5 years”. With the NHS under huge pressure and the insurance industry facing gargantuan claims, both are likely to lobby strongly for an increase in the discount rate. On the other hand, the economy is likely to be in deep recession by the autumn and the longer-term outlook seems bleak. Combine that with the historically low Bank of England base rate of 0.1% and a continuation of a low/negative discount rate and gives a clear argument for continuation of a negative rate. It is impossible to predict how other economic markers such as house-prices, inflation and bond markets will respond to the pandemic, but there will surely be a ‘pandemic’ effect upon any change to the discount rate.

Tragically, a revision of life expectancy figures may be a further consequence of the Covid-19 pandemic for an array of reasons. The economic downturn is forecast to have a negative impact upon life expectancy as a result of increased deprivation. Those in older age or BAME groups, or with particular vulnerabilities may face reduced life-expectancy, particularly if Covid-19 becomes ‘embedded’ in the absence of a vaccine. The suspension of almost all ‘normal’ NHS services could further contribute. Again, it is too early to prophesise the precise effect of this crisis upon life expectancy figures, but it is safe to predict that there will be disputes in due course.

The Covid-19 pandemic is taking a terrible toll on lives and livelihoods. The economic impact will be profound and that will be reflected in the conduct and quantum of PI and CN cases.

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