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Compensation not enough for young people who suffer life changing injuries

October 23, 2012

According to the newspaper, “The Scotsman”, lawyers have issued a warning that young people who need extra care because of serious injuries will not have enough money by the time they are 50 years old.

They have revealed that judges are showing an optimistic view of the amount of real interest that people will get on any lump sum compensation payments they may invest for use at a later date.

A young accident victim, Stephen Tortolano, aged 23 years, is asking for compensation after being inflicted with a severe brain injury in a 4 metre fall off a cherry-picker when at work in Stirling, 3 years ago.

He is now incapable of working and will require constant care for the remainder of his life. His settlement is expected to be worth millions of pounds, but lawyers have suggested that he will need at least another half a million to cover the cost of his care.

Lord Brodie, who was residing at the Court of Session in the city of Edinburgh, did not agree to this and is yet to publish his reasons.

Currently, when working out the amount of compensation for a case, judges include such factors as the needs of the victim, income loss and expected life expectancy.

Another factor that is taken into consideration is the use of a figure which is 2.5% over inflation, related to interest on a government stock that is index linked, and is referred to as the discount rate.

The Lord Chancellor set this rate in 2001. This was when the state of the economy appeared more vibrant. Lawyers are arguing that it was not fair to use the same figure more than 10 years on. In 2001,2.5 percent was then a realistic figure, but it is not the case today.

In August of this year government stocks were returning a zero rate.

Mr Tortolano’s parents are at present looking after him. They have now expressed concern that he may not be able to manage financially when they are unable to care for him in future years.

Assessments indicate that for any unfortunate younger person who has to make a claim, their investments will have to produce at least a 2.5 per cent rate now, otherwise by the time by the time they reach between 50 and 60 years of age, their compensation package will have been used up.

A spokesperson for the Association of British Insurers stated that “insurers have the duty to pay fair compensation in the most efficient way and the industry is to work with the government to work out the right way to set the discount rate.”

A spokeswoman for the Scottish government said that returns received on investments have been dropping over time and it appears the current discount rate might be a little too high.