Public value delivered at Parliamentary Select Committee
16 November 2017
Professor Victoria Wass from Cardiff Business School has given evidence to the Justice Select Committee on the Personal Injury Discount Rate Inquiry.
The draft bill sought to change the way courts value damages for future losses, such as on-going care costs and lost earnings, in personal injury and medical negligence claims.
When awarded as a lump sum, future losses are currently determined with reference to investment in risk-free assets. The changes proposed in the draft bill require claimants to invest in a mixed portfolio of risk bearing assets with the result that their damages would be lower.
There is a common law principle that damages are awarded with the purpose of achieving full financial restitution – the 100% principle.
Unless the current approach based on risk-free assets can be shown to over-compensate claimants, then the bill will not satisfy the 100% principle.
Professor Wass’ argument is that if claimants are risk averse then they are not over-compensated. If they are required to invest in a mixed portfolio they will be under-compensated.