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Inflation Warning: General Damages

UK inflation is running at approximately 10% at the time of writing. In March 2023 the CPIH Index was at 8.9% and the RPI all items was at 13.5%.

What does that do to general damages assessments and settlements?

Imagine the scenario: In March 2021 you advised as to likely Quantum in a clinical negligence case and, almost exactly two years later, the parties are close to settlement based upon that advice. Revisiting the original comparator cases may give you a surprise:

In March 2021, general damages as estimated by the Claimant’s solicitors in the case of AR v Mid-Yorkshire, 2019 WL 02255786, were approved by the court at £38,949 when adjusted for inflation. In April 2023 that figure has changed to £48,060. That’s a rise of 23.4% in a fraction over 2 years.

In N v Alder Hey, 2013 WL 12396420, generals in April 2021 were £59,773. In April 2023 that has risen to £73,606, again just over 23%.

Imagine that the Defendant had made an offer of £40,000 in April 2021 and made an improved offer of £50,000 in April 2023. In reality, after inflation is factored in, the offer of £40,000 in April 2021 would cost, in real terms, £49,018 now. The increase in offer is therefore really an increase of £982 only.

For Defendants of course, if the income to the organisation, be it NHSR, a professional indemnifier or a commercial insurer, has gone up commensurate with inflation each year, then no harm is done in real terms by making the higher settlements. But if the organisation has not been able to improve its income in that way (because of market forces or legislation or for whatever reason) then that is going to become very expensive very quickly.

For Claimants:

Be careful about settling cases based upon quantum advice, itself based upon comparator cases, that is any age at all. The change in settlement figures may well surprise you. A claim in which generals are valued at £100,000 will be changing its settlement bracket by about £960 every month that it is not settled.

For Defendants:

Factor in the additional effect of delaying settlement caused by inflation over and above the in-any-event effect of increased costs. Delaying settlement for a year of a claim in which generals are circa £100,000 will cost an additional £11,500 or so.

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