Financial loss

This is divided into:

• Past loss (expenses up to the date of the trial, called Special Damages)
• Future loss (from the trial onwards and for the rest of the person's life, called General Damages).

Past loss includes things like travel expenses, damaged clothing and jewellery, car repairs, replacement or hire, and medical costs, all of which are usually straightforward, because they have been paid for and so should be supported by receipts.

Loss of earnings can be difficult for a number of reasons: if the injured person was not employed at the time of the accident, or if he was anticipating promotion in the near future, it will be more controversial to calculate his career path. Insurance companies defending these claims may well argue that the unemployment would have continued, or that promotion would not have been achieved.

Another common claim in relation to the period up to trial is for the care which has been provided for the injured person by his family, relatives, friends or others. If such care has been given, it can be costed moderately accurately by a specialist, who can also judge whether it was reasonable in the circumstances of the case. Obviously, if the care was by a professional, one would claim the entire cost, but if it was by family or friends something (usually 25%) should be deducted to reflect the fact that private people do not have the business expenses which are involved in the provision of professional care.

Future loss tends to raise the same problems as are described above for loss of earnings following serious injury due to difficulties in estimating what loss will be suffered in the future as a result of the accident. A complex but structured process is used to calculate future loss of earnings.

For example, someone aged 25, who is injured so badly that he will never work again, has lost 40 years of earnings (if normal retirement would have been at 65): if he was earning £10,000 a year net at the time of the accident it would seem that he should receive £400,000 (£10,000 x 40), but he will not. When there is a stream of loss stretching into the future, the courts adopt the actuarial technique of 'discounting' for accelerated receipt of the money, and so they use a 'multiplier'.

Compensation for an injury can take the form of a lump sum, or an annual income (called a periodical payment), or a combination of both. When calculating a lump sum for future financial loss and expense, courts use the multiplier/multiplicand system.

If someone is injured severely, he or she will often need care, either from relatives or from an outside source such as an agency. Even though no payment has been made to the relatives, a claim can and should be made for the services provided by them. Again, the claim is for loss to the date of trial and for any future loss. The same method of calculation is used as described above but, if the need for care will last beyond the normal age of retirement from work, then the multiplier is likely to be greater than it is for work. This is very often the largest element of a claim, frequently measured in millions of pounds.