Changes to personal injury law to have ‘profound financial consequences’

Public liability cover needs to increase to buffer potential rises in pay-outs

Farmers & MercantileA new law passed on 20th March 2017 is set to have a major impact on personal injury claim settlements, and its ramifications will filter down to the commercial policy-holder and particularly the farming industry. This is the message from leading independent agriculture insurance broker, Farmers & Mercantile (F&M).

In a revision to the discount rate of the Ogden tables, the statistical tables used to calculate future losses in personal injury and fatal accident cases, lump sum awards are set to dramatically increase and will be applied retrospectively to all current claims, as well as new incidents.

The new discount rate ruling has significant implications for large personal injury claims, and given farming’s concerning health and safety record, will be felt hard by the agriculture sector.

An example given following the ruling, would see the pay-out for a female, 35, disabled in an accident and unable to work again, rise from £3,414,350 up to £8,480,400. This assumes the female has no educational qualifications and it is determined she would have earned £20,000 a year until retirement, and rest of life care would be £100,000 a year.

The current record level for a court award in the UK is £23 million made in 2012 at the previous discount rate. In theory, this figure could rise exponentially, and this could have a significant impact on the farming industry.

“Clearly the greatest impact will be to those commercial policy-holders with higher potential for large injury claims, as these costs will be disproportionately affected by increases in large awards, resulting from the discount rate reduction,” says Nigel Wellings, F&M’s founding director.

“This creates huge implications for the farming industry, and therefore it is not just prudent, but we would say essential to reconsider the adequacy of the limits of cover carried under both employers’ and public/products liability policies.”

F&M has been advising clients for some time to look at minimum limits of indemnity of £10 million for both covers, but following the ruling it has revised its recommendations.

“We would recommend that when setting their sums insured that any company now takes minimum limits of £20 million for employers’ liability and £20 million for public/products liability cover,” continues Mr Wellings.

“However, these are only our recommendations for the minimum limits required, and companies with increased exposures should consider taking even higher limits.”

Farmers & Mercantile is one of the largest independent insurance brokers specialising in agriculture, and its experienced team will advise policy holders concerned by the implications of the discount rate reduction.