Emerging A&H risks will transform the employment liability landscape

This article was originally published by Insurance Day on 23 November 2020.

While England may be under a second lockdown, claims continue to emerge and develop, with some issues arising that employers and insurers should be aware of. 

Swift v Carpenter [09.10.2020]

Accommodation claims can often represent a substantial element of catastrophic injury claims. However, with a negative discount rate, calculation of a claimant’s accommodation claim based on the approach adopted following the decision in Roberts v Johnstone [1989], effectively provided claimants with a nil award for the capital element of their accommodation claim.

The Court of Appeal addressed this issue in Swift v Carpenter, opting for the reversionary interest approach, through which the claimant gives credit for the market value of the expected reversionary interest in the additional capital required to purchase a suitable property.  Such calculation to be based on the assumption that the notional purchaser of the reversionary interest would seek an annual return of 5% on their investment.

Severely injured claimants often require a more expensive property as their existing property no longer meets their post-injury needs. The Roberts v Johnstone formula sought to provide the claimant with a contribution towards the purchase of a suitable property, whilst also mitigating against the potential for overcompensation and therefore a ‘windfall’ for the claimant’s estate on their death. Such ‘windfall’ would contravene the fundamental principle laid down in Wells v Wells [1999] that a claimant’s damages should put them back in the position that they would have been in but for the accident, or as close to that as possible, but do no more than that.

The reversionary interest  is calculated on the ‘market value’ by applying a discount rate of +5% to the claimant’s life expectancy. With the formula for calculating the reversionary interest including the claimant’s life expectancy, it is inevitable that in cases with shorter life expectancy, during conditions of anything other than a negative or a low positive discount rate, this guidance will however be challenged. Indeed, in Swift v Carpenter the Court of Appeal recognised that different considerations may apply in such cases.

The judgment marks a return to claimants receiving damages awards aimed at meeting their accommodation needs.  Those awards are still discounted in acknowledgement of the ‘windfall’ issue and thus the principle of 100% compensation still stands. 

Accommodation awards under this new model will frequently be substantial and represent a significant proportion of the required capital purchase cost.

The Court of Appeal has refused permission to appeal Swift v Carpenter.

Gaming disorders and opiate addiction

ICD 11 (the 11th revision, of the International Classification of Diseases) was adopted by the World Health Organisation in 2019. It was in this version that a Gaming Disorder was first officially recognised as a psychiatric disorder.

There is a risk to insurers that a claimant who suffers immobilising physical injuries may be isolated at home and play video games (potentially excessively) to pass time, particularly as games are becoming more advanced. This could lead to claimants developing an ICD-11 Gaming Disorder, as a consequence of the index accident and physical injuries, and in turn potentially higher awards of damages. In October 2019, the first NHS Clinic was opened to provide treatment for gaming disorders. Clinical evidence is still being gathered on the best way to treat the disorder, but a claim for a private, residential treatment programme for example could add a significant sum to a claim.

Some studies have reported the prescription of high dose, long acting opioids, which according to one study has increased by 580% in the last 20 years, is another developing area of psychiatric risk. An opioid dependency disorder is a recognised condition under ICD-11.

Opioids have commonly been prescribed to treat chronic pain, including post-surgical chronic pain. They can be highly addictive (some studies have shown a significant percentage of users reporting dependence), with side effects and withdrawal symptoms common. A claimant who is prescribed opioids to treat their injuries, could develop a dependency disorder. This has the potential to increase the level of damages claimed (especially if private residential treatment costs are claimed) and potentially legal costs. For insurers handling such claims, consideration will need to be given to these potential outcomes when reserving.

The challenges of homeworking

This year has seen an unprecedented change to our working practices. As a result of COVID-19 and the subsequent lockdowns, indications are that at least half of the British workforce has moved to working at home fulltime.

At the time of writing, the impact of this in terms of employee’s physical and mental well-being is uncertain, but the consequences are likely to be far reaching.

In October 2020 the Institute of Directors surveyed 1000 firms and 74% said they planned to continue with more emphasis on home working after the current health emergency is over.

What are the legal obligations for businesses in terms of homeworking ?

The basic requirement is the same in relation to both physical and mental wellbeing, namely an obligation to assess the risk posed in the workplace and to address them appropriately.

The advent of entire workforces working at home poses a huge challenge for businesses in terms of providing staff with the right equipment and ensuring that homeworking  and workstations are safe.

The  HSE has provided helpful  guidance to employers to help them address the problems that arise with homeworking. That guidance confirms that employers are not required to carry out full work station assessments for those staff working temporarily at home. However, the guidance does suggest employers could provide employees with advice in completing their own basic home work station assessment.

The guidance from the HSE in terms of mental health is brief and simply recommends that employers put procedures in place so they can keep in direct contact with homeworkers  and pick up any signs of workplace stress as early as possible.

In reality the guidance doesn’t impose any further obligations on employers  in relation to staff working at home. If the COVID-19  health emergency does stretch well into next year, it will be interesting to see whether the HSE decide to update the guidance and take the opportunity to  remind employers of their obligations to employees whether working in the office or at home.