Painting by numbers

Article, Post MagazineDecember 2006

Insurance / Liability / Casualty

How the courts determine liability in mesothelioma claims has come under close scrutiny but, as James Stanbury explains, other cases have helped paint a clearer picture on the equally important question of quantifying claimant damages.

The law pertaining to asbestosis-related diseases—and in particular mesothelioma claims—has been the subject of intense examination during the past few years. While the focus has rightly been on liability matters, the valuation of damages in such cases is just as critical to the parties concerned.

The cornerstone for quantifying damages in mesothelioma claims is the calculation of loss of earnings: claimants facing demise and early death are entitled to claim for the earnings they would have received but for the industrial disease. In practice, this means the lost income from the time the injury impacted on their ability to work, past the point of their early death, and up to the time they could otherwise have expected to continue working - for example, normal retirement age.

The value of loss of earnings in the latter part of this period - that is, from a claimant's early death, up to the time they could have expected to work but for the disease - is subject to a deduction, stripping out the portion of the award designed to cover the claimant's own living expenses, which are clearly not needed after death.

The correct proportion was considered by the Court of Appeal in Harris v Empress Motors in 1983. Their lordships defined living expenses as "the proportion of the victim's net earnings that he spends to maintain himself at the standard of living appropriate to the case" but declined to give a set figure for the proportion of earnings to be deducted on a victim's death. They took the view that this depends, firstly, on the level of joint expenditure with, for example, a spouse; and, secondly, the number of people between whom it was to be divided, that is, dependants.

Following on from Harris, the basic principle has emerged that sums spent to maintain a victim at the appropriate standard of living are to be deducted after death, subject to the qualification that where expenditure is incurred for the joint benefit of others still living, the portion deducted should be less.

Practical approach

In practice, the court may adopt several general guidelines. Firstly, in the case of a young, unmarried person - albeit an unlikely scenario for a mesothelioma victim - the court must rule on various imponderables; for example, whether the victim will marry, save or support anyone, all of which would result in a lower deduction for living expenses from what would generally be a high percentage. The deduction for a claimant living at home may be taken as 67%, whereas upon leaving home and moving into, say, an apartment, it may rise to 75%.

Secondly, for a married person with no children, a deduction of 50% for living expenses usually applies using the following rationale: one-third of the net income would typically be spent by the victim on their own needs (33.3%); their spouse would typically spend the same proportion on their requirements (33.3%); and the last 33.3% of net income represents joint living expenses, of which half is for the benefit of the victim - that is, 16.7%. Thus, living expenses attributed to the victim are 33.3% of net income (own share) plus 16.7% of net income (their half-share of joint expenses), totalling 50% of net income.

Furthermore, in the case of a married person with children, the percentage deducted reduces where the number of dependants increases, and the percentage deductions - following the rationale described above - may be calculated as follows. If a mesothelioma sufferer is married with one child, add a person's own expenses (now 25% instead of 33.3%) to their share of the joint expenses (11.1%, being one-third of 33.3%), creating a total of 36.1%. It is generally assumed that the level of joint expenditure would not significantly increase with the increased size of the family unit and, therefore, the starting point remains at 33.3%.

If a claimant is married with two children, add a person's own expenses (25%) to their share of joint expenses (a quarter of 33.3%, being 8.3%), creating a total of 33.3%. On the same basis, if they are married with three children, take a person's own expenses (25%) together with their share of joint expenses (one-fifth of 33.3%, being 6.7%), creating a total of 31.7%.

Of course, these are only guidelines and each case will always be assessed on its own facts. Claimants may be able to provide a detailed analysis of household expenditure to demonstrate what proportion of their current expenditure they use exclusively on their self. While rare, one case where such an analysis had been prepared - and on a monthly basis - helped to demonstrate that the presumed deduction was too great. Of course, cost considerations and a lack of adequate records usually dictate against such a specific approach but it should always be considered.

 

As appeared in Post Magazine, December 2006.

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