Record personal injury compensation awards - Dec 2010

This year has seen the courts making a number of record breaking compensation awards. Firstly, Wasim Mohammed, a car passenger left paralysed by a road traffic accident, was awarded £11.5 million.

Then in September, Manny Helmot, 39, a former Commonwealth Games cyclist, was awarded £14m after being knocked off his bike in 1998. Mr Helmot suffered a severe brain injury and will need full time care for the rest of his life.

Most recently, Chrissie Johnson, a car passenger who was left almost completely paralysed after an accident in 2006, was potentially awarded £17.5m. The payment to Ms Johnson, who was 16 at the time of the accident, is made up of a £4m lump sum plus an annual index-linked amount of £300,000.

In all three cases there would also be substantial legal costs in addition to the compensation awarded.

It is important to remember that the compensation awarded was based on the injury suffered and life expectancy of the injured person, not the type of accident. The courts would have made similar awards if the injuries had been as a result of work or business activities. Remember, however, that whilst motor insurance policies are unlimited in the amount of compensation they will pay, employers and public liability policies are subject to a limit.

When considering what is an adequate limit of cover, there are a number of factors which come into consideration beyond the level of current awards, such as the decision maker’s attitude to risk, the affordability of cover, contractual requirements, the buying habits of others, the upward trend of legal costs and future awards - after all, one of the above claims took 12 years to settle!

In light of the above cases a prudent insurance buyer would be wise to consider cover of at least £15m, even if they finally opted for a different level.

Further, if you are a contractor, it is almost certainly a condition of your liability cover that you make checks to ensure sub-contractors hold defined levels of liability cover. These are what insurers expect as a minimum and you may want to consider imposing a higher level.

Please speak to your usual Cooke & Mason contact if you would like to review the limits of indemnity on your business liability policies and a quotation to increase the same.