AVOIDING UNDER SETTLEMENT 1: CLAIMS FOR LOSS OF EARNINGS (1)
The curious thing about writing about avoiding under settlement is that there is very little material on the subject, particularly in the U.K. There are now plenty of websites which offer to sue your previous lawyer if you are not happy with the damages you received. There is precious little material on how lawyers can protect themselves. This is a surprising state of affairs. The vast majority of cases settle. The last thing the legal system needs is a spate of “cannibalism” with lawyers being sued because they under settled an action. A positive system needs to be in place to avoid under settlement.
Here I look at the risks of under settling a claim for loss of earnings. This, in itself, is such a large subject, that it merits several posts.
UNDER SETTLING A CLAIM FOR LOSS OF EARNINGS
This is the first post on this subject. Here we look at an example of under settlement. Some useful checklists; the claimant’s evidence and some important heads of damage. First we look at this in the context of a case where under settlement was found to have taken place.
A CASE WHERE UNDER SETTLEMENT WAS FOUND TO HAVE TAKEN PLACE
Hickman –v- Blake Lapthorn and David Fisher  EWHC 2714 (QB).
An action settled on the morning of trial on whether the Motor Insurers Bureau were liable to indemnify.
The action was settled on the assumption that the claimant would recover and had, at best, a chance of a Smith award.
The solicitors and counsel were found to be negligent in failing to have all the medical reports to hand when advising in relation to damages. The case settled for £70,000. That settlement was criticised and proceedings subsequently issued against the solicitor and barrister. The judge noted:
“There is considerable difficulty now in deciding how the decision to accept £70,000 was reached. It happened 8 years ago. Mr. Fisher and Mrs. Howard have some recollection of the occasion, but not the detail. They have the disadvantage that for them this was one case among many. That was not so for the Hickmans…”
In relation to the question of negligence the judge observed:
“What is clear, however, is that Mr. Fisher based his advice on the assumption that Mr. Hickman would regain full time employment. The possibility that he might not was apparently put on one side.
“It is well-known to practitioners in the field that the largest contributors in large claims are the claims for loss of future earnings and for future care, particularly with young claimants.”
The barrister had failed to consider whether vocational training had been put in place before putting figures to the claim. Training by Headway had failed. The claimant had not recommenced work. There was a very real question as to whether he would ever had held down a job. There was no evidence that the prospects of the claimant achieving full time employment was embarked upon.
“In the circumstances the omission was clearly wrong. I consider that it was also negligent. No reasonable and competent practitioner should in the circumstances have omitted to examine the possibility that this was not just a case which called for a generous Smith –v- Manchester award but one which might call for the loss of earnings and care to be compensated for on a lifetime basis. I do not think that this was simply an error of judgment, something on which opinions might differ. It was a failure to appreciate and take into account a real possibility, apparent on the papers, which called for further enquiry, and once enquired into, would have revealed itself as something which must be included in the advice to be given. So I find Mr. Fisher was in breach of his duty. He should have made such assessment as he could of what the claim might be worth if Mr. Hickman was unable to work, and should have included that in his advice to him. In contrast, the advice he gave was on a best outcome scenario.”
The solicitor was in a different position. She knew more about the medical evidence. The judge found that she should have raised the possibility that the claimant might never get into employment.
The fact that the MIB were running a Part 6 defence (alleging knowledge of lack of insurance and therefore no liability to pay) was important. However that was something for the claimant to take into account upon advice as to the full value of the claim.
The judge found the barrister two-thirds liable and the solicitor one-third.
ISSUES THAT AROSE IN HICKMAN
- The claimant’s lawyers in the original personal injury trial were advising on damages on the morning of a trial on liability/indemnity without having all the medical evidence available.
- There was an inadequate record of the advice given.
- The claimant’s lawyers had failed to turn their mind to the essential issue of whether, in reality, the claimant would work again.
- The claimant’s lawyers were negligent in advising that this was simply a “Smith –v- Manchester” case.
DEALING WITH LOSS OF EARNINGS CLAIMS: ESSENTIAL CHECKLISTS FREELY AVAILABLE
The essential point about claims for loss of income is to make proper and detailed investigations.
- I recommend (unsurprisingly) the questionnaire on loss of earnings in my blog on loss of earnings claims
- Equally unsurprising I also recommend you read the post on witness statements and loss of earnings.
- As much information should be obtained as early as possible. This deals with the possibility that a defendant may make an early Part 36 offer.
- Do not automatically defer to medical evidence on the issue of future employment/disability in the labour market. As the claimant for their views on how they will cope in the labour market.
- Do not make assumptions that a claimant is in a “safe job”. It is surprising how, on questioning, many people reveal periods of unemployment, redundancy risks and uncertainty as to their employment.
- Be very aware of the value of “fringe benefits” and bonus payments, again another plug for a post on this very subject.
ASSESSING THE VALUE OF THE CLAIM FOR LOSS OF EARNINGS/DISADVANTAGE IN THE LABOUR MARKET
Once all the evidence is available it is possible, and indeed it may be necessary, to give a claimant robust advice. However the dangers occur when advice is given without all the evidence available.
- Never accept, at face value, a claimant’s figures as to their loss of earnings. These should be checked against wage slips and tax returns. This is even more important if the claimant is self-employed (sometimes there can be under-estimates as well as over-estimates, or a failure to realise the difference between gross and net earnings).
- If there is an indication that the claimant is capable of work ensure that they are made fully aware of the risks of not seeking work/re-training. The burden in failing to mitigate loss lies with the defendant. However a claimant is who is adjudged capable of work, but has done nothing to find work, could have considerable difficulties at trial.
(The next post will look at other aspects of evidence and claims for loss of income/earnings).