GETTING TO KNOW THE OGDEN TABLES WHAT ARE THEY? The formal title of the tables is: Actuarial Tables with Explanatory Notes for Use in Personal Injury and Fatal Accident Cases They are admissible in evidence by virtue of section 10 of the Civil Evidence Act 1995: Admissibility and proof of Ogden Tables The actuarial tables(together with explanatory notes) for use in personal injury and fatal accident cases issued from time to time by the Government Actuary s Department are admissible in evidence for the purpose of assessing, in an action for personal injury, the sum to be awarded as general damages for future pecuniary loss They are tables prepared by the Government Actuary s Department which provide an aid for those assessing the lump sum appropriate as compensation for a continuing future pecuniary loss or consequential expense or cost of care in personal injury and fatal accident cases (paragraph 1 of Explanatory Notes) They are required when assessing any item of future pecuniary (i.e. monetary) loss or expense, whether a one-off item or continuous. The Tables provide the present capital value of that future loss/expense. HOW DO THEY WORK? MULTIPLICAND x MULTIPLIER = PRESENT CAPITAL VALUE Start with the present day value of the future loss/expense (or, if an ongoing recurrent loss, the present day annual loss/expense). This is your multiplicand. The Multiplicand is then multiplied by the Multiplier found in the relevant table, to produce the present capital value of the future loss/expense. The Multipliers in the Tables take into account: (1) Mortality. The prospect of death before the end of the period of loss/expense, or, where a loss/expense runs for life, dying before or after the average ; Richard Menzies 1
(2) Early Receipt. To take account of the fact that the Claimant s damages are received Mortality as a lump sum rather than incrementally over the years following assessment of damages. The 7 th Edition, published October 2011, uses projected mortality based on the 2008 data. A new edition was promised for autumn 2012 (paragraph 6 of Introduction) with updated mortality projections. Each new edition, with updated projections, tends to result in a slight increase to most multipliers. The effect of mortality is built in to the figures in the Tables (save for Tables 27 & 28, which take no account of mortality). Early Receipt It is assumed that the lump sum award will be invested and yield income. The columns in each table represent different rates of return in 0.5% increments. Rate of return = notional net return above inflation Damages Act 1996 s.1 rate of return may be prescribed by Lord Chancellor Damages (Personal Injury) Order 2001, 28/6/2001: 2.5%. [This rate of return is wholly unrealistic, but it seems unlikely that the Lord Chancellor will change it significantly. Whilst the Court has power to apply a different rate of return if it is more appropriate (s.1(2)), this has been interpreted narrowly (Warriner v. Warriner [2002] 1 WLR 1703, CA) and as a result such cases will be truly exceptional. Further, it is not permissible to argue that the loss/expense will increase at a rate greater than inflation (e.g. wage inflation historically greater than RPI, cost of private healthcare increasing faster than inflation), as this is seen as a collateral attack on the prescribed rate (Cooke v. United Bristol Health Care [2003] EWCA Civ 1370). Similarly, to claim for the cost of investment advice in order to obtain a better rate of return (Eagle v. Chambers (No 2) [2004] EWCA Civ 1033). Account can, however, be taken of a future increased (or decreased) requirement for care, promotion or other absolute changes.] Richard Menzies 2
WHAT DO THEY LOOK LIKE? There are 28 different tables and the HMSO version runs to 74 pages! The first 26 tables deal with continuous losses in 3 distinct scenarios, and take into account both early receipt and mortality. There are separate tables for male and female Claimants: Tables 1 & 2: Recurrent loss/expense for life (male/female) Tables 3 14: Recurrent loss/expense to age 50, 55, 60, 65, 70 & 75 (male/female) Tables 15 26: Recurrent loss/expense from age 50, 55, 60, 65, 70 & 75 (male/female) These tables deal with any regular frequent payments (usually weekly or monthly). Tables 3 14 are not just for claims for loss of earnings. Tables 15 26 are not just for claims for loss of pension. PNBA s Facts & Figures 2012/13 reproduces the 7 th edition of the Ogden Tables in full (p.44 120) and also provides useful male & female summary tables of the 2.5% columns of Tables 1 26 (p.4 7). The 2.5% summary tables are all you need for most calculations. Example 1 Male Claimant aged 39 will require nursing care for the rest of his life. The current cost of this care is 250 per week. Multiplicand (annual cost?): Multiplier (which table? which row/column?): x = Example 2 Female Claimant aged 44 requires prescription medication. She buys a Prescription Prepayment Certificate which currently costs her 29.10 every 3 months. When she reaches age 60 she will be entitled to free prescription medication. Multiplicand (annual cost?): Multiplier (which table? which row/column?): x = Richard Menzies 3
COMBINING TABLES It is possible to calculate multipliers for other periods by subtraction. i.e.: Multiplier for life multiplier to age x = multiplier from age x for life Multiplier to age y multiplier to age x = multiplier from age x to age y [The first of these has, in fact, been done for you in Tables 15 to 26] Example 3 Female Claimant aged 55 will require nursing care for the rest of her life. The current cost of this care is 100 per week. Due to deteriorating symptoms her need for care will increase in the future. It is expected that her need for care beyond age 75 will be 50% greater than her current requirement. Multiplier for life (female aged 55): Multiplier to age 75 (female aged 55): Multiplier from age 75 for life (female aged 55): Claim to age 75: x = Claim beyond age 75: x = Example 4 Male Claimant aged 46 requires ongoing psychiatric treatment for his PTSD at 100 per session. Initially he will require monthly sessions, but this is expected to reduce to every other month from around age 50 and no further treatment is expected to be required beyond age 55. Multiplier to age 50 (male aged 46): Multiplier to age 55 (male aged 46): Multiplier from age 50 to 55 (male aged 46): Claim to age 50: x = Claim from age 50 to age 55: x = Richard Menzies 4
THE OTHER TWO TABLES These tables are different. They take into account only the discount for early receipt, not mortality. This is why there is no mention of age and gender, merely a period of years: Table 27: Discount factor for a period of deferment ( F&F 2012/13, p.117 18) Table 28: Recurrent loss/expense for a term certain ( F&F 2012/13, p.119 20) Table 27 is used where: (1) there is a one-off item of loss/expense that will be incurred a given number of years post-trial (Example 5(a) below); and (2) a recurrent loss does not start immediately (Example 6 below) [although in most cases it is simpler to deduct for the period where there is no loss rather than multiply for the delay; see Alternative Approaches Example 8, methods 2 & 3 below]. Table 28 is used where: (1) the loss/expense will be suffered for a fixed future period (Example 5(b) below); and (2) where experts have agreed the Claimant s life expectation as a period of years(example 7 below). [As these tables take no account of mortality, the multipliers produced will be marginally too high. With young Claimants (under 30 or 40) and short periods the error will be slight, but be aware that with older Claimants (particularly once above 50 or 60) and longer periods the error could be significant.] Example 5(a) Male Claimant aged 35 has significant osteoarthritis at the left ankle. As his condition deteriorates fusion of the joint will become advisable. This is likely to occur around age 42. The present cost of such surgery is 5,000. Multiplier for period of deferment of 7 years: x = (present cost) (multiplier for deferment) Example 5(b) Up to surgery he will require domestic assistance of 4 hours per week (presently costing him 10/hr). After surgery this need will reduce to 2 hours per week. Multiplier for period of 7 years: Multiplier for life (male aged 35): Multiplier from age 42 for life (male aged 35): Claim to age 42: x = Richard Menzies 5
Claim from age 42 for life: x = Example 6 Female Claimant aged 10 suffered serious brain injury at birth, such that she will not be able to undertake remunerative employment. Her earning capacity but for the accident (taking into account contingencies) has been assessed at 10,000 pa net of tax. She would have started work at age 19 and worked to age 70. Multiplier to age 70 (female aged 19): Multiplier for period of deferment of 9 years: x x = (annual loss) (multiplier for period) (multiplier for deferment) [Conceptually it may be helpful to think of this in 2 stages: Firstly, what lump-sum award would be appropriate if the trial had taken place in [9] years time, when the Claimant would have started work? Second, what discount should be applied to that lump sum to reflect the fact that the Claimant will actually receive the lump sum [9] years earlier than that?] Example 7 Female Claimant aged 56 rendered tetraplegic following fall down stairs. She now requires care costing 50,000 pa. The parties experts agree that her life expectation is 12 years. Multiplier for period of 12 years: x = (annual cost) (multiplier for period) Richard Menzies 6
COMPARING ALTERNATIVE APPROACHES (This demonstrates the inherent error when using Tables 27 and 28) Take a male Claimant aged 54 will suffer a loss of 1,000 pa commencing at age 60. Example 8: Method 1 Multiplier for life (male aged 54), Table 1: 20.99 Multiplier to age 60 (male aged 54), Table 7: 5.49 Multiplier from age 60 for life (male aged 54): 20.99 5.49 = 15.50 [The same multiplier can be obtained from Table 19] 1,000 x 15.50 = 15,500 (annual loss) (multiplier for period) [This calculation takes appropriate account of mortality] Example 8: Method 2 Multiplier for life (male aged 54), Table 1: 20.99 Multiplier for period of 6 years, Table 28: 5.58 Multiplier from age 60 for life (male aged 54): 20.99 5.58 = 15.41 1,000 x 15.41 = 15,410 (annual loss) (multiplier for period) [The term certain multiplier for the period of 6 years takes no account of mortality over that period and as a result is higher than it should be, causing the multiplier for the remainder to be lower than it should be] Example 8: Method 3 Multiplier for life (male aged 60), Table 1: 18.30 Multiplier for period of deferment of 6 years, Table 27: 0.8623 1,000 x 18.30 x 0.8623 = 15,780.09 (annual loss) (multiplier for period) (multiplier for deferment) [No account is taken of the fact that the Claimant might not reach age 60 and accordingly the result is higher than it should be] The correct approach in this specific example is the first. If, however, the loss was expected to commence at (say) age 58, you could not use method 1 and would therefore have to use method 2 or 3. [There is, in fact, a method which can be employed to obtain multipliers for periods to/from any age in the range 50 to 75 by interpolation, but that is beyond the scope of this paper (Explanatory Notes paras 13 to 16). There is also a method for calculating multipliers for periods to/from an age outside this range, but that is even more complicated (Explanatory Notes paras 22 to 24).] Richard Menzies 7
PERIODIC LOSS AND EXPENSE Although designed to deal with regular frequent payments, the Tables are often used for losses which are incurred annually, or even less frequent than that. Arguably there ought to be some adjustment to reflect the fact that the cost is not incurred evenly over the year (or years), but more often than not this is not done. Averaging the recurrent cost to give an annualised cost is seen as a reasonable approximation. Thus, if the Claimant requires a perching stool which costs 90 and lasts around 6 years, the Claimant may claim 15 pa ( 90/6) for life. If the Claimant does not already have this item of equipment the Claimant will claim in addition 90 for the first one. The alternative of claiming the first one and then individual claims for replacements in 6, 12, 18, 24, 30, 36 years (etc, up to end of expected life), using Table 27, puts an artificial level of accuracy on the underlying assumptions. Example 9: Method 1 Female Claimant aged 63 requires a wheelchair as a result of her injuries. She currently has a wheelchair on loan from the Red Cross. The care expert has advised that she should have a specialist wheelchair which currently costs 5,000 and will last around 5 years. Her life expectancy is agreed at 18 years. Multiplier for period of 18 years (Table 28): x = (annualised cost) (multiplier) PLUS initial purchase cost: Total claimed: Example 9: Method 2 1 st wheelchair (immediate purchase): = 2 nd wheelchair (deferment of 5 years): x = 3 rd wheelchair (deferment of 10 years): x = 4 th wheelchair (deferment of 15 years): x = (cost) (multiplier for deferment) Total claimed: Richard Menzies 8
REDUCED LIFE EXPECTANCY Where the medical experts have agreed the Claimant s life expectancy as a period of years, the appropriate for life multiplier is calculated using Table 28, as in Example 7 above. See Wells v. Wells [1999] 1 AC 345 at p.378. [The Ogden Tables now provide for a more complex method where life expectancy is an agreed period of years Explanatory Notes para. 20 but so far this approach has not found favour with the courts. See, for example, RVI v. B (a Child) [2002] PIQR Q137; CA.] In other cases the experts will agree that the Claimant s life expectation has been reduced by a number of years. In such a case the Claimant is treated as being that number of years older, and that increased age is used in Table 1/Table 2 as appropriate. [BEWARE: You cannot do this with tables 3 26 as adjusting the age will also reduce the number of years to the assumed retirement age!] Example 10 Male Claimant aged 32 rendered tetraplegic following motorcycle accident. He now requires care costing 35,000 pa. The parties experts agree that his life expectation has been reduced by 25 years. Multiplier for life: x = (annual loss) (multiplier) Example 11 Female Claimant aged 60 rendered paraplegic following fall from a horse. She now requires care costing 25,000 pa. The Claimant s expert says that her life expectation has been reduced by 10 years. The Defendant s expert says her life expectation is 10 years. Claimant s case Multiplier for life:... x = (annual loss) (multiplier) Defendant s case Multiplier for life:... x = (annual loss) (multiplier) Richard Menzies 9
FUTURE LOSS OF EARNINGS In claims for loss of earnings account must be taken of contingencies other than mortality. That is, future periods when the Claimant would not be earning as a result of ill health, redundancy, accident/injury, career break for childcare, etc. The basic multiplier needs to be reduced to reflect these other contingencies. The Ogden Tables provides a set of 4 tables (A to D) which set out the reduction factors to be applied. Apart from the Claimant s age and gender, you need to consider: Employment status: Is the Claimant Employed or Not employed? This should be relatively straightforward to assess. Disability status: Is the Claimant Disabled or Not disabled? A person is considered to be disabled if their illness/disability: (1) has lasted or is expected to last over a year; (2) substantially limits their ability to carry out normal day-to-day activities [i.e. the Equality Act 2010 definition]; and (3) affects either the kind or the amount of paid work they can undertake. Educational attainment: What is the Claimant s highest educational attainment? There are three categories: O (below CSE Grade 1/GCSE Grade C), GE-A (at least CSE 1/GCSE C, but no higher than A level), or D (degree level or higher). See F&F 2012/13 p.61 for a table of grade equivalents. The 4 tables are reproduced at F&F 2012/13 p.63 4. The factors range from 0.93 (male, age 25 29, employed, not disabled, D ) to 0.06 (age 54, not employed, disabled, O ). These factors can be viewed in terms of percentage chance. That is, the average 25 to 29- year-old male graduate who is currently in employment and is not disabled is likely to be working and earning for 93% of the time to retirement, but not earning for 7% of the time. Similarly, the 54-year-old unemployed disabled person with no qualifications is likely to remain unemployed and not earning for 94% of the period to retirement. The basic Ogden multiplier (taking into account only mortality and early receipt) is multiplied by the relevant Table A D factor. This adjusts the multiplier to take into account contingencies other than mortality. Where the Claimant s status has been changed by the accident separate calculations must be undertaken for: (1) what they would have earned in the absence of the accident; and (2) what they are now likely to earn in future. The most likely changes of status to occur as a result of an accident are Employment and Disability. Richard Menzies 10
Example 12 Male Claimant aged 52 suffered serious injuries as a result of an accident such that he will never work again. Prior to the accident he worked as an accountant earning 60,000 pa after tax and intended to retire at age 65. Multiplier to age 65: Discount factor for contingencies other than mortality: x = (basic multiplier) discount factor) (adjusted multiplier) x = (net annual loss) (adjusted multiplier) Example 13 Female Claimant aged 54 suffered permanent injuries to her leg. She remains able to undertake all normal day-to-day activities and has been able to continue her work as a teacher, but has [reasonably] shed some additional duties due to pain/exhaustion towards the end of the working day. As a result her net earnings have reduced from 50,000 pa to 45,000 pa. Her contractual retirement age is 60. Multiplier to age 60: Discount factor for contingencies other than mortality: x = (basic multiplier) discount factor) (adjusted multiplier) x = (net annual loss) (adjusted multiplier) [NB. separate calculations could be undertaken for but for earnings and earnings now (as in the examples below), but this is unnecessary because the adjusted multiplier in each scenario is the same] Example 14 Male Claimant aged 32 previously worked as a self-employed builder earning around 40,000 after tax. As a result of his serious injuries he will be unable to return to physical manual work and he is disabled for the purposes of the DDA. Left school with no qualifications. He is currently seeking sedentary work and has recently passed an NVQ level 2 in data processing. In such sedentary work he can expect to earn 24,000 net and will remain able to work to retirement at age 65. Multiplier to age 65: Discount factor for contingencies other than mortality (but for accident): Discount factor for contingencies other than mortality (now): Richard Menzies 11
But for multiplier: x = (basic multiplier) discount factor) (adjusted multiplier) Multiplier now: x = (basic multiplier) discount factor) (adjusted multiplier) But for earnings: x = (annually) ( but for multiplier) Earnings now: x = (annually) (adjusted multiplier) Loss: = ( but for earnings) (earnings now) Example 15 Female Claimant aged 40 required leg amputation following motorcycle accident. She has been able to return to her pre-accident work as a driver for London Underground earning 35,000 net pa and will remain able to work to retirement at age 60. She is disabled. She left school with few qualifications, but has a CSE Grade 1 in Geography. Multiplier to age 60: Discount factor for contingencies other than mortality (but for accident): Discount factor for contingencies other than mortality (now): But for multiplier: x = (basic multiplier) discount factor) (adjusted multiplier) Multiplier now: x = (basic multiplier) discount factor) (adjusted multiplier) But for earnings: x = (annually) ( but for multiplier) Earnings now: x = (annually) (adjusted multiplier) Loss: = ( but for earnings) (earnings now) [NB. The discount factors in Tables A D are seen by most judges and practitioners as merely a starting point. The award in Example 15 above is unlikely to be made in reality, but provides a more useful starting point than asking the Court to award a large Smith v. Manchester award] Richard Menzies 12
ANSWERS Example 1: 349,180 Example 2: 1,516.69 Example 3: 78,104 + 54,990 = 133,094 Example 4: 4,548 + 2,508 = 7,056 Example 5(a): 4,206.50 Example 5(b): 13,374.40 + 22,588.80 = 35,963.20 Example 6: 229,160.34 Example 7: 519,500 Example 9, Method 1: 14,530 + 5,000 = 19,530 Example 9, Method 2: 5,000 + 4,419.50 + 3,906 + 3,452.50 = 16,778 Example 10: 688,800 Example 11: C: 310,500; D: 221,500 Example 12: 60,000 x 8.71 = 522,600 Example 13: 5,000 x 4.58 = 22,900 Example 14: ( 40,000 x 19.55) ( 24,000 x 7.47) = 602,720 Example 15: ( 35,000 x 13.39) ( 35,000 x 7.94) = 190,750 Richard Menzies 13