Foreword Aviva is pleased to be asked to respond in the Scottish Government Consultation on the Civil Law of Damages:. Aviva is the UKs number one and the world's fifth largest insurer, employing around 54,000 people across the world. Currently Aviva has approximately 15% share of the UK insurance market, and in 2009 handled over 72,000 personal injury claims made against its policy holders across the UK. Aviva is a major user of the Scottish Civil Litigation system. Aviva estimates it has approximately 80 outstanding claims which will be directly impacted by this consultation with outstanding Gross Incurred Cost of approximately 20m. Aviva has restricted its responses to the areas which it considers it is best placed to comment upon. In all its responses though, Aviva strives to get over a primary message that whilst it supports the aim of providing a fairer and modern civil law system in Scotland, any changes should ensure fair outcomes whilst maintaining the absolute rule that damages in this area of Scottish law should be compensatory. Aviva would be willing to be involved in further discussions and / or consultations that may assist in achieving a fair and modern compensation system in Scotland providing damages for wrongful death. Dominic Clayden Director of Technical Claims & Supply Chain Aviva UK General Insurance Rosso 1 Surrey Street Norwich NR1 3DH Telephone: 01603 689937 Email: dominic.clayden@aviva.co.uk Aviva Response August 2010 Page 1 of 9
Question 1 In your view, to represent what would have been spent on his/her personal living expenses in the lost period, in principal is it: a) Reasonable to introduce a standard fixed figure in all cases for the proportion to be deducted from a victim s income? Or b) Preferable to allow the courts to continue to decide the proportion on the merits of individual cases? Aviva s preference is a) It is Aviva s view that the victim in such a case will best benefit from a fair settlement which should be achievable as quickly as is possible enabling swift access to justice. This was a principal recommendation of the LCS report. It is Aviva s experience where there is scope for dispute; this delays settlement and is of no benefit to victim or defendant in both of whose interests it is to settle a case quickly paying fair compensation and without disproportionate legal costs. While Aviva accepts that the individual circumstances of one victim may be different to those of another, it is Aviva s opinion that by fixing a standard figure in all cases for the proportion to be deducted (providing the figure set is one with a sound rationale see Answer 1A) then this will serve to eliminate an area where currently dispute can be common place and effect a quick and fair solution. Aviva is prepared to accept there may be instances in which a victim may within the current system recover more or less than a fixed proportion however providing the proportion set is soundly based, this will balance over the majority of cases as the LCS recommends and prove to be of benefit to all parties. Aviva therefore accepts the LCS s view that introducing a fixed proportion of the victim s income to be deducted will benefit the victim and improve access to justice. Question 1A If such a fixed figure were introduced, do you agree that 25% is a reasonable level for the victim s living expenses? Aviva s preference is Yes Aviva has answered Question 1 in the positive. It is Aviva s opinion that if a fixed figure were to be introduced, 25% is one which is often used, has a sound legal rationale and would be seen as being the best fit for such a deduction. Aviva would support the certainty of such a figure if it were introduced. Question 1B This is N/A Question 1C If such a fixed figure were introduced, in your view should it be as a rebuttable presumption, which could be set aside if due cause were shown? Aviva is strongly opposed to this proposal. It is Aviva s belief that in the case of a fixed % being introduced, to then allow a rebuttable presumption will create a whole new area of dispute which the objective of introducing a fixed % would be intended to remove. Aviva envisages Pursuers and Defendants agents claiming this rebuttable presumption in all circumstances as an effective negotiation tool. In the end it would be a Judge who would have to decide if the rebuttable presumption was satisfied effectively reverting to the current system whereby a Judge decides the % defeating the objective of certainty Aviva Response August 2010 Page 2 of 9
for both parties and quick access to justice for the victim. This is a view supported by the LCS report which stated: This figure should not be variable. If this sum was open to variation, it would invite litigation thus defeating the object of reform Aviva would like to also caution that introducing a fixed % with a rebuttable presumption would more than likely spark satellite litigation which would serve neither the victims nor the defendants interests until case law becomes established as to how such a presumption should be applied. It is Aviva s view that satellite litigation is undesirable there is significant evidence of this in England & Wales for instance over CFA s which Lord Gill in his review of Civil Litigation in Scotland particularly warned against and which Lord Justice Jackson in England & Wales is now having to address. Aviva believes satellite litigation serves the interest of lawyers only not the parties and is a cause of consumer dissatisfaction. Question 1D If a rebuttable presumption were introduced, in your view what would require to be demonstrated for it to be set aside? Please list possible criteria Aviva does not, for the reasons set out above, support the introduction of a rebuttable presumption. Aviva stresses that any possible criteria would merely serve to fuel satellite litigation which would be in neither victim nor defendants best interests. If however this were to be introduced, Aviva would look for at least the following criteria to be demonstrated: Open and full disclosure of all of the victim s financial records over a meaningful period of time as justification Precognitions, or formal sworn witness statements (Aviva accepts these are not currently part of Scottish civil procedure) from all proximate family members in support of the victim s (or defendant s) assertion of a rebuttable presumption Question 1E Do you have any other comments on the approach to calculating the amount to be deducted in representation of living expenses for the lost period? Please provide any comments Aviva remains firmly of the view that the fixed proportion is the best solution for the reasons stated above. Question 2 Aviva Response August 2010 Page 3 of 9
In your view, to represent the proportion of a victim s income which is to be taken as having been devoted to his relatives, in principal is it: a) Reasonable to introduce a standard fixed figure for all cases? Or b) Preferable to allow the courts to continue to decide the proportion on the merits of individual cases? Aviva s preference is a) Reference is made to Aviva s answer to Question 1. It is Aviva s view that the dependant relatives of the victim in such a case will best benefit from a fair settlement which should be achievable as quickly as is possible enabling swift access to justice and the dependants to rebuild their lives as quickly as is possible. One of the stated aims of the LCS consultation was to reform in the face of the economic realities of modern family structures. In Aviva s opinion, the practice of due consideration of the pooled income of a family unit and the individual own spend of each contributing party is one such cornerstone principle in considering modern family life and making sure legislation is fit for purpose whilst providing true equality of arms and overall fairness for the consumer. It is Aviva s experience where there is scope for dispute; this delays settlement and is of no benefit to relatives of the victim or defendant in all of whose interests it is to settle a case quickly and without disproportionate legal costs. Aviva draws attention to the recent case of Guilbert v Allianz Insurance Plc 2009 as an example of a significant dispute in this area which could have been avoided were a fixed % in place. While Aviva accepts that the individual circumstances of one victim may be different to those of another, it is Aviva s opinion that by fixing a standard figure in all cases for the proportion to be deducted (providing the figure set is one with a sound rationale see Answer 2A) then this will serve to eliminate an area where currently dispute can be common place and effect a quick and fair solution. Aviva is prepared to accept there may be instances in which a victim may within the current system recover more or less than a fixed proportion however providing the proportion set is soundly based, this will balance over the majority of cases as the LCS recommends and prove to be of benefit to all parties. Aviva therefore accepts the LCS s view that introducing a fixed proportion of the victim s income to be deducted will benefit the victim and improve access to justice. Question 2A If such a fixed figure were introduced, do you agree that 75% is a reasonable level for that proportion? Aviva s preference is Yes Aviva has answered Question 2 in the positive. It is Aviva s opinion that if a fixed figure were to be introduced, 75% is one which is often used, has a sound legal rationale and would be seen as being the best fit for such a deduction. Aviva would support the certainty of such a figure if it were introduced. Question 2B N/A Question 2C If such a fixed figure were introduced, in your view should it be as a rebuttable presumption, which could be set aside if due cause were shown? Aviva is strongly opposed to this. Aviva draws reference to its answer in Question 1C. It is Aviva s belief that in the case of a fixed % being introduced, to then allow a rebuttable presumption will create a whole new area of dispute which the objective of introducing a fixed % would be intended to remove. Aviva Response August 2010 Page 4 of 9
Aviva envisages Pursuers and Defendants agents claiming this rebuttable presumption in all circumstances as an effective negotiation tool. In the end it would be a Judge who would have to decide if the rebuttable presumption was satisfied effectively reverting to the current system whereby a Judge decides the % defeating the objective of certainty for both parties and quick access to justice for the victim. Aviva repeats the LCS statement: This figure should not be variable. If this sum was open to variation, it would invite litigation thus defeating the object of reform. Aviva would like to also caution that introducing a fixed % with a rebuttable presumption would more than likely spark satellite litigation which would serve neither the victims nor the defendants interests until case law becomes established as to how such a presumption should be applied. It is Aviva s view that this would be undesirable there is significant evidence of this in England & Wales for instance over CFA s which Lord Gill in his review of Civil Litigation in Scotland particularly warned against and which Lord Justice Jackson in England & Wales is now having to address. Aviva reiterates that satellite litigation serves the interest of lawyers only not the parties and is a cause of consumer dissatisfaction. Question 2D If a rebuttable presumption were introduced, in your view what would require to be demonstrated for it to be set aside? Please list possible criteria Aviva does not, for the reasons set out above, support the introduction of a rebuttable presumption. Aviva stresses that any possible criteria would merely serve to fuel satellite litigation which (until case law established clarity) would be in neither victim nor defendants best interests. If however this were to be introduced, Aviva would look for at least the following criteria to be demonstrated: Open and full disclosure of all of the victim s financial records over a meaningful period of time as justification Precognitions, or formal sworn witness statements (Aviva accepts these are not currently part of Scottish civil procedure) from all proximate family members in support of the victim s (or defendant s) assertion of a rebuttable presumption Question 2E Do you agree that in all cases the surviving partner s income should be wholly ignored in calculating the damages award? Aviva strongly disagrees with this proposal and is absolutely opposed to any suggestion that the pursuer s income should be disregarded and would create potential inequalities which are not a desirable outcome. Aviva believes that to ignore the impact of the pursuer s income and to fail to consider the pooled income of the family unit would lead to gross overcompensation and be in breach of the defenders rights to fairness, equity and justice. This also creates a potential inequality of justice for a spouse as the proposal could lead to large numbers of situations where a pursuer is being put in a better financial support position than they would have been but for the accident, thus going against the basic Scottish Law principles of compensation / reparation. There would be many instances in the current economic climate where the pursuer is the main earner or earns as much as the deceased. One of the stated aims of the SLC s paper is to reform in the face of the economic realities of modern family structures and in our opinion, the practice of considering the pooled income of a family unit (and deducting the income of the Pursuer to arrive at the available loss of support pool) is one such cornerstone principle in Aviva Response August 2010 Page 5 of 9
considering modern family life and making sure our legislation is fit for purpose whilst providing true equality of arms and overall fairness for the consumer. To provide an example of the above in practice, here is an example: Example Family A: In Family A, there is one partner earning a net salary of 25,000 and the other partner does not work In this example, we will assume that the working partner dies, therefore, the multiplicand or annual loss of support is 18,750 (being 25,000 less 25%) Family B: In Family B, both partners are working and earn 25,000 each net salary Exactly as above, if one of the partners were to die, the multiplicand or annual loss of support would be 18,750 However, if we re-calculate Family B using the pooled income model: (and deduction of surviving spouse s income) Family B: (using pooled income) The family pooled income is 50,000. 25% is deducted for living expenses / own keep of the deceased, thereafter, the surviving spouse s income should be deducted. The multiplicand or annual loss of support is 12,500 (being 50,000 less 25% - 25,000) Conclusions: If we are to assume for simplicity of calculation, that the multiplier is 20, then the total loss of Support for Family A is 375,000. If this recommendation is enacted, The total loss of Support for Family B would also be 375,000, but the reality is the surviving spouse would still have their own income added on top if you apply the original income back in (modified to reflect a 25% own keep) using the same 20 multiplier, this adds an additional 125,000 making a total of 500,000 which would be significantly more than what Family A would receive over the same period. In effect the recommendations, if enacted, would create a clear inequity in the level of support awarded between the families to the detriment of the lower earning Family A. Aviva is not of the opinion this is the intention of the LCS or compensatory damages generally. Question 2F If you answered no to question 2E, do you believe that in all cases some other fixed proportion or some fixed sum of the surviving partner s income should be ignored in calculating a damages award? Aviva can see no reason for such a legal fiction to be introduced. As has been indicated in the response to Question 2E, Aviva is firmly of the view that a surviving spouse s income is part of the reality of modern family life and something which, if damages are to remain compensatory as opposed to punitive as is the stated aim of the LCS review, must be taken into consideration. Question 2G If the law were to specify that some or all of a surviving partner s income should be ignored, in your view should this be a rebuttable presumption, which could be set aside if due course were shown? Aviva Response August 2010 Page 6 of 9
Aviva is strongly opposed to this proposal. Aviva draws reference to its answers in Question 1C and 2C. In the case of a surviving partner s income being ignored, Aviva maintains a consistent belief that to then allow a rebuttable presumption will create a whole new area of dispute which introducing the fixed % would be intended to remove. In the end it would be a Judge who would decide if the rebuttable presumption was satisfied effectively reverting to the current system whereby a Judge decides the %. Aviva would like to again caution that if some or all of a surviving partner s income should be ignored but with the caveat of a rebuttable presumption, this would be likely to spark satellite litigation which would serve neither the victims nor the defendants interests until case law becomes established as to how such a presumption should be applied. It is again Aviva s view that this satellite litigation would be inevitable and undesirable. Question 2H If a rebuttable presumption were introduced, in your view what would require to be demonstrated for it to be set aside? Please list possible criteria Aviva does not, for the reasons set out above, support the introduction of a rebuttable presumption. Aviva stresses that any possible criteria would merely serve to fuel satellite litigation which would be in neither victims nor defendants best interests. If however this were to be introduced, Aviva would look for at least the following criteria to be demonstrated: Open and full disclosure of all of the victim s and Spouse s financial records over a meaningful period of time as justification Precognitions, or formal sworn witness statements (Aviva accepts these are not currently part of Scottish civil procedure) from all proximate family members in support of the spouse s (or defendant s) assertion of a rebuttable presumption Question 3 Do you agree that, in respect of future loss only, a multiplier should run from the date of proof rather than the date of death? Aviva Response August 2010 Page 7 of 9
Aviva is strongly opposed to this proposal. The stated aim of the SLC report recommended that reforms should take away situations where overcomplexity exists, simplify access to justice for the consumer / pursuer and to facilitate a quicker and easier method of agreeing appropriate compensation without the need to over burden the courts. By dividing a relative s loss of support claim into past and future losses the main overriding problem is what date can be taken as the present date? The starting point for the SLC s recommendation (Paragraph 6.3 on page 10 of the Consultation paper) is a Proof date. The losses sustained before the Proof date are the past losses and the losses sustained after the Proof date are the future losses. This approach would be contradictory to facilitating any settlement without the intervention of the court because the approach is predicated on the actual Court Proof date being the pivot upon which the calculation is balanced. Even if the defenders and pursuers do attempt to negotiate a settlement using the present date to calculate what is in the past and what is to be allowed to the future, such a calculation becomes more obsolete with every day which passes. The approach taken in the case of Dingwall v Walter Alexander & Sons we believe is appropriate. The multiplier should be calculated from the date of death. Furthermore, the multiplier starts from the date of death to avoid the removal of the risks relating to every day life that the deceased would have been exposed to had they survived i.e. they could have suffered ill health or accident and this is only compensated for by using a multiplier from the date of death. To calculate from the date of settlement is to remove that risk and, again, over compensate the Pursuer. Applying the multiplier from the date of death also fits with the aim of reducing needless litigation and not over burdening the judicial system with cases where negotiated settlement should be easily achievable Question 4 Do you agree with the SLC s recommendation that the category of person entitled to claim patrimonial loss should be restricted only to those who are defined as part of the immediate family Aviva s preference is Yes Aviva agrees that only members of the deceased immediate family (as redefined by the SLC) should have a right to sue for patrimonial as well as non-patrimonial loss. Question 5 Do you have any comments in relation to other recommendations made in the SLC report, besides those addressed in chapters 3 and 4? Aviva does not have any comment. Question 6 Do you agree that, in relation to claims by relatives, the recommended new approach does provide the greatest financial benefit to surviving partners who are comparatively high earners eg those with incomes significantly above average? Aviva agrees with this assertion. Aviva Response August 2010 Page 8 of 9
While Aviva has indicated support for the adoption of a fixed proportion, in Q1 and Q2 in the interests of access to swift compensation, Aviva does believe that the SLC proposal at Question 2E creates a potentially unfair situation(s). An example is that where the recommended approach of fixed % dependency and where Spouse s income is ignored could potentially deprive a non working or earning spouse of a victim (or one who is on very low income) by imposing a one size fits all 25% / 75% formula when such an individual could potentially have argued under the current law for a greater degree of dependency. At the same time, the same formula will potentially over compensate those spouses who are on high income where dependency could be argued now at a less than 75% figure and spouse s income be deducted. The examples Aviva has given in the response to Question 2E highlight this situation. If the stated aim of the SLC approach is to retain a compensatory nature of damages for wrongful death, Aviva questions the potential outcome of giving the greatest financial benefit to those who (arguably) have less need for compensation as being incongruent with the stated aim of the review. Question 7 Do you agree that the recommendations made in the SLC report would not have a significant impact on equality and diversity issues? Aviva agrees with this assertion. Aviva Response August 2010 Page 9 of 9