Ogden 8: an occasion for optimism?

The Seventh Edition of the Ogden Tables was published on 1 August 2011. Much has changed in the intervening nine years as the Explanatory Notes to the Eighth Edition make clear, not least Brexit, a global pandemic and gradually declining improvements in life expectancy.

The Tables themselves have seen addition, rather than amendment, in this time as successive Lord Chancellors introduced new Discount Rates for which no Tables initially existed. The Eighth Edition includes multipliers calculated by reference to the Discount Rates of -0.75% and -0.25%. It is anticipated that a Ninth Edition will be published in no more than five years.

Tables 1-34 incorporate assumptions on mortality within the population. The Office of National Statistics produced updated life expectancy statistics in 2019 showing that life expectancy across the population continues to improve but the rate of improvement has slowed significantly. The long term effect of COVID-19 on mortality is not yet known and is not factored into Ogden 8.

Observations

The main changes are as follows:

  • Previously there were 28 Tables, there are now 36, the Additional Tables allowing for more accurate calculations.
  • Tables showing loss of earnings multipliers at five year intervals from 50 to 80 rather than to 75.
  • Tables for earnings multipliers to 68.
  • Corresponding pension multipliers to match the earnings multipliers.
  • The old Table 27, which showed the discount for term certain is now to be found in Table 35. When the Seventh Edition was published, this was a discount for accelerated receipt based on a positive Discount Rate. With a negative Discount Rate, the opposite is true.
  • The old Table 28, multipliers for a term certain, is now Table 36. Tables 35 and 36 do not provide different figures for different genders because they do not take into account mortality data. These multipliers have therefore not changed.
  • The multipliers take into account the slowdown in life expectancy and are generally slightly lower, especially for losses after retirement age. For younger claimants, the approximate reduction in life expectancy between the Seventh and Eighth editions of the Tables is about one year for men and two years for women, or 1-2%. For older claimants, the difference in predicted life expectancy can be as much as 8-9%.
  • The Explanatory Notes have been extended as follows:
    • There is express disapproval of the practice of departing from Tables B or D reduction factors in the event that a claimant meets the threshold for disability.
    • The definition of disability is from the Disability Discrimination Act 1995 and not from the Equality Act 2010.
    • There is reclassification of the educational attainment categories. O–D has been replaced by Levels 1-3, which are categorised as Level 1 (below GCSE, no qualification), Level 2 (A level or equivalent, GCSE or equivalent) and Level 3 (degree).
    • Section D dealing with fatal accidents has now been updated to take into account the case of Knauer v Ministry of Justice [2016].
    • There is new guidance on pension claims which reflects increases in defined contribution pension schemes and auto-enrolment.
    • There is a new indexation formula where loss of earnings are awarded via periodical payments instead of a lump sum.


Comment

For defendants, insurers and indemnifiers the changes in the Tables themselves are generally helpful. The Tables have no retrospective effect but the new, reduced, multipliers should be adopted on all existing claims. Whilst the changes are modest, the saving could be noticeable in claims with significant multiplicands across various heads of loss and the reduced multipliers are likely to strengthen existing offers. Compensators will no doubt revisit some reserves on a case-specific basis and may wish to sense-check existing offers to ensure overcompensation is avoided.

We anticipate it is the contents of the Explanatory Notes that will provoke most inter-party discussion on cases. In particular, the express disapproval of the practice of departing from Tables B or D is a direct contradiction of Connor v Bradman [2007] and the common practice under Ogden 7 of splitting reduction factors between disabled and non-disabled figures. However, it is important to remember that the Ogden Tables are guidance only and are not legally binding. Connor v Bradman remains good law.

The definition of disability under the Disability Discrimination Act 1995 is arguably a more stringent test for claimants. The effect of an impairment must limit either the kind or amount of work a person can do, last for over a year and have a ‘substantial’ adverse impact on normal day to day activities.

The definition of disability within the Explanatory Notes includes a consideration of the amount and type of work a person can achieve within the definition of disability. These factors strengthen the rationale of departing from a full discount for disability when the effect of that disability on the type, amount or equivalent remuneration of a claimant’s post-accident work is limited.

The change in Periodic Payment Orders methodology relates only to earnings claims. The Explanatory Notes suggest that the new statistically correct approach is to agree one inflation-linked index for the pre-accident job and another for the post-accident job. In practice we anticipate the effects will be very limited because, in most large loss cases where periodical payments are considered to be the preferred form of award, the claimant is not able to work again and in those circumstances no comparison is therefore required.

The effect on life expectancy of the COVID-19 pandemic is uncertain but is likely to be negative and so a further reduction in life expectancy figures and Ogden multipliers may be on the horizon when Ogden 9 arrives.