Remedies for personal injury and death claims - Deductions from damages

Learning Outcomes

After reading this article, you will understand how damages awarded in personal injury and death claims may be reduced. You will be able to explain the operation of contributory negligence, identify which collateral benefits are deducted from damages, and apply the rules governing state benefit deductions. This knowledge is essential for answering SQE1-style questions on the calculation of compensation in tort.

SQE1 Syllabus

For SQE1, you are required to understand how damages in personal injury and fatal accident claims are adjusted before payment. In your revision, focus on:

• the principle that damages compensate, not enrich, the claimant or dependants
• how contributory negligence reduces damages under the Law Reform (Contributory Negligence) Act 1945
• the calculation and apportionment of reductions for contributory negligence
• the treatment of collateral benefits (insurance, sick pay, pensions, charity, state benefits)
• the effect of the Social Security (Recovery of Benefits) Act 1997 on deduction and recovery of state benefits

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which Act allows a court to reduce a claimant’s damages if they contributed to their own injury?
2. If a claimant receives £2,000 from a personal accident insurance policy after an injury, should this sum be deducted from their damages against the defendant?
3. True or false: If a claimant is found 30% contributorily negligent, their damages are reduced by 70%.
4. Name two types of collateral benefits that are generally not deducted from damages in personal injury claims.

Introduction

Damages in personal injury and death claims are awarded to compensate the claimant or dependants for loss caused by the defendant’s tort. However, the final amount payable may be reduced. The two main reasons for deductions are: (1) the claimant’s own fault (contributory negligence), and (2) the receipt of money or benefits from other sources (collateral benefits). Understanding these deductions is essential for determining the correct compensation.

Contributory Negligence

If the claimant’s own lack of care contributed to their injury or loss, their damages may be reduced. This is governed by the Law Reform (Contributory Negligence) Act 1945.

Key Term: contributory negligence
Contributory negligence occurs where the claimant’s own failure to take reasonable care for their safety contributed to the damage suffered. The court reduces damages by a percentage reflecting the claimant’s share of responsibility.

Legal Test and Apportionment

To succeed with this defence, the defendant must show:

1. The claimant was at fault (objectively, as a reasonable person in their position).
2. The claimant’s fault contributed to the damage (not necessarily to the accident itself).

The court decides what reduction is “just and equitable,” considering both the blameworthiness and the causative effect of each party’s conduct. The reduction is expressed as a percentage.

Worked Example 1.1

A pedestrian is hit by a speeding car while crossing the road outside a designated crossing. The court finds the driver 75% responsible and the pedestrian 25% responsible for not using the crossing. Damages are assessed at £40,000. What sum does the pedestrian receive?

Answer: The pedestrian’s damages are reduced by 25%. £40,000 – 25% (£10,000) = £30,000. The pedestrian receives £30,000.

Exam Warning

Do not confuse contributory negligence (which reduces a claimant’s damages due to their own fault) with contribution between defendants (which is about sharing liability between multiple tortfeasors).

Collateral Benefits

A claimant may receive money or benefits from sources other than the defendant after an injury or death. These are called collateral benefits. The question is whether such sums should be deducted from the damages awarded against the defendant.

Key Term: collateral benefits
Collateral benefits are payments or advantages received by the claimant from a source other than the defendant as a result of the injury or death.

The general rule is that most collateral benefits are not deducted from damages. The defendant should not benefit from the claimant’s prudence (e.g., buying insurance) or the generosity of others.

Key Term: double recovery
Double recovery means the claimant receives compensation for the same loss from more than one source (e.g., damages plus insurance payout). The law generally seeks to prevent double recovery, but not at the expense of penalising the claimant’s foresight or third-party generosity.

Main Types of Collateral Benefits

• Private Insurance: Sums received under insurance policies paid for by the claimant (or on their behalf) are not deducted. The claimant paid for this benefit.
• Charitable Gifts: Money received from public appeals or charities is not deducted. The defendant should not benefit from others’ generosity.
• Pensions: Ill-health or disability pensions are generally not deducted, especially if funded by the claimant’s own contributions or as part of their employment.
• Sick Pay:
  • Contractual Sick Pay: If paid under the contract of employment, it is usually deducted from damages for loss of earnings, unless the employer can recover the sum from the employee if damages are awarded.
  • Discretionary Sick Pay: If paid voluntarily (not under contract), it is treated as a gift and not deducted.
• State Benefits: The treatment of state benefits is governed by the Social Security (Recovery of Benefits) Act 1997.

State Benefits and the Social Security (Recovery of Benefits) Act 1997

Certain state benefits (such as Universal Credit, Personal Independence Payment, or Employment and Support Allowance) received as a result of the injury are deducted from specific heads of damage (mainly loss of earnings, cost of care, and loss of mobility). The defendant (or their insurer) must then repay the amount of those deducted benefits to the state (the Compensation Recovery Unit, or CRU). Benefits are not deducted from damages for pain, suffering, and loss of amenity.

Worked Example 1.2

A claimant is injured at work and is off for three months. During this time, they receive:

• £1,500 from a personal accident insurance policy
• £1,000 in contractual sick pay from their employer
• £500 from a public fundraising appeal
• £2,000 in state benefits for loss of earnings

Their total loss of earnings is £6,000. How are these benefits treated?

Answer: The £1,500 insurance payout and £500 charity payment are not deducted. The £1,000 contractual sick pay is deducted (unless the employer can recover it from the employee). The £2,000 state benefit is deducted from the damages for loss of earnings, and the defendant must repay this sum to the state. The claimant’s net loss of earnings claim is £6,000 – £1,000 (sick pay) – £2,000 (state benefit) = £3,000.

Revision Tip

Always check the source of any payment received by the claimant. Most insurance and charity payments are not deducted. State benefits and contractual sick pay usually are, but only from specific heads of loss.

Summary

Key Point Checklist

This article has covered the following key knowledge points:

• Damages in tort are compensatory, not punitive.
• Contributory negligence reduces damages by a percentage reflecting the claimant’s share of responsibility for the damage.
• Most private insurance and charitable payments are not deducted from damages.
• Contractual sick pay is usually deducted from loss of earnings.
• State benefits are deducted from certain heads of loss under the Social Security (Recovery of Benefits) Act 1997, and the defendant must repay the state.
• Double recovery is generally avoided, but not at the expense of penalising the claimant’s prudence or third-party generosity.

Key Terms and Concepts

• contributory negligence
• collateral benefits
• double recovery