Academic journal article Journal of Risk and Insurance

Compensation for Personal Injuries: A Review of Recent Legal and Insurance Developments in the UK

Academic journal article Journal of Risk and Insurance

Compensation for Personal Injuries: A Review of Recent Legal and Insurance Developments in the UK

Article excerpt

The purpose of the first part of this paper is to explore the principles which govern the award of damages for personal injury under English law. We show here that the traditional judicial approach to damages has a natural interpretation as a means of computing the present value of expected loss. The purpose of the second part is to apply the model to the debate going on in England at present as to how best the law in this area may be reformed in the light of the development of "structured settlements." The rapid growth of structuring is explained by reference to the advantages current arrangements (most notably the agreement struck between the Inland Revenue and the Association of British Insurers as to the tax treatment of annuities) offer to insurers, although we do not offer a full public choice treatment of the development of policy in this area.

The economic model of accident law familiar from the literature is usually based on the assumption that judges make awards of damages which reflect accurately the plaintiff's losses (see for example Shavell, 1987.) Claims about the efficiency of negligence rules rely on such assumptions, and yet much of the literature concerns itself with matters of detail about the structure of the liability rules and ignores the question of whether courts, in practice, are making reliable estimates of losses. …

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