Contingencies and the role of an Actuary in your claim
Claims of settlements for millions of Rands are all over the news and clients may be disappointed if they don’t receive the same settlements. Determining the value of a claim is actually a thorough process that has to be based on the circumstances of each unique claimant. If you have ever wondered how the value of a claim is determined, this article will discuss the basic requirements as well as how contingencies and actuaries come into play.
When an attorney has a great success rate and can pride themselves on excellent results for their clients, it definitely does speak to their abilities. These settlements and experience of previous clients will give you an indication of a legal firm’s achievements.
It is important however, to understand how the value of a claim is arrived at.
How is the value of claim determined?
When calculating the value of a claim, there is a basic recipe that attorneys and the court can use. Determining the value of a claim, or the quantum of a claim, involves a lot of proof, expert opinions, numbers and calculations.
The basic recipe for determining the value of a claim is as follows:
- Medical and other expenses;
- Loss of income or ability to earn an income; and
- General damages (for pain and suffering).
Every person’s claim is different because their needs, capabilities and income is different.
Secondly, there are some instances where the court may look at similar cases for guidance, but an individual’s personal circumstances are always taken into account.
What about the future?
The amounts that are claimed are set to cover the period that a person will have suffered the expense or the loss. For future expenses, this would be until the person passes away or will not have that expense anymore. For loss of income, it would be until a person would have stopped working had he not been injured.
Because the goal of a claim is to provide fair compensation, the law has to ask the question: What if things change in the future?
Factors such as early death, recovery, injury, promotions, retirement and rising cost of living and inflation all have to be weighed against the total claim.
In legal and mathematical fields, this is where the knowledge of actuaries and the use of contingencies are the answer.
What are contingencies?
This term “contingency” needs to be explained because of its vital importance to the plaintiff’s claim. Contingencies could be defined as uncertain circumstances (which could be positive or negative) which, would probably influence a person’s health, income, earning capacity, quality of life, life expectancy or dependency on support in the future or could have done so in the past.
These “uncertain” circumstances must consequently be taken into account in a fair and realistic manner by increasing or decreasing the plaintiff’s damages during the quantification process. If the relevance of a positive contingency is proved it will increase the amount of damages to be awarded, and if the relevance of a negative contingency is proved, it will decrease the amount of damages to be awarded.
A value of a claim is therefore adjusted by taking these unpredictable events into account. By using statistics and looking to previous cases we are able to make educated guesses.
What do actuaries do?
An actuary is a professional who applies analytical, statistical and mathematical skills to financial and business problems.
Applying all these contingencies and statistics is a process involving often complicated calculations. The calculation of the final amount is usually referred to an actuary, who also figures in various contingencies like inflation and discounting, to arrive at a total.
Your attorney will argue on your behalf
A court has a wide discretion that needs to be exercised when it determines fair and reasonable compensation for the loss. This is why an expert legal team is needed to ensure that a person’s claim is motivated and calculated correctly to ensure the best possible outcome for a client.
If you need more information on how the value of a claim is determined or have any questions on a personal injury matter, feel free to contact Paul du Plessis Attorneys at 012 809 1588 or send us an e-mail at paul@pauldup.co.za.
Sources:
“Fair” mathematics in assessing delictual damages, L Steynberg Potchefstroom Electronic Law Journal/Potchefstroomse Elektroniese Regsblad 14(2)