The best news in 33 years for ICBC claims and personal injury cases involving claims for future loss of earnings and costs of future care! The decrease in the discount rate for future loss announced April 30, 2014 means claimants can expect more money for awards and settlements for future losses. This better reflects the decrease in the real discount rate evident in the economy, putting claimants closer to where they were financially before their injuries.
WHAT IS A DISCOUNT RATE AND WHY DO WE HAVE IT
Since three decisions by the Supreme Court of Canada in 1978, and changes in our British Columbia Law and Equity regulations in 1981, discount rates have been used to reduce the awards for personal injury claimants, and any claims for future loss. These rates lower awards for future losses through use of discount multipliers.
The discount reductions are said to be justified in that money received today is worth more than money earned over a long period in the future.
CALCULATING A FUTURE LOSS WITH THE NEW DISCOUNT RATES
Most personal injury lawyers helping with ICBC claims have worked their whole legal career under the old discount rates. This is one of the first real positive changes, outside the common law, for personal injury claimants in the last 30 years. The same calculations apply so lawyers need not learn any new mathematical calculations.
The use of the discount rates in the calculation of future losses is a quite straightforward. A payment of $1,000 in 2032 will have a present value of $503 using a 3.5% discount. Using the new 1.5% discount rate for future loss of earnings would receive $742, much more fair to the victim of personal injury.
The discount rate prescribed under s. 56(2)(a) is used in in calculating the present value of future damages that are intended to compensate for or are determined with reference to (a) loss of future earnings because of partial or total loss of income earning capacity, or (b) loss of dependency under the Family Compensation Act.
The discount rate prescribed under s. 56(2)(b) is used for all other future damages.
Since 1981, the discount rate under s. 56(2)(a) has been 2.5% and the discount rate under s. 56(2)(b) has been 3.5%.
As of April 30, 2014 pursuant to the Law and Equity Regulation, BC Reg. 74/2014, the discount rate prescribed under s. 56(2)(a) is 1.5% and the discount rate prescribed under s. 56(2)(b) is 2.0%.
ICBC AND THE NEW DISCOUNT RATES
The conduct of the Insurance Corporation of British Columbia, ICBC, in opposing the decrease in the discount rates and at the same time hiding the loss tens of millions of dollars in mistakenly billed insurance rates, is nothing less than reprehensible. ICBC’s submissions to the public were clearly disingenuous and inaccurate.(see ICBC letter to British Columbia Utilities Commission, March 12, 2014).
Despite ICBC’s behaviour, the new discount rates should be applied to all out of court settlement figures currently on the table and also taken into account in all settlement negotiations involving future losses.
Contact one of our lawyers for professional assistance in calculating, assessing and applying these discount rates – 604-633-4878 .
Posted by Personal Injury Lawyer Mr. Renn A. Holness, B.A. LL.B.