40% contingency applied on past loss – IAC Newsletter 37/2013, (September 2013)
Welcome to the 37th edition of Independent Actuaries & Consultant’s (IAC’s) monthly newsletter.
40% contingency applied on past loss of earnings – Miller v RAF, Western Cape High Court, case no: A 134/2013
This was an appeal against orders in respect of the appellant’s past loss of earnings and future loss of earning capacity.
The amount claimed at trial by the appellant (‘Miller’) for past loss of earnings was R2 099 410.85 and the amount awarded was R90 670.86, the amount claimed for loss of earning capacity was R4.2 million and the amount awarded was nil.
The major part of the claim was based on the consequences of depression suffered by Miller post-collision which affected his ability to properly carry out his work as an architect on a major building project (The Decks) in which he was involved at the time of the collision.
Miller’s case was that his deficient performance on The Decks caused him reputational damage, which in turn impacted negatively on his ability to obtain work on better projects thereafter.
It was not in dispute that prior to the collision Miller was a gifted, accomplished architect with a growing practice of his own and particular expertise in the restoration of historic buildings.
The Decks project was Miller’s brainchild. Miller was severely injured in the collision and was bedridden for a period of three months thereafter at a crucial stage of the project.
Miller’s role was pivotal for the successful advancement of the project as much of the concept was ‘in his head’.
It was Miller’s testimony that The Decks project would have brought him not only professional esteem, but would also have put him on the map for future developments of this nature.
The developer of The Decks testified that Millers lack of performance on The Decks resulted in them refusing to appoint him as an architect on future projects; that word got around in the industry that he had become a high risk architect and this similarly resulted in him not being able to secure remunerative work of the same standard.
Taking these factors into account the court applied a contingency deduction of 40% to the net amount Miller could have earned on work that he would have been appointed on, but for the accident, from the time of the collision to the time of the hearing (past loss of earnings).
The court further held that it was not appropriate to deduct the actual income earned by Miller over the same period as it can be accepted in his favour that he would have been able to accommodate all of the work, given that his actual work over the period was relatively little.
In considering Miller’s R 4.2 million claim for loss of earning capacity the court found it probable that the reputational damage which Miller suffered as a consequence of The Decks is something that he would be able to overcome and accordingly has to be given a diminishing effect over time and the economic decline in the industry would undoubtedly have played a role in Miller’s future earning capacity.
The court awarded an amount of R 250 000.00 in regards to Miller’s claim for loss of earning capacity.
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