A decision made by the Court of Appeal based on research at Cardiff University could lead to fairer compensation to reflect the true cost of accidents.
Three top judges from the Court of Appeal upheld a previous ruling by the High Court that evidence by Dr Victoria Wass of Cardiff Business School was relevant to the assessment of damages for future losses and expenses and that courts should be allowed to hear such evidence.
Dr Wass is a labour economist and her evidence questions the use of the Retail Price Index to increase future earning-based losses by demonstrating that historically earnings have increased faster than prices.
Dr Wass said: "The difference between the growth in prices and earnings can have serious consequences for an injured claimant where an annual sum which covers the cost of a particular care package at the date of trial is increased by reference to the wrong index."
For example in the majority of care packages for people with severe disabilities, more than 80 per cent is spent on labour costs. Basing future care costs on the Retail Price Index instead of an appropriate earnings index would leave the claimant unable to meet the cost of the care package in future years.
Colin Ettinger, partner at law firm Irwin Mitchell - which acted on behalf of the claimant - and a past president of the Association of Personal Injury Lawyers, said: "There has always been a concern that claimants have been out of pocket in the big injury cases, with those injured unable to pay for future care. This judgement gives courts the opportunity to remedy this concern."
The Court of Appeal's decision in the case 'Flora v Wakom (Heathrow) Ltd' means that for the first time it is now open to the courts to look at and to use its discretion to choose an index other the Retail Price Index for the escalation of future losses and expenses when compensation is paid using periodical payments.
Professor Richard Lewis of Cardiff Law School, joint author with Victoria Wass of the leading research in the field, said: "The Court decision is a major development in personal injury litigation, and it is particularly pleasing to see Victoria's unrivalled expertise being made available to benefit those who have suffered severe injury