A case currently in front of the Constitutional Court to force a revision of the way compensation is worked out when injuries happen on the workplace may open a can of worms for the legal profession, the insurance industry, and employers. The current system, in place since 1967, has been described as “discriminatory” by the heirs of a man killed while at work, and is now up for review in Malta’s highest court.
Karmnu Micallef, 71, was killed by a truck manoeuvring on a narrow road on 3rd February 2022.
His heirs have this week opened a case claiming that the formula used to work out compensation is a breach of their rights, explaining that the formula is not entrenched in law but emanates from an appeal judgment handed down on 22nd December 1967.
Speaking to BusinessNow.mt, leading employment lawyer Andrew Borg Cardona explains that the formula used by the courts to establish damages in civil cases dealing with personal injury has been in place for decades.
“Basically, it is the result of the percentage of disability multiplied by the number of years of earning power by the plaintiff multiplied by the annual income of the plaintiff, from which a percentage is deducted since the money will come in a lump sum.”
Illustrating the formula, Dr Borg Cardona provides a rough example.
“Imagine someone who suffers 10 per cent disability at the age of 50, earning €25,000 per year. They would expect a sum in the region of €35,000 [0.1×25,000×14], from which the court, depending on the circumstances, would deduct 25 per cent to take into account the fact that the payment is being made up front, with no guarantee that the plaintiff is going to work up to age 64. This would leave them with €26,250.”
He also points out that “in recent years, the courts have taken to adding an amount for ‘loss to quality of life’ and/or general pain and suffering, but the method of calculation is not generally applied.”
Anyone who has watched movies or series set in the US is likely to be familiar with the enormous sums often sought in “moral damages” there, but in Malta, as in most other jurisdictions, the sum is worked out on actual damages.
Dr Borg Cardona believes there is “definitely a good case to be made for a reform in the way damages are calculated”.
“I’m not aware that the issue has been brought up before in the context of the ‘ageist’ argument,” he says. “It is understandable that this is an area where there is some resistance to the formula accepted to date, because as things stand, the older you are, the less you’re going to get in damages.
“The whole argument is a reflection of how difficult it is to establish damages properly, especially when emotions, understandably, get involved.”
He believes that insurance companies will welcome a revision of the formula to eliminate the large degree of discretion currently enjoyed by judges in such situations.
“Insurance companies would benefit from the greater certainty,” he says, “which might also make out-of-court settlements more easily achieved.”
Another legal source speaking to BusinessNow.mt on condition of anonymity explains that the way the formula is currently worked out discriminates against those working past pensionable age.
“Effectively, if you are beyond pensionable age, the formula does not take this into account because it works on remaining years in employment,” they say, “so whoever is of pensionable age and gets hurt on the workplace is at the mercy of the judge.”
“’I can’t give this person – or their heirs – nothing,’ a judge would think, ‘so let me work it out on four years, or five.’ Simply put, it is up to them.”
While the current formula does apparently leave older victims lacking in legal assurances, that is not the only way it discriminates.
“The wage earned is also a major factor, so if you maim someone on a construction site, you had better hope it is an unskilled labourer and not an architect,” says the legal source. “Even if they are of the same age and suffer the same disability, the compensation awarded will be markedly different.”
Asked if they would recommend another country’s system for working out fair compensation, they say that no system is perfect, “but we can certainly work to improve ours”.
In the UK, for example, a well-established body of case law is used to determine how much disability by an injury to any given body part, while in Malta, a lot of time is lost in debate between different medical experts.
“If you get your little finger cut off, one may say that is a four per cent disability, while another might say it is a seven per cent disability. It borders on the ridiculous.”
This legal source disagreed with Dr Borg Cardona’s assessment that insurance companies would be happy to have a degree of additional certainty, arguing instead that payouts would likely be higher if the system is reworked.
“You can expect to start seeing opinion pieces from people in the industry arguing in favour of the current method,” they said, “or saying that premiums will have to go up across the board to turn public opinion against the attempt to improve it.”
Another ironic quirk to the current system is that, economically, it is better if the victim dies than if they are maimed and left disabled.
“Reviewing past sentences, the heirs receive less compensation than the victim, since the court awards them what might reasonably be expected to receive as inheritance. That is, it reduces a sum from the compensation that the victim would have likely spent on themselves.”
“Effectively, it is cheaper to kill someone than to maim them.”
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