COVID-19 & Assessing Damages: What is the true measure of a plaintiff's loss?

01 May 2020

The outbreak and spread of COVID-19 along with the global response to the crisis has had far-reaching and significant economic and other effects. It is worthwhile taking this into account when considering the compensation entitlement to an injured plaintiff in these new economic and market conditions.

The purpose of compensation is of course to restore a plaintiff as much as possible to the position in which they would have been had the wrong (i.e. the defendant’s breach of duty) not occurred.

When assessing the likely compensation for an injured plaintiff at the present time it is worthwhile giving consideration to how the entitlement to damages (for breaches prior to the crisis, as well as subsequent breaches) might be materially impacted by COVID-19.

The most obvious potential impact on damages assessments is in the quantification of economic loss or loss of earning capacity.

In the first instance, it is reasonable to expect that many businesses or individuals may be less profitable, or will earn less income than had been previously anticipated (in the absence of COVID-19). For example a plaintiff, due to the effects of an injury suffered because of a defendant’s breach, may have been precluded from engaging in a number of activities relevant to their income-earning capacity. These may have included and depended on, for example, face-to-face interactions, interstate travel, or even just general consumer spending in the retail, hospitality and travel spheres. In a pre-COVID world, such losses may have been relatively easy to gauge and quantify. A plaintiff may for example have demonstrated years of consistent earnings as a self-employed restaurateur. Had they lost the ability, because of a defendant’s breach, to earn such income then ordinarily the measure of their loss would be analysed by considering their post-injury earnings relative to their pre-injury earnings (subject to the application of the usual contingencies). Such a plaintiff would now, quite aside from the impact of any injury, have faced significant economic challenges because of the government-imposed restrictions on the hospitality industry. The same can be said for a vast number of industries. Arguably, because of COVID-19 and its restrictions on some employment and business, a plaintiff’s notional losses (which would have otherwise been attributable to the defendant’s breach) may not or will not now crystallise.

Conversely, a plaintiff’s loss may in fact be greater than it would have been in ordinary conditions. Aside from loss of income a plaintiff may, on account of his or her injury, need to incur costs which have now increased because of demand or shortages in materials and / or labour (particularly in remote or rural areas), or the additional safety measures that now need to be implemented. Such expenses might include the provision of care or implementation of home equipment/aids needed to accommodate a plaintiff’s injuries.

The assessment of economic loss again also needs to be considered. For example, an injured plaintiff with certain qualifications or expertise may be unable to share in and benefit from the growth witnessed in some sectors. It is clear certain businesses and industries have flourished and if a plaintiff has lost the ability to pursue such opportunities, in a society dealing with COVID-19, they have arguably suffered a greater loss of earning capacity because of the defendant’s breach of duty.

There are other ways COVID-19 may be relevant to assessing damages. For example, if a plaintiff has psychological injuries from an incident, and this has been exacerbated by a loss of employment because of COVID-19, what is the measure of the general damages attributable to the incident?

It seems causation will become a key element to any assessment. In all personal injury claims, parties will clearly need to assess whether COVID-19 has affected a plaintiff’s loss, and how this can be evidenced. In pursuing such enquiries, it will be helpful to consider general industry trends, how these have been swayed by COVID-19 and then, in turn, whether a particular plaintiff on account of his or her background, qualifications and experience might be at an advantage or disadvantage in the new economic and market conditions.

In all claims, parties should either conduct or revise their assessments of quantum, including the assumptions on which those assessments are premised, and the quantification of any offers of settlement. In many cases, it may be necessary to make adjustments that factor in the impact of COVID-19.

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