Current Developments in Compensation for Pain and Suffering

Prof. Hohlbein, let's take a look at the development of court-awarded compensation for pain and suffering in recent years. What do you consider to be most relevant? 

In recent years the courts have increased the amounts of damages for pain and suffering significantly. Until about 1990, the maximum amounts were around € 100,000. Ten years later, it was already twice that much. Then a dynamic set in, so that € 1 million was finally reached in big steps. And all indications are that the development will continue.

And yet the higher payments do not seem to be satisfactory from the point of view of those affected. Why?   

Such maximum sums are only awarded in extremely tragic cases. Most recently, for example, a 1-year-old boy suffered gross medical malpractice after a comparatively harmless infection. The result is, among other things: Brain damage, intelligence reduction without active speech, spastic disturbance of the nervous and muscular system, and epilepsy. And the boy also suffers from anxiety. He has to be taken care of 24/7.
If we assume a possible life expectancy of about 80 years, a simple division of € 1 million apparently leads to a compensation of € 12,500 per year, i.e., about € 30 per day. As I said, apparently. Because inflation, gilt-edged investments and possible taxes on interest gains have to be taken into account. This is almost a management task that requires fee-based external help.
In such a case the desire for more money is completely understandable. Especially in comparison with compensation for wrongful imprisonment, which is € 75 per day, or with loss-of-use tables for cars, which list amounts from € 23 to € 175 per day, depending on the type of car.
We need to ensure as a society that compensation for pain and suffering does not dwindle to an insulting amount due to the passage of time.

What do these higher claims and resulting payments mean for the insurance market?

There is good reason to ask about the insurance market. After all, we are talking about sums that will not realistically be affordable without insurance. Besides, compensation for pain and suffering has to be paid in addition to damages. And in tragic cases, the claim for damages alone can reach into the two-digit million Euro range. In such cases, children are often the victims. And because life expectancy can still be long thanks to medical advances, it becomes expensive.

... and which types of insurance are particularly affected?

Personal injuries often result from accidents in road traffic, private liability, animal owner's liability, or from the aforementioned medical malpractice arena. It is therefore advisable to insure these risks adequately. That is the only way to achieve adequate victim protection and at the same time to avoid insolvency of the tortfeasor.

In your last article, you calculated that, depending on the rate of inflation and assumed longevity, the usual sums insured today are insufficient in many cases. What sums insured do you recommend?

Coverage sums in the single-digit or lower two-digit million Euro range seem to me to be inadequate in view of the improved life expectancy of seriously injured persons, the development of costs in the medical sector, and inflation. As a rule, private liability cover in the mid two-digit million Euro range is advisable today. The additional premium for an increase is low.

Based on this, what would you recommend and who should do what?

Since I currently see neither a German legislative initiative for comprehensive mandatory liability insurance cover nor a European directive on compensation for pain and suffering, my hopes rest on the courts. In my opinion, they should award damages for pain and suffering as an indexed pension payment in serious cases; concerns raised that this might promote inflation are not valid in my view. A pension for pain and suffering can help to ensure compensation adequate to severity over the long term, and help to avoid misallocation of funds in form of too much or too little. And a pension avoids covetousness on the part of carers, often relatives and heirs. After all, a large sum of money can tempt people to make decisions that are not in the best interests of the victim.
It would be helpful if the German Lawyers' Conference, the German Insurance Association or a commission yet to be set up would take up the issue. The injured parties deserve all the help they can get.

Thank you very much for the interview!        

The interview was conducted by Lüneburg alumnus Mathias Paulokat, MBA. He holds a degree in Business Law (FH) and is press officer in the banking industry.

The article leading to this interview was published in VersR 2022, issue 20, p. 1269 et seq. The co-author, Nina Bölke, is the former student assistant of Prof. Hohlbein and assisted with the publication. Ms Bölke is now, after finishing her BA degree, studying law for the First State Examination in Law; at the same time she is working in a law firm.

Please find more information about Prof. Dr. Bernhard Hohlbein here.