4 November 2015

Payment of compensation for loss of capacity for work not binding on the employer

A new Supreme Court ruling of 3 November 2015 determines that the employer's insurance company had not contractually accepted liability to pay compensation and the size of the loss of capacity for work by calculating and paying a differential claim concerning loss of capacity for work.

An employee had been involved in a traffic accident, which was recognised as an industrial injury. The accident resulted in physical problems, but the employee also experienced a reactivation of work-related traumatic incidents that had taken place many years earlier when the employee had worked as a bus driver.

Together with the accident, these traumatic incidents led to serious post-traumatic stress, and the employee was unable to work after the accident and was granted early retirement pension.  

The National Board of Industrial Injuries fixed the employee's loss of capacity for work at 90 % stating that 45 % was a consequence of the traffic accident and 45 % of already existing mental problems.

Subsequently, the employee's attorney and the employer's insurance company disagreed on the calculation of the differential claim concerning compensation for loss of capacity for work. However, both parties based their calculation on the fact that the loss of capacity for work amounted to 45 %, and the insurance company paid differential compensation based on this percentage.

The National Board of Industrial Injuries changed the loss of capacity for work

During the legal action, the Board was requested to make a new assessment of the employee's loss of capacity for work, and it was then reduced to 15 %.

The employer therefore claimed that payment of the differential claim was not to be considered a binding commitment that the employer would accept liability or the size of the loss of 45 %.

The Western High Court: Binding commitment

The High Court found that the insurance company/the employer had recognised a loss of capacity for work of 45 % with binding effect. It was of no importance to the High Court that the insurance company had not explicitly used the word "commitment" etc.

The Supreme Court: The size of the loss of capacity for work not explicitly recognised

The Supreme Court affirmed the High Court ruling - however, with completely different grounds.

The Supreme Court found that the insurance company had not explicitly recognised the size of the loss of capacity for work as a result of the accident, and that the insurance company was not bound by the accounts and assumptions, which had been taken into account when making the first calculation of the claim for differential compensation.

Even though the basis of the calculation had been a loss of 45 %, this was not binding during a subsequent dispute between the parties concerning additional compensation.

However, the Supreme Court found that, based on the medical records, the Board had no grounds for changing the loss from 45 % to 15 %, and the Supreme Court therefore set aside the Board's reduction of the loss of capacity for work.

Comments

The Supreme Court ruling is specifically reasoned. However, the ruling shows that if there is doubt about the final fixing of a loss of capacity for work, it may be a good idea for the employer and its insurance company to make reservations in connection with the consideration and payment of a claim for compensation that the payments do not constitute an acceptance of the liability or the size of the loss.

Further, the ruling is interesting as the Supreme Court on its own initiative sets aside the Board's specific assessment concerning the loss of capacity for work because the Supreme Court finds that the change is not sufficiently substantiated.

The content of this Newsletter is not, and should not replace, legal advice.

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