Wed | Oct 28, 2020

CPI recalibration causes reduced personal injury awards

Published:Thursday | October 15, 2020 | 12:13 AM

THE EDITOR, Madam:

In April 2020, shortly after the world was thrown into a tailspin due to the COVID-19 pandemic, personal injury lawyers in Jamaica were given another reason to panic.

The Consumer Price Index (CPI), a measure of inflation, which is used to compute present court awards to litigants, based on comparison with previous awards, was recalibrated by the Statistical Institute of Jamaica (STATIN), the government agency which publishes the CPI each month.

Under normal circumstances, based on rising rate of inflation, and consequently an increasing CPI over time, as the value of money decreases, the dollar amount awarded to litigants usually increases. How it works in practice is that: If 30 years ago, in June 1990, someone was awarded $100,000.00 as damages for a lost leg, a judge faced with a similar case today would award today’s equivalent of that sum, adjusted to account for inflation, using the ratio of today’s higher CPI to that in June 1990.

However, it was observed that for April of 2020, STATIN published a CPI of 103.7, whereas for February 2020, two months prior, it was 269.5. This was frightening, to say the least, as it suggested a drastic revaluation of the Jamaican dollar. Thankfully, a senior statistician from the Indices and Price Analyses Unit at STATIN has explained to me that it’s not that inflation went down, but that there was a change of the units by which the CPI is reported. Put another way, it’s as if your favourite market vendor suddenly started measuring the weight of their goods in kilograms (kg) instead of pounds (lbs). There is no proper way to compare unless the numbers are converted to the same units. So the CPI may appear to be less, but it nonetheless continues to correspond with the current inflation rate.

DRASTIC DIFFERENCE

But, many lawyers and judges aren’t aware of the change and so continue to compare the old CPI to the current CPI. The difference was so dramatic and unrealistic that persons receiving court awards based on the April 2020 CPI would receive significantly less than the equivalent in May 2007, 13 years earlier.

STATIN has produced an entirely new table of the CPI series going back to 1976, using the new unit of calibration. What concerns me, however, is that this error of comparing apples to oranges has, in the interim, been promulgated by lawyers, judges, insurance companies, and possibly other entities in other industries who are ignorant to the changes made by STATIN.

During these past six months, how many citizens have been undercompensated as a result of this shift? How many consumers have been overcharged? In cases where a court has already delivered its judgment, can the problem be corrected without filing a costly appeal?

We are grateful to STATIN for publishing the CPI and other useful statistics, and we hope that in the future we will not miss such radical changes.

BIANCA S. SAMUELS

Attorney-at-law