Keoghs Insight

Author

Jonathan Lanigan

Crowdfunding and the deduction of collateral benefits

Blogs27/01/2021

One of the features of social media has been how it has allowed individuals to give so generously, via “crowdfunding”, to those considered deserving of financial support, whether they be an individual or a particular cause (or even the outgoing President of the United States….!). How might the court treat such payment in the context of a claim for damages?

The issue of whether monies raised by voluntary donation can be offset by an insurer against a particular head of loss is not new. As long ago as 1947 in the case of Redpath v Belfast and County Down Railway the Court rejected set off and accepted: “it would be startling to the subscribers to that fund if they were to be told that their contributions were really made in ease and for the benefit of the negligent railway company.” The tenor of this judgment has survived the test of time.

It is quite common to see those injured in road accidents or at work asking for crowdfunding support to cover (often short term) shortfalls in loss of earnings, rehabilitation costs, equipment outlay, or in the case of fatal accidents, funeral costs etc.

The starting point in any personal injury case is that a claimant can only recover his or her “net” loss.  That involves taking into account monies received by the injured person as a consequence of injuries, typically sick pay and CRU benefits.  It has long been established that there are exceptions, notably the benefits of an insurance policy and/or an ill-health pension to which the injured person has contributed whether financially by paying a premium or working for the pension contribution.  The same has applied to voluntary donations by the community. The rationale is that it would be unfair to allow the tortfeasor to reap the benefit of the injured person’s sensible financial planning.

However in contrast, if the tortfeasor is the employer and voluntarily makes an ex gratia payment (funded personally or by insurance) to the injured party, that sum can be taken into account (Gaca v Pirelli General Plc 1990) - the same logic should apply where the employer is not the tortfeasor and pays for PHI insurance gratuitously.

In fatal accident cases insurers face an additional hurdle by Section 4 of the Fatal Accidents Act 1976 which states, “In assessing damages in respect of a person’s death in an action under this Act, benefits which have accrued or will or may accrue to any person from his Estate or otherwise as a result of his death should be disregarded”. Charitable donations, via crowdfunding would probably fall within the “otherwise” exception.

Conclusions

When the issue was re-visited in Parry v. Cleaver (1970) Lord Reid used extraordinary language saying it would be “revolting to the ordinary man’s sense of justice” if the benevolence of the public were taken into account. This sets a high bar for insurers for sure.

But what if an appeal for funding is focused on a specific cost such as the funeral, a memorial, or a particular item of equipment, for example a high specification wheelchair? At face value there is a risk of “double recovery” if an award were to be made for this outlay unless on terms that the claimant intended to repay the donors, which seems impractical.  Is the answer that there is in fact no loss to claim for in the first place, or merely a claim for any shortfall? As regards an item of equipment, the loss might only be the subsequent replacement costs? Our view is that ultimately the Court are likely to go back to the 1947 logic in Redpath and find against any credit being required even in this type of case.

In a world where it is rare to find a tortfeasor who lacks insurance (leaving aside limit of indemnity), there is an increasing risk that the public’s generosity will result in “double recovery”, which is not only what the law specifically seeks to avoid, but is also surely the opposite of what the donor intended.

In the case of Parry v Cleaver [1970] AC 1 at 13, it was held that “The common law has treated this matter as one depending on justice, reasonableness and public policy.”  That mantra probably still holds good.

Voluntary crowdfunding in favour of a claimant, other than by the tortfeasor, will probably not be deducted from the award of damages save in circumstances where it can be shown the funding was targeted at, and extinguished, a specific outlay, and even here the issue will be open to argument. These arguments are unlikely to prove attractive and the risk of adverse publicity significant, and so would require very careful drafting if pursued.

For more information, pleae contact Jonathan Lanigan