Multiplier Method For Compensation Not Restricted To Motor Accident Deaths, Also Applicable To Serious Injuries: Kerala High Court

The Kerala High Court recently held that while computing compensation in motor accident cases, the multiplier method proposed by the Supreme Court in Sarla Verma v. Delhi Transport Corporation remains applicable even if the accident resulted in serious injuries instead of death.

Justice C. Jayachandran clarified that the purpose of adopting the multiplier method was to achieve uniformity and consistency in compensation assessments, regardless of the nature of the injury. 

"The very purpose of adopting the multiplier method in Sarla Verma (supra) is to do away with the considerable variation and inconsistency in assessing compensation and also to bring uniformity and consistency....the Honourable Supreme Court (has) opined that following the multiplier method will subserve the cause of justice, avoiding unnecessary contentions before the Tribunals and Courts. If this be the logic for adopting the multiplier method, can any change in the legal position be conceded for the reason that the result of the accident is an injury - especially in cases of serious injuries - instead of a death? The answer to the above question is surely negative, in the estimation of this Court, having regard to the logic and purpose behind adopting the multiplier method."

The multiplier method involves the ascertainment of the loss of dependency(multiplicand) and capitalizing the multiplicand by an appropriate multiplier. It involves determining the financial loss, selecting a multiplier based on the expected duration of support, and calculating the appropriate capital sum to cover the annual support during that period. This ensures that the compensation adequately reflects the loss of dependency and is fair to the affected parties.

On the other hand, the split multiplier method is a variation of the multiplier method that applies different multipliers for different periods of time, typically pre-retirement and post-retirement periods. This approach is usually used when the victim has suffered a permanent disability that affects their ability to earn income. While the split multiplier method was applied in some cases, it has been criticised for lack of uniformity and consistency, which led to confusion in assessing compensation.

The present case involved two appeals, one filed by the insurance company and the other by the injured claimant, challenging the Motor Accident Claims Tribunal's award granting compensation for injuries sustained in a motor accident.

The accident occurred in April 2007 when the claimant's scooter was hit by a bus owned and insured by the respondents after which the claimant sustained substantial injuries. The Tribunal found that the accident had resulted from the negligent driving of the bus and awarded compensation of over Rs. 5 lakhs along with interest to the claimant.

Advocate V.P.K Panicker appeared for the insurance company and contended that the compensation for permanent earning disability (monthly Rs.1500 for the next 9 years) was erroneous since the claimant had not suffered any loss of income due to disability. The insurer also challenged the calculation of a 15% functional disability, especially for a post-retirement period of 5 years.

Advocate Geetha Kumari appeared for the claimant and argued that the Tribunal wrongly applied the split multiplier method and overlooked the impact of disability on his personal life, particularly 'loss of amenities and conveniences.'

Justice Jayachandran referred to the Apex Court decision in Sarla Verma v. Delhi Transport Corporation which expressed concern over the considerable variation and inconsistency in awarding compensation by Courts and Tribunals, leading to confusion among common people.

In National Insurance Company Limited v. Pranay Sethi, the Supreme Court held that uniformity and consistency could be achieved if the multiplier method prepared in the Sarla Verma case was followed.

The High Court acknowledged that the aforesaid decisions were dealing with cases where the accidents had resulted in death. However, it was concluded that it would be inappropriate to alter the legal position solely because the result of the accident was an injury rather than death.

"The moot question is whether the dictum as regards the multiplier method laid down in Sarla Verma (supra)... would undergo any change, if the result of the accident is an injury, instead of a death. This Court is of the definite opinion that it would not." 

Accordingly, the Tribunal was found to have erred in applying the split multiplier method and it was clarified that the method fixed in previous judgments should also apply uniformly in injury cases. 

Regarding the compensation, the claimant was found entitled to additional compensation for 'loss of amenities' due to his permanent disability, 'pain and suffering' for the severity of his injuries, and 'extra nourishment' during hospitalization. The total compensation awarded after enhancement was Rs. 7,67,148/-.

The Court directed the insurance company to pay interest at the rate mentioned in the original award for the initial amount and 8% interest for the enhanced amount, with any delay affecting the interest accrual.

Thus, the claimant's appeal was partly allowed while the insurance company's appeal was dismissed. 

Case Title: The Oriental Insurance Company Ltd v. Abdul Khader

Citation: 2023 LiveLaw (Ker) 362

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