Contingencies refer to events that may happen with some level of probability and could affect earnings or the need for support in the past and/or the future.

Loss of Earnings
The uninjured contingencies that need to be considered are the possibility that the claimant’s earnings could have been affected by risks unrelated to the accident such as illness, accidents, strikes and unemployment. In particular, the claimant’s injured earnings may be affected by the need for treatment, reduced productivity, and accident-related conditions. Saved travelling costs reduce the level of contingencies that may impact the injured earnings.

Application of Contingencies
Contingencies (as a percentage) are typically deducted from the lump sum earnings to allow the legal teams to apply various levels themselves. There are four contingencies that need to be set for loss of earnings:
•    Past uninjured earnings
•    Future uninjured earnings
•    Past injured earnings (this should be factual and usually does not have any contingencies deducted)
•    Future injured earnings

The exact level of contingencies to be applied is decided by the attorney and ultimately the judge.

The following factors should be considered in each claim: 

1.    Severity of the accident
A court needs to exercise care that the long-term health impact of the accident is not brought into account twice, once by way of explicit allowance for reduced earnings growth/ progression in the actuarial calculation, and then again by way of contingencies.

It is not recommended that the impact (arising from the severity of the accident) be addressed via standard contingencies – but rather allowed for explicitly based on expert opinion. A 10% future earnings differential cannot be universally applied to Claimants 1 and 2, where 1 has no permanent damage and 2 will require extensive future medical treatment.

2.    Employment history
An adult victim may have been in-between jobs at the time of the injury. Even for persons who were in employment at the time of the injury, it may be that the employer has by the time of the trial ceased trading or engaged in major layoffs. 

One may expect the deduction for contingencies for an unemployed victim to be substantially greater than for an employed victim of the same age and having regard to the same employment. Consideration needs to be given to the claimants' past work history, given that it may be common for the claimant to experience periods of unemployment – in this case, unemployment after the accident may not be related to the accident but rather the claimants career and work environment. On the other hand, if the claimant was unemployed at the date of the accident, having just lost a job in which they worked 20 years, it may be that the claimant experienced a longer period of unemployment than they would have, had the accident not occurred.

For an unemployed child or young adult who has never worked there will be uncertainty not only as regards the finding of employment when the time comes but also as regards educational progress. This consideration is particularly relevant when the education system is subject to major disruptions, and education on its own does not guarantee a job. Industrial psychologists who testify as to the potential earnings of a victim tend to have regard to potential rather than likelihood. 

3.    Level of future work life
Age seems to be a very relevant consideration in determining contingencies. As per Bee v Road Accident Fund the younger the victim the longer the period over which the vicissitudes of life will operate and the greater the uncertainty in assessing the claimant’s likely career path. 

4.    Level of education
Unemployment tends to reduce with higher levels of education. For this reason, we will not recommend that the standard contingencies be applied to all individuals to (1) address future periods of unemployment and (2) struggles entering the labour market.  University graduates are less likely to experience long periods of unemployment between jobs and may secure employment quicker than non-graduates when first entering the labour market. These realities should be considered when future career postulations are made and should be accounted for explicitly in the calculation.

5.    Early (or later) retirement
A court needs to exercise care that the contingency of early retirement is not brought into account twice, once by way of explicit allowance for early retirement in the actuarial calculation, and then again by way of general contingencies. 

The older the claimant is, the larger the impact of retiring early is on their loss. This suggests that early retirement should be calculated explicitly rather than with contingencies.

6.    Non-standard life expectancy
The standard actuarial calculation includes a full allowance for the risk of early death and the deduction for general contingencies should thus make no allowance for this consideration. Exceptions to this rule arise when the calculation has not been done by an actuary, or when the evidence indicates heavier mortality and a greater risk of early death has not been allowed for in the actuarial calculation.

The older the claimant at the date of the accident, the lower the impact of reduced future life expectancy.

7.    Promotions lost/delayed
A court needs to exercise care that the potential loss of future promotions (or delayed progression or delay in reaching career ceiling) is not brought into account twice, once by way of explicit allowance for reduced earnings growth/ progression in the actuarial calculation, and then again by way of contingencies.

The impact of a loss of promotion 10 years from the date of the accident remains significant, albeit less severe than a promotion 5 years from the date of the accident (mortality and discounting reduces the effect). Therefore, the possibility of such a loss should be allowed for explicitly in the calculation – which may require multiple scenarios suggested by the IP.

8.    Nature of earnings
The future earnings of employees protected by insurance are subject to less risk (in the form of contingencies) than the earnings of an employee who does not enjoy insurance cover. The self-employed person who insures himself will have to pay the premiums from his earnings. For an employee there will often be little or no deduction from his basic earnings, the majority of the cost being met by the employer. An employer is less likely than an employee to allow insurance cover to lapse. The average self-insured income earner thus has a higher risk profile than the average employer-insured employee.

Basic earnings would only be lost in the event of total unemployment not covered by unemployment insurance or sick pay. 

Overtime and commission earnings are subject to much greater risk than the basic salary.

An employer who wishes to reduce an employee's salary may achieve this merely by discontinuing increases to offset inflation. The vast majority of employment contracts do not entitle an employee to increases to offset the effects of inflation. The extent to which such increases are granted by an employer depends on the relative negotiating strengths from time to time of employer and employee. The same is true of salary increases associated with promotions.

9.    Saved travelling expenses
Many deductions have not included allowance for saved travelling expenses. It needs to be borne in mind that travelling costs are not saved by a victim who continues to work, albeit at a lower rate of pay. This saving is sometimes offset after the injury by the costs of travelling to obtain medical attention.

It is not recommended that this loss be addressed via standard contingencies – but rather allowed for explicitly and based on expert opinion. A 10% future earnings differential cannot be universally applied to claimant 1 and 2, where 1 spends 30% of their daily earnings on travel to work (which may be the case for informal manual labourer's who commute long distances by train and taxi) and 2 spends less than 1% of their daily earnings on travel to work (which may be the case for higher income workers who live close to work).

10.    Government workers
It is preferable with government workers that IPs explicitly specify the probable effect of injuries on earnings. To simply apply higher contingencies is dangerous, given that (1) it is unlikely that the government will reduce the earnings of a disabled person given that they are not profit- and performance-driven to the extent of privately owned businesses; (2) generous ill-health benefits are available on medical boarding and (3) certain benefits like medical aid subsidies and home-owners allowances are unlikely to be affected by the accident.

11.    Location
Where the claimant lives may impact their education, employability and employment opportunities available. The image below indicates the varying unemployment between provinces. Whether this should be accounted for in the damages calculation is unclear – as the claimant may not be as restricted by geography/location as they are by their level of education.

Loss of Support
There are 2 types of contingencies that are deducted for LOS claims:

1. General contingencies
These could include allowance for saved travelling costs, divorce, and the deceased and spouse’s general health. It also includes the possibility that the deceased and spouse’s earnings could have been affected by illness, accidents, strikes, taxation changes and unemployment.

2. Remarriage contingencies
If the surviving spouse remarries, her support requirement reduces and will stop completely if the new partner earns the same as the deceased partner, or more. It is therefore sensible to allow for the probability that the surviving spouse could remarry. Remarriage contingencies are generally taken from The Quantum Yearbook. However, due to the limitations of the remarriage contingencies from The Quantum Yearbook and as per various rulings that indicate that remarriage contingencies are incorporated into the general contingencies, the application of remarriage contingencies is not often allowed for. 

Application of Contingencies
Contingencies (as a percentage) are typically deducted from the lump sum loss to allow the legal teams to apply various levels themselves. There are 5 contingencies that need to be set for the loss of support:
•    Spouse’s past loss
•    Spouse’s future loss
•    Spouse’s future remarriage 
•    Children’s past loss
•    Children’s future loss

The risk to the deceased’s earnings should result in a higher contingency, while risk to the spouse’s earnings should result in a lower contingency.