Temporary and Permanent Incapacity Compensation

Temporary and Permanent Disability Compensation: Legal Aspects and Calculation Methods

Physical damages that occur as a result of unexpected accidents or events encountered in life can deeply affect people's quality of life and economic future. The legal mechanism that aims to cover the losses suffered by the victim in such cases, temporary and permanent disability compensation In a city with heavy traffic like . In this article, the legal basis of incapacity compensation, the situations in which it comes to the fore, who may be entitled to this compensation, and the current approaches to compensation calculations and the problems encountered will be examined in detail. As

Legal Nature and Purpose of Incapacity Compensation

Incapacity compensation is a provision regulated under the Turkish Code of Obligations (TBK). tort liability . This compensation aims to compensate for the financial losses suffered by a person if he suffers bodily harm as a result of an unfair and unlawful act. It is type

Article 54 of the Turkish Code of Obligations, discussed bodily harm under four main headings:

• Treatment expenses.

• Loss of earnings.

• Losses arising from reduction or complete loss of working power.

• Losses arising from the shaking of the economic future.

The main purpose of this compensation is to compensate for the decrease in the assets of the injured person, if possible, to bring him/her to the level closest to the situation before the damage and to provide the economic balance necessary for his/her survival. Bodily harm is not limited to the violation of physical integrity; It also includes economic consequences such as the person becoming temporarily or permanently unable to work, being deprived of professional activities, and losing income. In practice, for this type of damage; Concepts such as “permanent incapacity”, “disability”, “loss of physical strength” or “loss of working capacity” are used.

Temporary and Permanent Incapacity Concepts

Incapacity for work, depending on its nature temporary or permanent (permanent) could be: It is called

• Temporary Disability Compensation: It is calculated assuming that the victim's working capacity is 100% during the temporary incapacity period determined in the Board Report. There is no distinction between professions in this calculation.

• Permanent (Permanent) Disability Compensation: It is calculated based on the permanent disability rate determined in the Board Report, starting from the end of the temporary incapacity period. Permanent incapacity refers to the situation where a person completely or partially loses his ability to work permanently and affects the economic and social life of the victim in the long term.

Determination of Work Disability Rate

Permanent incapacity rate, regulated by hospitals authorized by the Ministry of Health and relevant health boards. Disability Health Board reports . The higher disability rate directly affects the increase in the compensation amount.

Different regulations have been taken as basis in determining disability rates from past to present:

• Before 11.10.2008: Social Insurance Health Operations Regulations.

• Between 11.10.2008 – 01.09.2013: Regulation on Determination of the Rate of Loss of Earning Power in Working Power and Profession.

• Between 01.09.2013 – 01.06.2015: Disability Determination Procedures Regulation.

• Between 01.06.2015 – 20.02.2019: Regulation on Disability Criteria, Classification and Health Committee Reports to be Given to Disabled People.

• After 20.02.2019: Regulation on Disability Assessment for Adults.

• For children, there is a Regulation on Special Needs Assessment for Children.

The report should state the nature of the jobs in which the person cannot be employed due to his disability and explain his special situation.

Basic Elements Considered in Compensation Calculation

Many factors are carefully considered to determine the amount of compensation in a fair and equitable manner. These are:

1. Earnings Level: The victim's monthly earnings are used as the basis for calculating the loss of income.

◦ Real Earnings Principle: In compensation calculations, if there is a job and income, it must be real earnings should be investigated. If official documents such as pay slips and tax declarations do not reflect the truth, they are not taken into account. When necessary, comparable earnings are asked from relevant professional organizations. It is essential to investigate

◦ Minimum Wage Basis: Minimum wage is accepted as the income of the victim who does not work in any job. Contributions made by housewives and elderly people through "help and service" are also calculated on the basis of the minimum wage.

◦ Earnings Not Related to Working Life: Earnings such as rent, dividends and interest are not included in the compensation calculation.

◦ Additional Payments: Regular payments such as bonuses, premiums, clothing, fuel, and additional lessons can be included in the monthly income, but this must be documented within the last year.

2. Age and Life Expectancy: The estimated life expectancy of the victim is determined based on the age of the victim on the date of the tort. This period is an important parameter in determining the amount of compensation.

◦ Active and Passive Period: The active life of the victim is usually Starts at age 18 and ends at age 65. The loss during this period is calculated according to the earnings he has earned or is likely to obtain from his business and profession. Passive period (old age and retirement periods) loss is calculated based on legal minimum wages. The Supreme Court emphasizes that passive period damage should be calculated since the person will make more effort in proportion to his disability even in old age.

◦ Young Children: Accepting that children will have difficulty and spend more effort in their daily lives in proportion to their disability, their compensation should be calculated starting from their age at the date of the accident, not from the age of 18, until the end of their lives.

3. Disability Rate: The permanent incapacity rate determined by the medical board report is a criterion that is directly effective in determining the amount of compensation.

4. Defect Rate: Compensation calculations, regardless of the type of liability defect rates . If the injured party is involved in the fault, this rate may be a reason for reducing the compensation. If the injured party has no fault, there is no need to go into the details of the sharing of fault among other responsible parties, because the injured parties can claim the entire damage from any responsible person.

Compensation Calculation Methods and Current Discussions

There are differences between institutions (Social Security Institution, insurance companies, judiciary) regarding calculation methods in converting human damages into compensation. there is no harmony, there is chaos.

Main Calculation Methods:

1. Progressive Annuity Method: It is a method frequently requested by victims and widely used in practice.

◦ Calculation: "Processed period" earnings between the event date and the report/judgment date are calculated without discount. Earnings for the "functioning period" after the report date are determined by taking the earnings of the last year as a unit, increasing by 10% and discounting by 10% for each year. This actually means a 0% real discount.

◦ Advantages: It is easy to understand and calculate, includes the assumption that incomes will increase, and produces results in favor of the victim.

◦ Disadvantages: Non-standardized, not fully based on actuarial basis, carries the risk of deviating from economic reality (inflation is ignored). It is criticized by those responsible for compensation on the grounds that it imposes an excessive burden.

2. Fixed-Term Annuity Formula with Payment per Period-Technical Interest Method (1.65/1.8 Ratio):

This is the method that is stated to be more balanced, especially by insurance companies. In this method, the calculation is made based on the present value of future annual losses and technical interest is usually applied at a rate of 1.65% or 1.8%.

◦ Effect of the Constitutional Court Decision: Constitutional Court's decision dated 17.07.2020 (E.2019/40, K.2020/40) , the phrases referring to the general conditions of insurance in Article 90 of the Highway Traffic Law (KTK) have been cancelled. This cancellation decision eliminated the legal basis of the tables annexed to the traffic insurance general conditions and the application of 1.8% technical interest.

◦ Result: Therefore, the compensation calculation It must be done without applying 1.8% technical interest.

◦ Reviews: It is argued that not applying technical interest leads to a significant increase in compensation (for example, 30.5% more than PMF) and that this may lead to unjust enrichment. It is stated that a discount should be made for cash payment, otherwise the beneficiary will be unjustly enriched due to the opportunity to invest the money early.

3. Average Earnings and Fixed Rent Method (with 10% Increase and Discount Value):

It is a method that has been used in the Turkish judiciary for a long time. Future earnings are increased by 5% (then 10%) each year and discounted to find the cash value of the lump sum compensation.

Important Problems and Solution Suggestions:

• Institutional Incompatibility: The lack of unity of implementation between institutions (SGK, insurance companies, judiciary) and high court decisions should be eliminated.

• Specialization and Training: It is recommended to establish Human Injury Courts and organize training processes to specialize the judges and experts who will work in this field. Organizing liability law as a separate department in law faculties may also be a solution.

• National Data and Tables: It is necessary to prepare and constantly update data such as life, activity, economic indicators and marriage chance tables in accordance with the social and economic structure of our country by the Turkish Statistical Institute (TUIK).

• Method of Payment of Compensation: Instead of lump sum compensation payments in monthly/annual periods is recommended. This will both provide long-term security for the victim and reduce the disproportionate burden on those responsible. For this fund system, the infrastructure and experience in life insurance and private pension systems can be used. According to the express provision of

• Prevention of Unjust Enrichment: Especially, the legal basis of technical interest application disappears. unjust enrichment and unjust impoverishment situations, calculation methods must be based on objective and scientific foundations.

• Discount Policy: It is actuarially realistic to apply an appropriate discount rate on prepaid compensation, and for this, current interest and inflation data determined by institutions such as the Central Bank or SDDK / TURKSTAT must be taken into account.

Result

Methodological differences in the calculation of temporary and permanent disability compensation prevent the determination of fair and realistic compensation and lead to uncertainty and a perception of injustice for both the victims and those responsible for compensation. To ensure the principle of legal security, to minimize contradictions between compensation decisions and to increase public confidence in the judiciary. Establishing a system that is objective, predictable, compatible with economic realities and maintains a reasonable balance between the parties is vital