Posted in New Legal Developments on 25 June 2014

The awarding of damages in the Irish courts is based on the principle restitutio in integrum that is to put injured parties back, insofar as money can do, to the position that they would have been in but for the injury. At present compensation is by way of a single lump sum of damages.

In catastrophic medical malpractice or very serious personal injury cases the lump sum is awarded in order to compensate the Plaintiff for past and future losses. The lump sum awarded  is based on estimates of the Plaintiff’s life expectancy. Other factors taken into consideration are interest rates and investment returns. Assessing damages is difficult due to uncertainties and assumptions as to the Plaintiff’s future circumstances. Issues such as investment returns and inflation rates also arise. There has been much debate in recent years regarding the appropriateness and adequacy of lump sum awards in cases of catastrophic medical malpractice or very serious personal injury.

The key advantage of a lump sum is that it is final. This enables proceedings to be concluded with a clean break between the parties. The danger of the lump sum approach is it often results in over-compensation or under-compensation. It is almost impossible for a lump sum payment, however carefully calculated, to precisely compensate an injured party. The injured party will almost always be either over-compensated or under-compensated. There is no recourse for a Plaintiff to seek more compensation when he exhausts his fund by exceeding his projected life expectancy, perhaps due to advances in medicine and new treatments. Similarly, there is no facility for a Defendant to seek to recover an over-payment where the Plaintiff dies before the original projected life expectancy. In such circumstances the remainder lump sum passes on to the Plaintiff’s relatives in a windfall.

A Periodic Payment Order (hereinafter “PPO”) is a structured settlement whereby the Plaintiff receives damages periodically rather than by way of a lump sum. PPO’s provide for a series of regular payments made under certain heads of damage to meet the Plaintiff’s needs as they arise over his / her lifetime. The regular payments are typically made annually and may be linked to an inflation index.

In October 2010, the High Court Working Group on Medical Negligence and Periodic Payments recommended that legislation should be enacted to empower the courts to make PPOs.  Such orders will be made to compensate the Plaintiff in cases of catastrophic injuries where long-term and continuous care will be required on condition that the court is satisfied continuity of the periodic payments will be secured. The enactment of legislation would represent a significant change in the law governing compensation for personal injury. The Working Group has made it clear that the current method in Ireland of awarding damages, the single lump sum award, is inadequate and inappropriate in some circumstances where a Plaintiff has been catastrophically injured and will require continuous care and treatment into the future.

The PPO attempts to ensure that the Plaintiff is accurately compensated for his needs as they arise throughout his life. They apply mainly to the future cost of care, treatment and the future provision of medical aids and appliances. Each heading of damage will be quantified and agreed. If the Plaintiff exceeds his projected life expectancy, he will continue to be compensated for the remainder of his lifetime. The ultimate size of the award may be considerably in excess of the lump sum applied under the current approach. On the other hand, if the Plaintiff does not survive as long as projected, the compensation payments will end upon death.

A crucial feature of the PPO regime is the legislative measures aimed at guaranteeing continuity of payment. If the State is the Defendant security of payment should not be an issue. In the case of private Defendants, usually insurance companies, it is more complex and will require the establishment of a financial infrastructure to ensure continuity of payment.

The Working Group recommended the introduction of earnings and costs related indices which would allow periodic payments to be index-linked. The introduction of such indices would allow periodic payments to be index linked to levels of earnings or treatment and to changes in costs of medical aids and appliances. The Central Statistics Office is regarded by the Working Group as the body with the competence and independence to compile and maintain such indices. This should ensure that Plaintiffs will be able to afford the cost of treatments and care into the future without seeing the payments adversely affected by inflation.

In January 2012 the Minister for Justice, Equality and Defence, Mr. Alan Shatter TD announced that the Government had approved proposals to prepare legislation. Since the Working Group’s report was published in October 2010, the final settlement of many catastrophic injury cases has been put on hold pending the introduction of legislation. At present, there are a number of claims awaiting final resolution by means of periodic payments.  The lack of legislation has created uncertainty for Plaintiffs.  A number of Plaintiffs have obtained interim payments usually covering past and future general damages as well as special damages for a period running from the injury and ending usually two years following the settlement. The interim settlements have left Plaintiffs in a vulnerable position and the sooner legislation can be enacted the better.

Contact us at Cantillons Solicitors at +353 (0)21 -4275673 or [email protected] if you would like more information.

* In contentious business, a solicitor may not calculate fees or other charges as a percentage of any award or settlement.

 


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