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03 November 2015
The recently published General Scheme of the Civil Liability (Amendment) Bill allows a court to provide for index-linked annual payments to persons who have suffered catastrophic injuries. The legislation's purpose is to ensure that those needing long-term care have the necessary financial resources to cover the care costs for the duration of their lives. The legislation is intended to be restricted to those who have suffered a catastrophic injury – namely, a severe injury involving a serious impairment, the direct and proximate cause of which requires the plaintiff to receive life-long, permanent care and assistance.
The bill provides that a court awarding damages for future monetary loss in respect of catastrophic injury may order that all or part of the damages be paid as periodic payments where it is in the best interests of the plaintiff and the most appropriate method for the plaintiff's future care and medical treatment. The Injuries Board will also be empowered to make awards in the form of periodic payments.
A court can provide that the amount awarded under a periodic payment order can increase or decrease on specific dates where there will be expected changes to the plaintiff's needs (eg, entering school, reaching the age of majority or moving into residential care). A periodic payment order will be reviewed annually to cater for increases in costs for goods and services. The revision will be calculated by reference to the Irish Harmonised Index of Consumer Prices, published by the Central Statistics Office.
The use of a periodic payment order instead of a lump-sum award is intended to transfer risk from the plaintiff to the insurer (eg, risks relating to inflation, investment and longevity). However, the plaintiff will bear the risk that the insurer could become insolvent. For this reason, the court must be satisfied that the continuity of the payment is reasonably secure, on the basis that the defendant is a state authority or that the periodic payment order is eligible for payment from the Insurance Compensation Fund. The Insurance Act 1964 provides maximum amounts that can be paid from the fund in the event of the liquidation of an insurance company. However, these limits will not apply to periodic payment orders.
A plaintiff cannot commute, assign or charge the right to payment under a periodic payment order without court approval. It will be approved only in special circumstances where it is in the plaintiff's best interests.
Plaintiff representatives have expressed concern about the bill, in particular the proposal to link future payments to the Irish Harmonised Index of Consumer Prices. The index measures inflation over a broad range of consumer goods and will not accurately reflect the greater increase in wage inflation for carers' salaries or medical services. It has been argued that this may result in plaintiffs being unable to meet the cost of future care and many plaintiffs will therefore continue to seek lump-sum awards.
The attraction for plaintiffs to seek lump-sum awards is motivated in part by the recent High Court decision in Russell v HSE. Russell indicated that awards for future special damages should be discounted only by 1% (previously 3%) to allow for the income that would be generated by a plaintiff who receives a lump-sum to cover future costs. In effect, a plaintiff may receive a multi-million euro award in 2015 in respect of payments that may not need to be made until decades into the future. The discount is intended to reflect the fact that the plaintiff receives a benefit by being able to invest that sum of money until it is needed. Defence practitioners, and numerous actuaries and economists, have argued that the discount should be significantly higher. The decision is under appeal and was heard by the Court of Appeal on July 7 2015. Judgment was reserved and is expected before the end of 2015.
The minister for justice has indicated her intention that the bill be enacted before the end of 2015.
For further information on this topic please contact April McClements at Matheson by telephone (+353 1 232 2000) or email (email@example.com). The Matheson website can be accessed at www.matheson.com.
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