Prior to the commencement of the 2017 Act, the courts were only able to award lump-sum payments in catastrophic injury cases with interim payments schemes also being utilised in recent years in cases where the parties were waiting for the legislation to be enacted. However, lump-sum payments were not always fit for purpose and could leave a plaintiff in a precarious position should they outlive the life expectancy used to calculate the amount of future care that they may require. From a defendant’s perspective, it was also possible that a lump sum payment could “overcompensate” a plaintiff.
The 2017 Act:
The 2017 Act defines catastrophic injury as a personal injury of such severity that it results in a permanent disability requiring the person to receive life-long care and assistance in daily living or a substantial part thereof. Where a court awards damages for personal injuries to a plaintiff who has suffered a catastrophic injury, the court may order that the whole or part of the damages be paid by the defendant in the form of a PPO in such amounts as the court may determine.
An award of damages by PPO can be made under the Act where the damages relate to;
- the future medical treatment of the plaintiff
- the future care of the plaintiff
- the provision of assistive technology or other aids and appliances associated with the medical treatment and care of the plaintiff
- future loss of earnings where both parties consent in writing
The court has the discretion to decide whether to award a PPO whether both parties consent or not and will consider whether it is in the best interest of the plaintiff and the particular circumstances of the case. Under subsection (2) of section 51I of the Act, the court shall take into consideration inter alia the form of award preferred by the plaintiff and the defendant and the reasons for same and any financial advice received by the plaintiff. Under subsection (3) of section 51I, where both parties agree to the payment of all or part of the damages by PPO, the court has discretion to either make a PPO in accordance with the agreed terms, refuse the application or refuse the application and make a PPO under subsection (1) of section 51I of the Act.
A Periodic Payment Order will specify the annual amount awarded to the plaintiff, the frequency and method of the payments and the amount of damages awarded in respect of the future medical treatment, future care and provision of assistive technology/aids & appliances associated with the medical treatment and care of the plaintiff and the amount awarded for loss of earnings if applicable.
Any award made by way of PPO is exempt from tax under section 189B of the Taxes Consolidation (TCA) 1997.
The 2017 Act also provides for “stepped payments” where it is anticipated that there will be changes in the plaintiff’s circumstances during their lifetime that are likely to have an effect on their needs. In such circumstances, the court can make provision in the Periodic Payment Order that from a specified date a payment can be either increased or decreased by a specified amount. The changes in circumstances could include the plaintiff starting primary or secondary school, reaching the age of 18, entering third-level education or predictable changes in care needs such as moving into residential care.
Security of Payments:
A court must be satisfied that the continuity of payment is “reasonably secure”.
The court shall have regard to whether;
- the defendant is a state authority and the payments are protected under a scheme of indemnity administered by the State
- the Periodic Payment Order is eligible for payment from the Insurance Compensation Fund (established under s2 of the Insurance Act 1964) or the MIBI (Motor Insurers’ Bureau of Ireland) or
- the continuity of payment can be guaranteed by some other means.
The annual amount awarded to a plaintiff under a PPO in Ireland will be adjusted annually in line with the Harmonised Index of Consumer Prices (HICP) which is subject to ministerial review every five years. The Minister has the power under the Act to change the index used if following review a different index would be deemed to be more appropriate for indexation purposes.
Indexation is, however, one of the main concerns of plaintiffs, their families and advisors regarding the PPO legislation as the HICP does not measure increases in the cost of medical appliances or the salaries of care workers which will make up a significant proportion of a PPO. PPOs in the UK use the ASHE 6115 Index which is an annual earnings survey applicable to home carers and care assistants however there is no equivalent index in Ireland. Another difference between the Irish and UK PPO system is that there is no power given to the Irish courts to make a variation order meaning that a plaintiff is unable, under the current legislation, to return to the court following a deterioration in their condition.
Justice Deirdre Murphy addressed at length the difficulties indexation using the HICP presented for plaintiffs in a recent High Court judgment (JH v HSE) where a minor had suffered a catastrophic injury at birth in Cork University Maternity Hospital. She concluded that there was overwhelming evidence that a PPO linked to the HCIP would lead to under-compensation for plaintiffs. One expert witness estimated that as a matter of probability that after 10 years the PPO would only meet 86% of the plaintiff’s care needs leading to a shortfall of 14%, after 20 years the shortfall would be 26% and at age 50 only 48% of the plaintiff’s care costs would be covered by the PPO. Justice Murphy found that “in circumstances where the expert evidence is unanimous that the indexation chosen (HICP) will not meet the future care needs of catastrophically injured plaintiffs, then no judge, charged with protecting the best interests of a plaintiff […] could approve a periodic payment order adjusted by reference to the HICP”. Furthermore, she held that “It is clear […] that no competent financial expert would recommend a periodic payment order linked to the harmonised index of consumer prices to provide for the future care needs of a plaintiff. In its current form, therefore, the legislation is regrettably a dead letter. It is not in the best interests of a catastrophically injured plaintiff to apply for a Periodic Payment Order under the current legislative scheme.”
The purpose of the Periodic Payment Order legislation was to ensure that the future care needs of catastrophically injured plaintiffs are funded for the rest of their lives and to remove the uncertainty regarding future care costs associated with lump-sum payments. The courts in the UK have discretion, under the Damages Act 1996, to devise an indexation measure by which the PPO would increase in a manner capable of ensuring that the plaintiff’s future care needs are met. However the Irish courts can only use the HICP index which does not account for increases in the cost of medical appliances or care workers costs. As a result plaintiffs risk being seriously under-compensated for their future care needs.
Justice Murphy’s decision has shed light on the practical difficulties of using the HICP index instead of a wage-based index such as in the UK when the courts are seeking to ensure that a plaintiff will be fully compensated for their future care needs. Unless the Minister uses the power under the Act to change the index to one which makes the legislation fit for purpose to adequately compensate catastrophically injured plaintiffs for their future care costs, the 2017 Act unfortunately risks being redundant.
For further information and advice in relation to “Periodic Payment Orders in Catastrophic Injury Cases”, please contact Daragh Burke, partner, Amorys Solicitors firstname.lastname@example.org, telephone 01 213 5940 or your usual contact at Amorys.