Periodic Payments
Background
Generally, the only type of award allowed is a lump-sum award. It represents a once and for all payment for all past and future losses, whether quantifiable in monetary terms or not. In recent years, the courts have approved a number of structured settlement agreements involving periodic payments in the case of State defendants.
A working group reported on the possibility of periodic payments in certain classes of personal injury cases. The group recommended that courts should have the power to make or to provide for settlements with periodic payments to injured victims in cases of catastrophic injury in order to provide for future care and treatment, medical needs and appliances.
The group proposed that a periodic payments order might apply to the whole or part of the award, having regard to the nature of the injury and the circumstances. It might be made if the court considered that it was in the best interests of the claimant.
It should be made only where the court was satisfied that the continuity of payment was reasonably secured. It was recommended that the State might be empowered to provide injured victims with the necessary security to make payment by way of annuity or otherwise as appropriate.
This might apply, for example, in the event that the claimant contracts a particular disease at a future date. Proposals have also been made about the possibility of secured awards being provided to deal with contingencies. At present, the possibilities and contingencies are simply factored into the lump sum, disregarding the ultimate outturn.
Periodic Payment Orders
The Civil Liability (Amendment) Act 2017 empowers the courts, as an alternative to a lump sum awards of damages, to make consensual and non-consensual periodic payments orders (PPOs) to compensate injured victims in cases of catastrophic injury where long term permanent care would be required.
A court may award damages by way of periodic payments orders for personal injuries to a plaintiff who suffered a catastrophic injury. Where a court is awarding damages to a catastrophically injured person it may order that all or part of the damages for future medical treatment, future care of the plaintiff and the provision of assistive technology be paid by way of a periodic payments order. Where all parties are in agreement, damages in respect of future loss of earnings may also be paid by periodic payments order.
A “catastrophic injury”, which is defined as meaning “a personal injury which is of such severity that it results in a permanent disability requiring the person to receive life-long care and assistance in all activities of daily living or a substantial part thereof”.
“Activities of daily living” as including activities such as dressing, eating, walking, washing and bathing.
A plaintiff or a defendant may appeal a decision of the High Court under most of the above provisions to the Court of Appeal on a point of law.
The provisions apply to proceedings that are brought on or after the commencement of the Part
PPO Factors
The court is to take account of the following in deciding whether to make a periodic payments order. The court must have regard to the best interests of the plaintiff., the nature of the injuries suffered by the plaintiff and the preferences of all the parties regarding the form of award which would best meet the needs of the plaintiff.
The court has regard to
- the amount of any payments proposed to be made to the plaintiff,
- whether the court has made an order in the proceedings concerned expressed to be one of an interim nature with respect to the payment of damages to the plaintiff, and where such an order has been made, the amount of such damages,
- the form of award preferred by the plaintiff and the reasons for that preference,
- any financial advice received by the plaintiff in respect of the form of the award, and
- the form of award preferred by the defendant and the reasons for that preference.
Where the parties agree to the payment of damages by way of periodic payments, the parties may apply to the court for a PPO in accordance with the terms of the agreement and the court may make a PPO on the agreed terms, refuse the application for a PPO or refuse the application and make a PPO under the previous mentioned power
Particulars of Order
A court may make provision that a PPO may increase or decrease from a specified date by a specified amount to cater for anticipated changes in the plaintiff’s needs. The changes in circumstances which may form the basis of a stepped payment include entry into primary, secondary or third level education, reaching the age of 18 years or changes to the care needs of the patient including transfer to residential care.
Where a court makes a PPO it shall specify
- the annual amount awarded to the plaintiff,
- the frequency of payments,
- the annual amount awarded to the plaintiff,
- the amount awarded for damages in respect of 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,
- where, the periodic payments order includes damages in respect of future loss of earnings by the plaintiff, the amount awarded for such loss of earnings,
- the method by which payments are to be made by the paying party to the plaintiff,
- that the payments under the order are to be made to the plaintiff during his or her lifetime,
- that the annual amount awarded to the plaintiff will be adjusted in accordance with the Harmonised Index of Consumer Prices,
Stepped Payments
Where a stepped payment is provided for, the order is to specify
- the change in circumstances on which an increase or decrease in the amount of a payment is based,
- the date on which the relevant increase or decrease shall take effect,
- the amount of the relevant increase or decrease at current value, and
- that the amount of the relevant increase or decrease shall, on the date that it takes effect, be applied to the annual amount awarded to the plaintiff as adjusted in accordance with the Harmonised Index of Consumer Prices and
- any other matter that the court considers appropriate.
Where a court provides in a periodic payments order for a stepped payment, and prior to the date that the stepped payment is due to take effect, it is evident to the plaintiff that the anticipated change in the plaintiff’s circumstances on which that stepped payment was based will not arise, the plaintiff shall, as soon as practicable and not later than 10 working days before the date on which the stepped payment is due to take effect, notify the court that made the periodic payments order and the paying party in writing that the anticipated change in the plaintiff’s circumstances which formed the basis for the stepped payment concerned will not arise.
Where a court receives a notification in relation to a stepped payment specified in a periodic payments order, the court shall amend the periodic payments order concerned by making such adjustments to the order as it considers appropriate. Where a periodic payments order is amended the court shall cause a copy of the order as amended to be sent to the plaintiff and the paying party.
Security for PPO
A court may only make a PPO where it is satisfied that the continuity of payments under the PPO are reasonably secure. In considering whether continuity of the payments under a periodic payments order is reasonably secure, a court shall have regard to the following matters:
- whether the payments under the order are guaranteed under the Clinical Indemnity Scheme or the General Indemnity Scheme;
- whether the payments under the order are eligible for payment from the Insurance Compensation Fund, or) by the Motor Insurers’ Bureau of Ireland;
- whether continuity of the payments under the order can be guaranteed by another means
Where the defendant is not covered under the above provisions and the defendant puts forward a PPO which is guaranteed by some other means. the court must have regard to whether the means of guaranteeing the payments in a PPO will last for the lifetime of the plaintiff and can be indexed .
Alteration & Indexation
A paying party must make application to the court where it proposes to alter the method of payment of a PPO. Such application shall be on notice to the plaintiff. The court may make an alteration to the method of payment as proposed by a paying party if the plaintiff consents to the alteration and where the court is satisfied that continuity of payments is secure and the altered method of payment is capable of indexation.
There may be and adjustment on an annual basis of a payment under a PPO in line with the prevailing rate under the Harmonised Index of Consumer Prices. The state is to review of the application of the index after a 5-year period to determine the HICP’s suitability for use in PPOs. Where, following the review, an alternative index is considered to be more suitable for the purposes of PPOs, the Minister may, by regulation specify an alternative index for use in determining the adjustments of a PPO.
Assignment Commutation or Charging of a PPO
A plaintiff may apply to the court for approval to assign, commute or charge the right to a PPO. The PPO may not be assigned, commuted or charged without the approval of the court. Any assignment, commutation or charging done without the approval of the court shall be void.
In considering whether or not to approve a proposed assignment, commutation or charge of a plaintiff’s right to receive payments under a periodic payments order, a court shall have regard to—
- whether the capitalised value of the assignment, commutation or charge represents value for money,
- whether the assignment, commutation or charge is in the plaintiff’s best interests, and
- how the plaintiff will be financially supported following the assignment, commutation or charge, as the case may be
Insurer Insolvency
Where an insurance company goes into liquidation the total amount that may be paid out of the Fund in respect of any sum due to a person under a policy shall not exceed (whether as one payment or as the total of a series of payments) 65 per cent of that sum, or €825,000, whichever is the less. The limits do not apply where the court has made a Periodic Payments Order
A claimant’s periodic payment award are protected in the event of the claimant’s bankruptcy so that a claimant will continue to have the possibility of receiving the resources needed to cover necessary long-term care and medical attention and that such resources would not be available for distribution to creditors by the Official Assignee.
A bankrupt is entitled to retain as excepted articles—
- any assistive technology or other aids and appliances associated with the medical treatment and care of the bankrupt, his or her spouse or civil partner, his or her children and any dependent relative residing with him or her, and
- such articles of clothing, household furniture, bedding, tools or equipment of the bankrupt’s trade or occupation or other like necessaries for the bankrupt, his or her spouse or civil partner, his or her children and any dependent relatives residing with him or her, as the bankrupt may select.
- The total value of articles selected by a bankrupt shall not exceed €6,000 or such further amount as the Court may, on an application by the bankrupt, allow.”,
Income Tax
There is an exemption from income tax in respect of payments made to persons under a periodic payments order. The exemption shall apply to PPOs made in this jurisdiction and to similar orders made in other jurisdictions. In this way, PPOs will have the same tax exempt status as exists for payments for damages under a lump sum arrangement.
Mandatory Offer to Settle
All parties in a personal injuries action shall make a formal offer of settlement prior to the commencement of a trial in the action and that the offer must be lodged in court. On the conclusion of the case, the court may, in making a decision on costs, have regard to the terms of the formal offers and the reasonableness of the conduct of the parties in making the offer.
In a catastrophic injury case involving a PPO, any offer made in a bid to settle the case must include the amount of the offer attributable to future pecuniary loss and the relevant portions of that amount attributable to medical care, treatment, etc.
Where a formal offer is made in respect of a personal injuries action relating to a catastrophic injury, the formal offer shall specify the proportion of the amount of the formal offer that is attributable 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, and
- future loss of earnings of the plaintiff.
Effect of Offer
Where a court has made a periodic payments order in a personal injuries action, the court shall, when considering the making of an order as to the payment of the costs in the personal injuries action, have regard to—
- the terms of any formal offer, other than mattersthose terms which relate to the above mentions (future care etc.) matters.
- the reasonableness of the conduct of the parties to the personal injuries action concerned in making any formal offers.
In determining liability for the part of the costs of the personal injuries action relating to the above matters, the court shall have regard to
- any offers not expressed to be without prejudice or in terms having like effect, and
- any offers made without prejudice save as to the issue of costs which were made by or on behalf of a party to the personal injuries action after the commencement of the trial of the action, to effect a settlement of that action.