Ireland: Periodic Payment Orders: A Clean Break From Lump Sum Awards?

Last Updated: 17 October 2018
Article by David Strahan, Jillian Conefrey and Sinead Reilly
Most Read Contributor in Ireland, October 2018

Since 1 October 2018, the courts have the power to award periodic payment orders instead of traditional lump sum payments in catastrophic injuries cases.

Until now, the courts could only award damages in the form of lump sum payments, though in recent years they often approved interim payment schemes in the context of personal injuries settlements.

It has long been recognised that lump sum payments, by their nature, may miss the mark of fair compensation and fail to take into account a claimant's future personal circumstances, future investment returns and inflation rates. The commencement of the relevant provisions of the Civil Liability (Amendment) Act 2017 means that claimants who have suffered catastrophic injuries may now receive damages, including the cost of future care, medical costs and in certain circumstances future loss of earnings, in the form of index-linked annual payments known as periodic payment orders or PPOs.

The introduction of PPOs is a welcome development for both claimants and defendants. From a claimant's perspective, risks such as inflation, longevity and poor investment returns are minimised. From a defendant perspective, in particular a defendant insurer, the risk of over-compensation is substantially reduced. Defendant insurers will, however, need to reserve for an unknown ultimate cost, and consider this when managing the investments which will back PPO liabilities.

KEY POINTS

1. Discretion of the Court

When deciding whether or not to make a PPO, the court must consider the claimant's best interests given the particular circumstances of the case, the form of award preferred by the claimant and defendant, and the reasons for that preference.

A PPO may also be made on the consent of both parties, subject to being approved by the court. In such instances, the court has discretion to accept or reject the PPO or make its own order.

2. Stepped PPO

The legislation provides for a "stepped PPO", which is effectively a stepped payment regime whereby payments are increased or decreased when certain identified milestones are reached. Milestones might include the claimant starting school or reaching the age of majority or anticipated changes in care needs.

The claimant must notify the court and the defendant if it transpires that a stepped payment is not required at a particular point in time or that a stepped payment should be deferred for a further period.

3. Security of Payments

A court may not make a PPO unless it is satisfied the continuity of payment is "reasonably secure". A PPO is considered reasonably secure where:

  • the defendant is a state authority and the payments are protected under a scheme of indemnity administered by the State;
  • the court is satisfied that the PPO is eligible for payment from the Insurance Compensation Fund or the Motor Insurers' Bureau of Ireland; or
  • the continuity of payment can be guaranteed by some other means.

WHAT TO EXPECT

Though PPOs are new to the legislative framework, periodic payment plans have been a common feature in many settlements and negotiations since the legislation was proposed in 2015. Going forward, it is expected that not only will we see PPOs being awarded by the courts, we will also see an increase in PPOs forming part of negotiated settlements.

With this, we can expect lengthy negotiations between medical and financial experts, on both sides, about the future prognosis, future care, and foreseeable milestones of a claimant.

The maintenance of an ongoing financial relationship between the parties for the remainder of a claimant's life will also mean that there will be no "clean break", as can be achieved with lump sum payments, and a defendant or insurer will no longer be able to "close the book" on a claim.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

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