Reverse Indemnities – what have they got to do with the Court of Protection
What happened
In this case the financial Deputy for BJB applied to the Court of Protection to be released from a reverse indemnity made in their damages award. When BJB's damages award was made there was a concern that they shouldn't be getting state provision and money from the defendant for their care. Rather unusually the Court of Protection was nominated to be the body that decided whether or not the reverse indemnity should be released. The Court of Protection does get involved in these matters but usually in a different format (see Comment below).
Under the terms of the Order, BJB got a periodical payment each year. The Order required that payment be reduced by 98% of the sums that BJB had in state provision.
The issue was that BJB essentially seems to have done rather better physically and socially than expected but that caused financial issues. Essentially, the cost of caring for BJB and carrying on with the care to provide a "rich and varied social life" for her is £60,000 more than BJB's actual income.
BJB's funds were going to run out in 10 to 12 years. The Court didn't see any evidence that there had been mismanagement and felt that now was the appropriate time to bring the application. The parties were invited to agree the terms of an Order to reflect the findings.
Comment
It's quite unusual to see a reverse indemnity in this form and there were issues over what the Court of Protection's jurisdiction actually was in this case.
Far more commonly in cases where clients lack mental capacity is what is called a Peters Undertaking after the case of the same name. In that scenario, the Deputy agrees to apply to the Court of Protection to remove their ability to apply for state funding without the approval of the Court of Protection. Sometimes the defendant also requires that they be involved.
We do find that although there are many cases where there is enough money to pay for the care, some circumstances can mean there is not. These can be:
- Where the claim is very old and the amount awarded would simply not allow for the level of care required these days. In a lot of claims it was never anticipated that the claimant would live in their own home with care but rather that they would live in some form of supported living accommodation.
- Where the claimant is doing significantly more than was anticipated at the time of the claim and this fuller life involves more care being required.
- Where there is a large lump sum award but no periodic payment and life expectancy is very long. Sometimes the tax implications of this can mean that funds will run out prematurely.
- Where the claimant has recovered only part of their compensation although in this case it would be difficult to see how a full Peters Undertaking would be appropriate.
Janice Jefferies has recently applied to the Court of Protection to have a Peters Undertaking removed in a situation where it was clear funds were not going to last for the claimant's life.
In this client's circumstances, a claim had been made through the Criminal Injuries Compensation Authority (CICA), which settled for a significant pre-tariff lump sum in 2012.
In the period immediately following settlement, the client's care needs were met by agency provision. Faced with increasingly high costs and poor quality care, in 2016 the deputy made arrangements to commission support through a bespoke team employed by a case management company.
More recently the rising cost of care made it apparent that capital would be depleted well in advance of the claimant's life expectancy. The deputy was able to evidence the necessity for statutory finding, based on cash-flow modelling prepared by the Independent Financial Advisor. In the two years preceding the deputy's COP application, IFA reports had consistently indicated that the claimant's lump sum compensation was unlikely to last her lifetime, and with no change in expenditure capital would be depleted in 7-8 years.
Historical use of agency input meant the deputy was able to contextualise the requirement for statutory funding, demonstrating prudent financial management over the years, and that the existing model combined best value with the highest quality of care.
The application was not contested by CICA and the court being satisfied with the evidence presented by the deputy, was able to make the best interest declaration on the papers without the requirement of a hearing or further expert evidence.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
