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Periodic Payment Orders in Catastrophic Injury Cases
The Civil Liability (Amendment) Act 2017 was passed in November 2017. The act addresses issues raised by the Working Group on Medical Negligence and Periodic Payments, particularly the deficiencies underlined in the lump sum system. Importantly, and after significant delays, the act provided for the Irish courts to award periodic payment orders (PPOs) in cases where a plaintiff has suffered catastrophic injuries. However, the relevant parts of the act required commencement by ministerial order before this new power could be invoked by the courts. After a further delay of nearly a year, this order was ultimately signed by the minister for justice and equality in October 2018, marking the formal introduction of the long-awaited PPOs in Ireland.
When is a PPO appropriate?
The act provides that a judge may order a defendant to pay damages towards future medical care and treatment of the plaintiff in the form of periodic payments. Periodic payments will be ordered only where it is considered to be in the best interests of the plaintiff, given the nature of their injuries and the form of award that would best meet their needs. Periodic payments may also be ordered for damages relating to future loss of earnings where the parties consent.
Content of a PPO
A PPO will:
- contain the amount of the award (and whether this includes future loss of earnings);
- specify the frequency and method of payments;
- specify that payments are to be made to the plaintiff during the course of their life; and
- contain a provision that the annual amount awarded will be adjusted in accordance with the Harmonised Index of Consumer Prices (HICP).
Notably, a PPO may contain a provision specifying that the payment will, from a specific date, increase or decrease by a specified amount. This is known as a 'stepped payment'. Stepped payments will be included where it is anticipated that there will be changes in the plaintiff's circumstances during their life which are likely to affect their needs, such as reaching 18 years of age or moving into residential care.
Where a stepped payment is provided for, the PPO must also include:
- the change in circumstance causing the increase or decrease; and
- the date and amount of the increase or decrease at current value.
The order will also note that the increase or decrease will be applied to the amount awarded as adjusted by the HICP.
What impact will the act have?
For insurers, the act should be a welcome development as it will avoid upfront payment of compensation in catastrophic injury cases. It will also align the Irish regime of awards in case of catastrophic injury with the UK system, where PPOs are already available. On the other hand, PPOs can create uncertainty for insurers in terms of reserves and capital requirements, as lump sum payments are conclusive and have the benefit of finality and certainty. For those reasons, it will be interesting to watch the uptake of PPOs in the coming years by insurers, state indemnifiers, plaintiffs and indeed judges.
The first PPO order was approved by the High Court in February 2019.
This article was first published in the International Law Office Insurance newsletter on 23 April 2019.