The General Scheme of the Civil Liability (Amendment) Bill was published in March 2015. It allows a court to provide for index linked annual payments to persons who have suffered catastrophic injuries. The purpose of the legislation is to ensure that those needing long term care have the necessary financial resources to cover such care costs for the duration of their lives. The legislation is intended to be restricted to those who have suffered a catastrophic injury, namely a severe injury involving a serious impairment, the direct and proximate cause of which requires the plaintiff to receive life long, permanent care and assistance.
The Bill provides that a court, awarding damages for future monetary loss in respect of a catastrophic injury, may order that all or part of the damages be paid as periodic payments where it is in the best interests of the plaintiff and the most appropriate method for the future care and medical treatment of the plaintiff. It is anticipated that the Injuries Board will also be empowered to make awards in the form of periodic payments.
A court can provide that the amount awarded under a Periodic Payment Order ("PPO") can increase or decrease on specific dates where there will be expected changes to the plaintiff’s needs (eg, entering school, reaching the age of majority or moving into residential care). A PPO will be reviewed annually to cater for increases in costs to goods and services. The revision will be calculated by reference to the Irish Harmonised Index of Consumer Prices as published by the Central Statistics Office.
The use of a PPO instead of a lump sum award is intended to transfer risk from the plaintiff to the insurer eg, risks relating to inflation, investment and longevity. However, the plaintiff will bear the risk that the insurer could become insolvent. For this reason, the court must be satisfied that the continuity of the payment is reasonably secure, on the basis that the defendant is a State authority or the PPO is eligible for payment from the Insurance Compensation Fund (the "Fund"). The Insurance Act 1964 provides maximum amounts that can be paid from the Fund in the event of a liquidation of an insurance company. However, these limits will not apply to PPOs.
A plaintiff cannot commute, assign or charge the right to payment under a PPO without court approval. It will only be approved in special circumstances where it is in the plaintiff’s best interest.
It should be noted that plaintiff representatives have expressed concern about the Bill, in particular the proposal to link future payments to the Irish Harmonised Index of Consumer Prices. The Index measures inflation over a broad range of consumer goods and will not accurately reflect the greater increase in wage inflation for carers’ salaries or for medical services. It has been argued that this may result in plaintiffs not being able to meet the cost of care into the future and therefore, many plaintiffs will continue to seek lump-sum awards.
The attraction for plaintiffs to seek lump-sum awards is motivated in part by the recent High Court decision in Russell v HSE. This case indicated that awards for future special damages should only be discounted by 1% (previously 3%) to allow for the income that would be generated by a plaintiff who receives a lump-sum to cover future costs. In effect, a plaintiff may receive a multimillion euro award in 2015 in respect of payments that may not need to be made until decades into the future. The discount is intended to reflect the fact that the plaintiff gets a benefit, by being able to invest that sum of money until it is needed. Defence practitioners, and many actuaries and economists, argue that the discount should be significantly higher. This decision is currently under appeal and was heard by the Court of Appeal on 7 July 2015. Judgment was reserved and is expected before the end of the year.
The Minister for Justice has indicated her intention that the Bill be enacted before the end of 2015.