In March 2014, I co-authored an article with the financial expert, Richard Cropper, on the case of Barbara Oliva.
I assisted Jenny Kennedy on Barbara’s case. Whilst Barbara’s story is sad and tragic, it is a case that will stay with me throughout my career for many positive reasons, such as the bravery exhibited by Barbara and her family throughout her long and arduous recovery but also the unique legal and financial issues which had to be overcome to ensure that she was properly compensated.
The article focussed on the financial elements of Barbara’s settlement and in particular the periodical payments agreed with the Defendant. As part of Barbara’s legal team, I spent a considerable amount of time investigating whether it would be possible and/or beneficial for a UK insurer to pay periodical payments to a foreign jurisdiction. A year on from the publication of the article, I have revisited the case and the periodical payments to see what position Barbara is in now.
Barbara was involved in a road traffic accident on 16th June 2008 in London when she was riding as a pillion passenger on her husband’s motorcycle. She suffered a severe traumatic brain injury. Barbara was a Brazilian national had only just turned 21 years old at the time of the accident. She was travelling across Europe with her husband.
Barbara suffered life changing injuries. Her brain injury left her in a state of minimal awareness and required 24 hour care. Her mother travelled from Brazil and remained by her bedside in a London hospital. Barbara’s treatment stalled on the NHS. She required a craniotomy which was continually delayed without reason.
Barbara’s mother wanted her to return to Brazil to undergo the surgery and to continue her long term rehabilitation in the family home. Jenny Kennedy a partner at Anthony Gold was instructed by Barbara’s mother. Jenny made sure Barbara was able to return home. She travelled to Brazil on various occasions. She identified a suitable hospitals to care for Barbara, met with architects to discuss a project to adapt the family home, and she interviewed nursing agencies about suitable care packages. By December 2011, Barbara was back in her adapted home living with her family with a 24 hour care package in place. She had made great progress. She could feed herself, take a couple of steps and recognise family members. She was thriving in her family home.
Once Barbara was back at home with a secure care package, the focus turned to dealing with a number of legal difficulties which needed to be overcome.
Life expectancy was an issue between the parties. Legal experts instructed for each party differed in their views on Barbara’s life expectancy. The experts instructed for Barbara believed she would live another 50 years whilst the Defendant’s experts believed she would only live for another 20 to 25 years.
Our concern was to make sure that Barbara was provided for the rest of her life. She would need 24 hour care for the rest of her life and the cost of her future care package was R$325,000 per annum. When there is such a massive disparity of opinion on life expectancy, a lump sum settlement is generally unattractive as Barbara would not have sufficient funds if she lived for longer than expected. We also had additional issue to consider that any lump sum would be paid to a claimant living in a different country. We obtained expert evidence from a global risk analyst, Piers Lowson, which confirmed that Brazilian inflation was significantly higher compared with UK at the time of settlement and had been for many years beforehand. Applying the conventional 2.5% annual discount rate to any lump sum would likely leave Barbara in a perilous position in the future given Brazil’s history of default on debt, and uncertain financial future given it was due to host the world cup and Olympics in the immediate future.
Periodical payments seemed to be the obvious method of overcoming such concerns. However we had to answer the question of what measure should be used to uprate the periodical payments as ASHE 6115 would not be suitable. We instructed Dr Victoria Wass to investigate whether there was a suitable measure in Brazil which could be used. She managed to identify a price and earning-based candidate measure the IPCA health and personal care group (IBGE IPCA 62) was suitable. This confirmed that the costs medical treatment and care in Brazil had increased at an average range of 6% per annum since 1999.
The parties accepted the use of IGBE IPCA 62 in terms of calculating the ongoing payments. Richard Cropper was instrumental in drafting a guide to the workings of the annual payments.
The IGBE IPCA 62 is updated every December. Therefore it was agreed with the Defendant that the periodical payments would be recalculated every January.
The case settled in June 2013 and this has meant that the payments have been recalculated in January 2014 and January 2015.
I have calculated the increase using the guide prepared. It confirms that the cost of medical care had raised by 4.49% from June 2013 to December 2013, meaning that the periodical payment had increased from R$325,000 to R$339,592.50 in six months.
From December 2013 to December 2014 the cost of medical care had raised by another 8.95% increasing the cost of Barbara’s care package to R$369,986.03. In 18 months the cost of Barbara’s care package has increased by R$44,986.03. Whilst I do not have formal confirmation my understanding is that it was finally confirmed that the periodical payments are exempt from income tax.
The increase is quite staggering and is vindication of the lengths we went to ensure that Barbara received periodical payments based on an appropriate measure. Reports from Brazil confirm that Barbara continues to do well and has made progress with walking.