On 27 May 2015 Minister for Justice and Equality, Frances Fitzgerald TD, published the long awaited general scheme of the Civil Liability (Amendment) Bill 2015 which provides a statutory basis for the award of Periodic Payment Orders, instead of a lump sum, to catastrophically injured plaintiffs. 

The risks inherent in the ‘lump sum’ approach, which were identified in the High Court's Working Group on Medical Negligence and Periodic Payments (2011), have long been the subject of judicial frustration.  It poses risks to Plaintiffs with regard to:

  • ‘investment risk’, where the lump sum does not maintain its capital value;
  • 'mortality risk’, where the Plaintiff outlives his expected life expectancy; and
  • ‘inflation risk’, where inflation runs higher than was predicted at the time of the award. It also presents a risk to Defendants, for example in cases where a Plaintiff dies earlier than predicted, there is no recourse to recover the ‘unspent’ remainder of the lump sum. 

The recently published Periodic Payment Orders ("PPOs") Bill makes a number of key proposals to address these shortcomings and to ensure financial security for those who require long term care.

Key Proposals

  • While PPOs will apply to public and private defendants, the court must be satisfied that continued payment is ‘reasonably secure’ (see below).
  • PPOs will only apply to catastrophic injuries, defined as “a severe injury, involving serious impairment, the direct and proximate cause of which requires the plaintiff to receive life-long, permanent care and assistance”. The definition is not based on a specific financial threshold or on the size of the award.
  • The decision whether to make a PPO will be at the court's discretion, having considered both the plaintiff’s and defendant’s preferences, as well as the needs of the plaintiff.
  • A PPO can still be made with the consent of the parties, but will be subject to approval by the court. 
  • In deciding whether or not to make a PPO, a ‘best interests’ test will apply.
  • The PPO will encompass the costs of the plaintiff’s future medical treatment, care, assistive technology, aids and appliances.  It will not include future loss of earnings unless the parties consent.
  • The PPO can be increased or decreased (a ‘stepped PPO’) at specified times to account for changes in the plaintiff's circumstances, such as starting education, although the stepped PPO must be specific as to when the increased/decreased amount takes effect, and by how much.
  • To protect against inadequate future funding, the Bankruptcy Act 1988 will be amended to put a claimant’s award beyond the reach of creditors in the event of him/her becoming bankrupt later in life.
  • Payments will be indexed to the Irish Harmonised Index of Consumer Prices as published by the Central Statistics Office, which will be reviewed at 5 year intervals. 
  • The Personal Injuries Assessment Board Act 2003 will be amended to allow the Board to make awards in the form of periodic payments, subject to the provisions of the proposed legislation.
  • Under Section 17 of the Civil Liability and Courts Act 2004, a section 17 Formal Offer must now specify the portions of the offer which are attributable to future pecuniary loss and must be broken down into future medical treatment, future care, assistive technology or future loss of earnings.  The formal offer will not apply to the costs of the proceedings which are attributable to any head of loss the subject of the PPO.   However, when assessing costs attributable to these heads, the court will still be able to take into account any formal offers, or any other offers, made by the parties.  

Security of future periodic payments: the position of private insurers

The court can only make a PPO if it is satisfied that the continuity of payment is reasonably secure (Head 51J). The draft Bill recognises payments through the State Claims Agency as providing such security. However, the position of non-State and private defendants is less clear.

The Working Group had recognised that such defendants may face difficulties demonstrating such security and while it considered a number of mechanisms by which such security could be guaranteed it ultimately recommended one of two options:

  • The provision by the National Treasury Management Agency of annuities to private insurers and others.
  • The introduction of a statutory scheme whereby payments made under PPOs would be statutorily protected and fully guaranteed.

The draft Bill does not advance either of those schemes. Instead, it proposes what it refers to as the Department of Finance’s preferred mechanism for guaranteeing payments under a PPO, that the court be only permitted to make a PPO in respect of a non-State and private defendant if the PPO is eligible for payment from the Insurance Compensation Fund (ICF) or if the defendant can provide evidence it can guarantee security “by some other means”.

To facilitate the involvement of the ICF, Head 51L abolishes the current limits which apply to pay-outs from the ICF in respect of meeting liabilities from PPOs. Any defendant not covered by the ICF, however, will have to prove on a case-by-case basis that it can guarantee continuity of payment.  The “some other means” referred to above is not particularly well fleshed out in the draft Bill other than authorising the court to take account of whether the proposed mechanism is capable of making equal payments to the plaintiff over his/her lifetime and taking into account the likely effects of inflation over the plaintiff’s lifetime.

The proposals will now go to the Joint Oireachtas Committee on Justice, Defence and Equality for further scrutiny and to provide a further opportunity for the views of stakeholders to be heard. It will then go through the normal legislative process. Enactment is expected before the end of the year.  In a related development the Department is currently drawing up proposals on pre-action protocols in medical negligence cases, also due for enactment later this year.