Periodical payment orders (PPOs) have been available as a litigation tool for over 20 years for high value personal injury (PI) claims. When they first appeared, they were discussed in terms of being revolutionary to PI damages.
Whilst the use of PPOs has perhaps taken a different course to the one envisaged at that time, there remain benefits to be enjoyed by insurers, provided that suitable checks and balances are in place.
The following contains the salient discussion points that arose in our recent catastrophic claims workshop.
There are a number of issues to be considered in respect of PPOs. These include:
- Payment date - preferable to have the same date each year. A payment date in January each year would be prudent, which is four to six weeks after the Office of National Statistics (ONS) publishes its annual earnings to ensure tie in with indexation.
- Timing of first escalation - a defendant should always argue the first escalation should take place the year after settlement.
- Standard percentile - a percentile of ASHE 6115 should be adopted to calculate the annual increase of a periodical payment.
- Pro-rata payment - during negotiations, or within the terms of any Part 36 offer, it should be made clear to a claimant that the pro-rata periodical payment is included in the retained lump sum.
- Stepped payments - consider accommodating to reflect increase or decrease in periodical payment during claimant’s lifetime.
- Unclaimed PPOs - consider specifying sanctions to avoid being left with uncertainty around large reserve.
Proof of life and medical examination
- Wallace v Follett (07.03.13) considered two important issues - future medical examinations and proof of life.
- Court decided Defendant could request examination facilities at any time for annuity quotation but not more than every seven years for checking reserve. Defendant to pay all associated costs and Claimant could apply to Court if reasonable concern as to nature or extent of any such examination. Court suggested acceptable wording:
"The Defence Insurer shall be entitled to require the Claimant to undergo medical examination at its request upon reasonable notice being given to the Claimant at any time during the Claimant’s life time, such medical examinations to be limited to obtaining a medical opinion as to the Claimant’s general health in order to obtain a quotation for the purchase cost of an annuity to fund the periodical payments and/or (not more frequently than once every seven years) for the express purposes of reviewing its reserve. The cost of any such examination, to include any reasonable costs and any loss of earnings incurred by the Claimant in attending the examination, shall be paid by the Defence Insurer. The Claimant shall have permission to apply to the court in the event of reasonable concern as to the nature or extent of any such examination."
- Court also suggested acceptable proof of life wording:
“Following a request by the Defence Insurer in writing on or before 1 November each year, the Claimant shall obtain and provide to the Defence Insurer by 1 December each year, commencing 1 December 2012, written confirmation from his GP or other medical adviser dated not before 1 November of the same year confirming that the GP or medical adviser has seen the Claimant on or after that date and that the Claimant is still alive, in default of which the obligation of the Defence Insurer to make instalment payments to the Claimant shall be suspended until 7 days after the written confirmation (dated not more than one month before the date of its submission) is provided to the Defence Insurer.”
- In non-NHS LA cases without a model order, standard clauses regarding suspension of payments for inadequate proof of life are now difficult for claimants to argue against. Courts may even be amenable to arguments for automating consequences of orders and not taking up future court resources, especially if risk of lay/no Deputy in future.
- Defendants should also consider specifying the type of identification required - usually from the GP or professional Deputy.
Variation of periodical payments
- Court may make a variable PPO as well as an award of provisional damages.
- Variation can take place if the claimant develops in the future some serious disease or suffers some serious deterioration and enjoys some significant improvement in his mental or physical condition.
Any variation requires consent of parties and the variable order must contain:
- Damages assessed on the assumption the disease, deterioration or improvement will not occur.
- Specification of disease or type of deterioration or improvement and can include more than one disease.
- Period within which an application for the order to be varied may be made. If more than one disease, time period for each disease needs to be set out.
- A party can only have one "shot" at the application to vary a variable order in respect of each disease, type of deterioration or improvement.
- A party can apply to extend the time period for any application and can do it numerous times. Any application to extend time for the variable order to be varied must be made before the specified time period has expired.
- Variation of periodical payments can be used tactically to reduce annual periodical payments if there is an improvement in claimant’s condition or to assess a claimant's damages on the basis there is no deterioration in a claimant’s condition.
- In 2010, the ONS split ASHE 6115 into ASHE 6145 and ASHE 6146 to distinguish carers in a residential based environment from those providing home based care. The new classification caused difficulty in terms of its statistical reliability.
- In November 2012, the ONS published the ASHE data with a change in methodology. The Survey in 2011 was based on the old Standard Occupational Code (2000) and the 2012 Survey was based on the new Standard Occupational Code (2010).
- Kennedys were instructed to identify a "solution", approved by Mrs Justice Swift in RH v United Hospitals Bristol NHS Foundation Trust (01.03.13). The NHS LA has applied the "solution" to over 640 cases and to date no claimant has objected. This is the experience of other compensators.
Tactics and recent experience
- Cases are seen where the claimant uses a request for a PPO to force up the level of a lump sum - believing that the insurer would be "scared" into paying a higher lump sum (to avoid a PPO).
- The care element of a claim typically defines the suitability for a PPO. Where care is not the main head of loss, a PPO may not be suitable and on negotiation the claimant will tend to back down from his request for a PPO.
- It is important to maintain willingness towards a PPO and decide on individual case basis.
- Most claimant solicitors seem content to accept that defendant insurers are covered by the Financial Services Compensation Scheme. However, certain firms have been taken a 'difficult' stance in requests to prove 'reasonably secure'. This may be a costs building exercise and can disrupt settlement negotiations.