The introduction of Universal Credit is likely to have consequences for both claimants and insurers when considering offers of settlement.
The introduction of Universal Credit will result in the consolidation of payments of six individual weekly benefits into one single monthly payment.
The Department of Works and Pensions has started moving benefit recipients over to Universal Credit, with the roll out expected to be completed in 2022.
Universal Credit and the Compensation Recovery Unit
The Compensation Recovery Unit ("CRU") recovers social security benefits in certain compensation cases and NHS costs in certain injury cases. On receipt of a claim, the insurer of the defendant notifies the CRU of the claim. CRU then issues a Certificate of Recoverable Benefit.
Throughout the claim up to settlement, a claimant's Certificate of Recoverable Benefit ("CRB") sets out those benefits deemed to be recoverable against a particular head of the claimant's damages. The DWP website sets out those benefits which are recoverable against certain heads of loss.
Of the six benefits being subsumed into the Universal Credit (UC) payment, there are currently three benefits - which can be recovered by the CRU specifically against loss of earnings claims:
- Income Support
- Employment and Support Allowance ("ESA")
- Jobseeker's Allowance ("JSA")
The remaining three benefits to be integrated into Universal Credit are not recoverable against any head of loss:
- Housing Benefit
- Working Tax Credit
- Child Tax Credit
Under the current system, if a claimant was in receipt of both JSA and Housing Benefit for example, the JSA payment would be listed on the CRU certificate as recoverable (against a loss of earnings claim alone). If the claim was successful, the JSA payment would be repayable by the insurer client, by deducting that figure from the loss of earnings claim as appropriate. Where the amount of compensation in respect of the loss of earnings claim is less than the amount of JSA, it to be recovered, the insurer is also liable to pay the difference.
So far, so good.
However, under the new UC system, this single payment will be listed on the CRB. This figure will not indicate how any payments for those six benefits have been integrated into the single payment, presumably as those benefits are no longer deemed to exist.
Following enquiries with CRU regarding whether the UC payment can be broken down, the CRU have advised they have no access to a breakdown and the sum listed on the certificate is to be repaid in its entirety. This marks a departure from the existing system.
By way of example in a case where the claimant is currently in receipt of Universal Credit and had previously received payments of ESA. The results are interesting
- The Employment and Support Allowance payment totalled £57.90 a week.
- The payment was then changed to Universal Credit – as ESA is one of the six benefits to be brought into the remit of the single UC payment.
- This payment now totalled £600+ a month (around £150+ a week).
The position of the CRU is that this entire UC sum is recoverable against a loss of earnings claim, and will not (and cannot) be apportioned to reflect the previous recoverable benefit (ESA), despite this representing only around a third of the UC recovery being sought.
What does it mean in practice?
It must be stressed that this change will only affect those claims with a loss of earnings elements – due to the particular benefits being subsumed into UC.
However, in those instances, it is apparent that CRU recovery amounts could potentially increase significantly – the example above shows an increase of £100+ per week.
Part 36 offers in personal injury are made gross or net of any CRU liability. Depending on whether an offer is made gross or net of this liability, the rollout of UC could have some interesting effects on a claim with loss of earnings:
- Any offer made to a claimant expressed as gross of recoverable benefits (and then accepted) could result in reduced compensation amounts for the claimant – although we would expect claimant's solicitors to be alive to this point;
- It remains to be seen whether or not claimant firms will accept gross offers inclusive of Universal Credit recoverable benefits at the same level as before – or whether they will try to apply a 'premium' to acknowledge the change in the amount of recoverable benefits.
- There is an increased risk to insurers and legal representatives that any offers made net of UC repayments, will result in additional liability for the client – and possibly involve the undertaking of a CRU appeal on what is still an emerging issue.On a claim where there is a particularly large sum to be recovered for loss of earnings, this sum could be substantial.
Given that the position of the CRU is that they have no method of breaking the UC payments down, the onus potentially now lies with insurers and their legal representatives to access the claimant's benefit records for the purpose of a CRU appeal.
It is possible that the CRU will provide further formal guidance on this issue in the near future, and that apportionment of the Universal Credit payment will be possible.
In the absence of guidance and the possibility of apportionment, we may see some satellite litigation on this point once the complete rollout of UC occurs.
In the meantime, claims handlers at both insurers and their legal representatives will have to be mindful as to the precise terms of any Part 36 offers so as not to incur additional liabilities.