The Recoverable Benefits and Assistance Scheme, will come into effect on the 1 August 2014 and is intended to give effect to Sections 13 and 14 of the Social Welfare and Pensions Act 2013. These sections will introduce a new process whereby certain categories of social welfare payments will become deductible from the Loss of Earnings element of a Plaintiff’s claim for Special Damages.
The categories of deductible Social Welfare payments are:
- illness benefit
- disability allowance
- partial capacity benefit
- injury benefit
- incapacity supplement
- invalidity pension
- increases in disablement benefit.
The new legislation puts the onus on Insurers to directly reimburse the deductive Social Welfare payments to the Department of Social Protection, regardless of any liability issues. The refund payable will be to a maximum of five years social welfare benefits or the total payments up to the date of compensation, whichever is the smaller amount.
The new legislation will impact Insurers by placing the obligation on them to make the social welfare repayments directly to the Department of Social Protection rather than to the Plaintiff. The Scheme sets out to remove the option of the parties resolving the claim on a reduced value basis, thereby allowing the Plaintiff to consider how and at what level to reimburse the Department of Social Protection.
The Act places a legal duty on Insurers in cases to which the Scheme will apply (once a case is identified as suitable for settlement or one which is advancing to hearing) to establish the extent of the social welfare benefits received by the Plaintiff, by making a request to the Department of Social Protection for a Recoverable Benefits Statement, the “Statement”. In accordance with the rules the Department will, within four weeks of receipt, issue the Statement simultaneously to the Insurer and to the Plaintiff. This Statement is valid for three months. If the case is finalised within this time period, the legislation requires that the amount specified in the Certificate must be discharged by the Insurer to the Department of Social Protection, prior to the payment of any compensation to the Plaintiff.
An article by Colette Reid for the Law Society of Ireland Legal E-zine1 helpfully provides the following guidelines regarding scenarios whereby caution will be required in the application of the Recoverable Benefits and Assistance Scheme:
- Settlements on short notice. While it is possible to seek expedition, the Act envisages a four week period from the request of the statement of the recoverable benefits to the delivery of the Statement.
- Where there is apportionment of liability (e.g. contributory negligence). The Scheme does not allow for ro rata reduction in the recoverable benefits payable to the State except on foot of a specifically obtained Court Order confirming apportionment of liability.
- Where no loss of earnings have been pleaded by the Plaintiff, but may be relevant.
- Where there are uninsured Co-Defendants.
1“State recovery of benefits in PI claims“ Colette Reid Issue 54: July 2014
We would suggest to Insurers and handlers that over the course of the next two to three months the first 10-20 cases in each court jurisdiction, should be collated for review in respect of:
- the likely impact, if any, on the costs of a case, in comparison to the projected costs prior to the introduction of the Recoverable Benefits and Assistance Scheme
- the actual working timeline in terms of implementing the procedures, as required by the new legislation any changes, if applicable, to the Reserve which on review are related to the change in legislation.
- Between 1 August and 14 September 2014, Eversheds’ Insurance Defence Team will flag the cases that are identified as being potentially capable of being settled/ listed between end September and end December 2014.
- We will be happy to collate our own data and share with you any learnings, and to work with you on proposals and strategies going forward in light of the new legislation.
Please click the links below to view the documents: