As of the 1st of October 2018, the Courts have been able to order Periodic Payment Orders (PPOs) in catastrophic injury claims. The implementation of this legislation has been long awaited, particularly by a number of our clients. These clients have returned to the courts on multiple occasions settling for interim payments to cover a number of years while they waited for this legislation, in the hope that it would resolve the issue of uncertainty surrounding lump sum payments. While PPOs are now available, unfortunately for Plaintiffs, the issue of uncertainly remains.
Lump Sum Uncertainties
The issues surrounding lump sum orders mainly concern the uncertainty in predicting future care needs, prognosis and life expectancy. One’s life expectancy will inevitably have a huge impact on the future needs of the Plaintiff as well as the costs of care, aids, appliances and equipment into the future. The main concern we hear from our clients regarding lump sum payments is the fear that the funds required to care for the Plaintiff will run out if the Plaintiff exceeds the life expectancy that has been predicted.
Lump Sums vs PPOs:
Lump sum payment:
- Difficulties/uncertainty around life expectancy prediction
- If Plaintiff outlives predicted life expectancy the funds will be depleted
- Inevitably, it will not be correct amount due to future uncertainties
- Security of payments for life
- HICP index leaves uncertainty as to whether amount awarded now will fully cover care needs into the future
- Likely to leave shortfall on care monies in the long term
PPO Legislation Index Issue
The PPO legislation has unfortunately failed to address clients concern that there should always be sufficient funds to cover the costs relevant to the Plaintiff’s needs for the entire duration of their life. The main reason for this uncertainty is as a result of the index which is applied to PPOs.
Prior to the enactment of the legislation, the Working Group on Medical Negligence and Periodic Payments highlighted the need to ensure that adequate and appropriate indexation of periodic payments be applied. The Working Group recommended the introduction of earnings and cost-related indices which would allow periodic payments to be index-linked to the level of earnings, of treatment and care personnel,and to changes in costs of medical and assistive aids and appliances. This would ensure that the Plaintiffs would be able to afford the cost of treatment and care into the future. Unfortunately,the indexation rate chosen to apply to PPOs is the annual rate of the Irish Harmonised Index of Consumer Prices (HICP) index, as published by the Central Statistics Office.
Therefore, while the legislation was welcomed to tackle the problems related to lump sum payments, the HICP index in particular, is still causing uncertainty for clients. This is especially true in circumstances where it does not measure the increases in the costs relating to care workers earnings or medical appliances, which generally form the major costs of PPOs. It appears that we have not learned from the UK, where the original use of the retail price index linked to PPOs was reviewed and now the ASHE 6115 index is used which collates carers earnings, by way of an annual survey.
What this means for Plaintiffs
The net effect is that catastrophically injured patients receiving awards subject to a PPO, under the current indexation scheme, will over time face a significant erosion in their ability to pay for vital care. At the end of, say, three decades, the Plaintiff may only be provided with funds to pay for approximately half to two thirds of the vital care needed and as assessed when the original PPO award was made.
It was hoped that with the implementation of the legislation, the future needs of catastrophically injured Plaintiffs would be effectively funded with security and certainty through PPOs. The reality, however, is that as a result of the HICP index, clients are now faced with the decision of whether to proceed with cases by way of a lump sum payment or availing of the PPO legislation. The decision is not as clear-cut as one would have hoped.
Both options are not without flaws and both leave the clients with uncertainty as regards ensuring the funds required will always be available. The life expectancy prediction issue remains a serious concern in deciding to choose a lump sum payment and on the other hand, the HICP index applied to the PPO legislation does appear to mean that there will be a shortfall on the amount of care monies provided over the longer term.
29 April 2019