Periodic Payment Orders could cover the needs of those who have suffered catastrophic injuries but they need to take into account the wages of carers, writes Marian Fogarty
A Periodic Payment Order (PPO) provides financial security to a Claimant and is designed to meet the care and therapy needs of a catastrophically injured plaintiff over the course of their lifetime. It is a full and final settlement similar to a lump sum, the only difference being the PPO is paid out periodically. The PPO legislation is set out in Section 2 of the Civil Liability (Amendment) Act 2017 and was commenced on October 1, 2018.
A lump sum payment was the only option open to a catastrophically injured plaintiff when one wanted a full and final settlement prior to the introduction of the PPO legislation. The plaintiff’s life expectancy is relied on by a plaintiff’s legal team/experts when calculating care and therapy costs for the remainder of the plaintiff’s life. If the plaintiff lives longer than the agreed life expectancy, the plaintiff could run out of funds in later life. They cannot return to court in such circumstances. The idea of the PPO is to buy off this risk as the periodic payments will continue to be paid out for as long as the plaintiff lives. Therefore, in theory PPOs are supposed to afford the catastrophically injured plaintiff more certainty and less risk.
The PPO act provides that a court may order a PPO when it is considered to be in the best interests of the Plaintiff, given the nature of the injuries and the form of award that would best meet their needs.
The law in this country arising from the case of Gill Russell v HSE, is that a plaintiff is entitled to be compensated in full for the injury they sustained. If a Plaintiff accepts a PPO, they will be under-compensated contrary to the Russell decision. This is due to the legislature’s choice of indexation in the PPO legislation. The government recognised correctly that the periodic payments (which could extend to 50 years or more) would need to take account of inflation. The PPO legislation provides that the annual amount to be paid to a plaintiff is to be adjusted in accordance with the Harmonised Index of Consumer Prices (HICP).
The choice of HICP is flawed. HICP is a measure of price inflation comprising of goods and services including food, alcohol, clothing and footwear.
The items that comprise of HICP are almost entirely unrelated to components of the annual payment in these cases.
Whilst undoubtedly some monies would be spent on food, alcohol and footwear, nonetheless, the vast majority of a plaintiff’s expenditure will be on the wages paid to their carers.
An appropriate index for PPOs ought to be a wage-based index as carer wages form the major aspect of a catastrophically injured plaintiff’s claim. The net effect of HICP is that it will result in a diminution of the value of the plaintiff’s ability to pay for care.
This is because wages generally rise faster than HICP/price inflation by about 1.5% per annum. When compounded, the PPO could meet less than half of the projected expenditure after say 50 years. Therefore, there is a real and significant problem that will become manifest in later life for catastrophically injured claimants with a relatively ordinary life expectancy.
Under the PPO legislation, the minister can amend the indexation following a review.
The first such review will be, at the earliest, in 2023.
There is no obligation on the minister to review it at that time. This seems to be on a five-year ‘trial and error’ basis. The trial is at the expense of the most vulnerable in the community.
There is no provision in the legislation to make up any loss that will undoubtedly be suffered by the plaintiff by the use of an inappropriate index. If the minister improves the indexation provision at 5-year intervals, that will not apply retrospectively. Therefore, it will not assist catastrophically injured claimants who settle their cases by way of PPO in the interim.
It is hard to understand how the legislature did not introduce an appropriate index into the long-awaited PPO legislation given it had the benefit of the knowledge of what occurred in the UK over 10 years ago regarding the exact same issue and also expert reports recommending wage inflation be factored into the index.
In the UK when PPOs were introduced initially, the payments were linked to retail price inflation. However, in the case of Thompstone v Tameside, the English Court of Appeal accepted that the appropriate index to calculate the annual increase of periodical payments for care is Ashe 6115 (relates to carers’ wages) and not the retail price index.
In Ireland there were several expert reports commissioned prior to the introduction of the PPO legislation. The 2010 Working Group on Periodic Payments Report at page 8, recommended a wage-based index.
The report was also clear that data could be collected by the CSO to provide for such an index. This has not occurred in the PPO legislation.
Next was a report commissioned by the State from Towers Watson in March 2014. On page 43 paragraph 5.4.3 the report acknowledged the problems with HICP and recommended that there should be HICP plus a fixed percentage to take account of the differential that would exist between the PPO payments over the lifetime of the claimant and the actual cost of expenditure incurred by the plaintiff. Unfortunately, this did not occur either in the legislation.
Finally, there was a Working Group established in 2015 which did not include a Patient/Plaintiff representative. It ultimately recommended indexation tied to HICP.
The basis for the recommendation appears to have been the requirement for certainty for budgetary purposes of the State/insurers rather than having any regard to the catastrophically injured Plaintiff.
The result is that catastrophically injured persons will, in the later years of their lives, not be able to pay Carers to undertake such mundane tasks as getting them up in the morning.
This is why, notwithstanding the long-awaited introduction of Periodic Payment Orders, they will not be availed of, unless and until the indexation problems are rectified.
This view was endorsed most recently by the High Court where Ms. Justice Murphy in the case of Jack Hegarty described the PPO legislation as being a ‘dead letter.’
Marian Fogarty is an Associate Solicitor in Cantillons Solicitors and has represented a number of catastrophically injured plaintiffs most recently Jack Hegarty and Connor Corroon.