A Rosier Future For Periodical Payment Orders?

Periodical payments (formerly structured settlements) have been around now for several years as a method of compensating a seriously injured claimant for future expenses. The take-up for this form of compensation had been somewhat lower than had been anticipated. One of the main reasons for the low take-up (particularly in large cases with long life expectancies) was that the Index to which the periodical payments were linked was producing a guaranteed under-compensation.

By far and away the majority of the future expenses related to the provision of care. The cost of providing care is most significantly affected by the carer’s wages. Courts had, until two recent cases, felt constrained to link increases in the annual periodical payments to the Retail Prices Index. The Retail Prices Index has historically grown at a considerably slower rate than the rise in average earnings.

The first of the two cases to be heard was that of A v B Hospitals NHS Trust. In that case, the Defendant objected to settlement of the case on a lump sum basis, arguing that a periodical payment order linked to RPI was the more appropriate order. Having heard expert financial evidence, the Court accepted that linking the periodical payments to the RPI would not meet future care costs. On the other hand, the Judge concluded that there was, in fact, a very good prospect of meeting future care costs from a lump sum award and hence concluded that that was the appropriate basis to settle the claim.

In the subsequent case of Thompstone v Thameside and Glossop Acute Services NHS Trust, the claimant went further and argued that whilst RPI-linked periodical payments would not meet the claimants’ long-term care needs, periodical payments linked to another Index (more closely linked to average earnings) would. Three possible Indices were identified namely, (1) the Average Earnings Index; (2) ASHE Median and (3) ASHE 6115, which measures changes in the levels of average earnings of a particular occupational group, which included carers. In the Thompstone case, the Judge held that the periodical payments should be linked to ASHE 6115. The Judge did say that the Thompstone decision was based on the particular facts relating to future care costs and the expert evidence produced in this case. Whilst, therefore, it cannot be said that this decision will impact on every case involving future periodical payment orders, nonetheless there has been a clear change of judicial direction.

This would appear to create a much more favourable background against which to consider PPOs for seriously injured claimants with expectation of long-term future care needs.

Published 26/04/2007.