Courts can now order periodical payments in personal injury cases, but they also have the power to vary them. This is not fair on claimants or insurers, says Andrew Parker
Government proposals to enable courts to order periodical payment of personal injury damages for future loss are probably common knowledge by now. A surprising turn of speed from the Lord Chancellor's Department saw the provisions tucked into the Courts Bill at clauses 92 and 93 and debated in the House of Lords in December.
Very few would argue with the need for the courts to have and exercise this power. It will reduce at a stroke the increasingly artificial arguments about possible returns from investment, the need for investment advice and the measurement of life expectancy.
Those arguments mainly benefit lawyers and experts, rather than seriously injured claimants who deserve the fairest method of compensation available.
The drive for these reforms within government comes largely from the Treasury, which is keen to enable the NHS to unlock reserves held for very large lump sum awards, predominantly in birth injury cases.
No one would doubt the overall benefit and we can expect to see a move towards periodical payments becoming the norm rather than the exception. So far, so good.
There is one major catch. The draft clauses also give the courts power to vary such awards in the future. Initially, this power will be restricted to cases where the courts have specifically provided for the right to come back and only then following significant changes in medical condition. But with the power to determine the rules vested in the Lord Chancellor and operated via subordinate legislation, there is every prospect of significant widening of the review provisions in the future.
The opportunity for either party to return to court to review the award may seem like the fairest system of all. But it means re-opening old wounds, arguing about the cause of medical changes and monitoring the activity of claimants.
Do we want to spawn a satellite industry of spot checks on the seriously injured, on the off-chance of their condition improving?
Claimants whose cases have settled will hesitate to engage in rehabilitation programmes, for fear that their damages will then be cut. This risks undermining the very initiatives the insurance industry seeks to promote.
And with the looming shadow of reviewability, there appears to have been little thought given to its regulatory consequences. General insurers who handle such claims will be unable to close off reserves and will have to make provision against possible liabilities many years ahead. Provisional damages already give insurers this headache, but only in isolated cases and only if the claimant requests them.
The courts are likely to grasp this new power with significantly more enthusiasm, as envisaged in the recent report of the Structured Settlements Working Party, prompted by the senior judiciary.
There is still a chance to influence government thinking on reviewability, more realistically to restrict as much as possible the operation of any power to review.
Every insurer handling future loss claims needs to consider how best to shape this and to support the
ABI, IUA and Lloyd's in their efforts. With all the other current pressures, this is a regulatory minefield that general insurers do not need.
Andrew Parker is a litigation partner at law firm Beachcroft Wansbroughs and head of its strategic litigation unit