In May, DSS commissioners gave decisions on four test appeals against Compensation Recovery Unit (CRU) certificates and the insurers were successful in all cases.

The 1997 Social Security (Recovery of Benefits) Act makes insurers liable to repay to the DSS benefits "paid in respect of the accident, injury or disease" for which damages were paid.

The DSS claimed that a benefit was so paid if they had awarded it and had attributed the condition giving rise to entitlement to the relevant accident. Subsequent medical evidence suggesting the claimant was more capable than the DSS had appreciated, or the effects of the accident were more short-lived than the period over which benefits were paid, was irrelevant.

A benefit can only be considered as paid in respect of the accident if it ought to have been paid and, simply because a claimant was entitled to the benefit, it did not follow that the payment of the benefit should necessarily be attributed to the accident in question.

The DSS appeared to accept that the insurer is only liable to repay benefits paid while the accident is an effective cause of the incapacity. Insurers should certainly argue that this is the case on any subsequent appeal.

Comments made by the commissioners suggest that, when someone applies for Incapacity Benefit, payments made prior to consideration of their medical questionnaire may be repayable, whatever the true level of function. The position remains unclear.

The 1997 act has increased benefits recovered by more than £75m per year. A significant proportion must be benefits that should not have been recovered from the insurers. The Secretary of State has until August 15 to decide whether or not to appeal to the Court of Appeal.

CRU certificates will continue to include benefits which the claimant was entitled to receive, but which insurers should not be liable to repay.

It is likely that the battle will now shift to interpretation of medical evidence obtained and the precise settlement terms.

  • Gregor Woods is with DLA, Sheffield.