The true impact of the Social Security 1997 Act is only now becoming apparent. Greg Woods from law firm DLA asks if benefit recoupment is daylight robbery

Insurers have historically been required to repay so-called “recoupable benefits” that are paid by the DSS to a claimant as a consequence of injury or disease. Benefits are recoupable when a compensator is, or is alleged to be, liable to any extent for the accident, injury or disease, and when a compensation payment is made.

Prior to the Social Security (Recovery of Benefits) Act 1997, those benefits were offset from the claimant's total damages. But, even if this reduced the compensation to nil, there was no requirement to repay any sum greater than the damages.

The Act came into force on October 6 1997, and significantly altered the potential liability of insurers to repay DSS benefits.

The true impact of the Act has not, however, been fully appreciated until recently owing to the significant delay in the processing of appeals. The results of recent appeals should be of great concern to insurers and their advisers.

Current law

The Act significantly increases the insurance industry's liability. It requires that no person shall make a compensation payment (other than an exempt payment) without first applying to the DSS Compensation Recovery Unit (CRU) for a certificate of recoverable benefits.

The compensator will be liable to pay DSS an amount equal to the total amount of the recoverable benefits. The Act also prevents the insurer from offsetting recoupable benefits against general damages and future loss. Where the sum paid in respect of loss of earnings is less than the benefits received by the claimant, therefore, the insurer is often faced with a significant additional payment.

Review and appeal

The Social Security Act has increased the grounds for review and appeal against a CRU certificate. The compensator, or their solicitors, can now ask the DSS to review a CRU certificate at any time during the course of a claim, on one of the following grounds:

  • There has been a mistake in the preparation of the certificate.
  • The amount on the certificate is more than the amount due to the Secretary of State.
  • Incorrect or insufficient information was provided by the person applying for the certificate.

    The review is undertaken by a dedicated section at the Benefits Agency, and a response can usually be received within a few weeks.

    Once the claim has been settled and the benefits paid, the compensator is entitled to appeal against the certificate on the following grounds:

  • Any amount, rate or period specified in the certificate is incorrect.
  • The certificate specifies benefits that were not paid as a result of the accident, injury or disease in respect of which compensation was paid.
  • Benefits listed which have not and are not likely to be paid to the claimant have been brought into account.
  • The compensation payment made was not as a consequence of the accident, injury or disease.

    The period to appeal has been reduced to one month from three, since November 29 1999. Those who have missed the deadline can apply for their appeal to be heard late, but the grounds on which the appeal will be heard are extremely limited.

    So, where benefits have been paid beyond the period of relevant symptoms, as identified by the parties' medical experts, will an appeal against recovery of such “additional” benefits succeed? The answer is probably not. The tribunal asks why the benefits were paid. If they were paid as a consequence of the accident, then they are recoupable, full stop. The fact that a settlement may have been agreed assuming a shorter period of entitlement to benefit is irrelevant. What matters is the reason, at the time of payment, for the payment of that benefit. This wholly unjust situation has been lent significant support by a Social Security Commissioner's decision dated 20 October 1999 (decision number C6/999 (CRS)).

    In giving his decision, the commissioner stated: “…if the competent adjudicating authority (in this case a Social Security Appeal Tribunal) finds a claimant to be a victim incapable of work and attributes that incapacity at least in part to a relevant accident or injury, neither the court dealing with damages, nor a medical appeal tribunal in an appeal… can oust that authority's jurisdiction and essentially retry the matter of entitlement to benefit.”

    This fairly recent decision is being quoted by the DSS both in replies to requests for a review of the certificate and in its submissions to the Appeals Tribunal. It is, however, being referred to the Court of Appeal.

    A recent case of my own involved a claimant with work-induced silicosis. The condition was symptom-less. The claimant was made redundant following his employer's liquidation and managed to convince his GP to issue sick notes referring to “dust disease” over a period of several years. On the strength of those sick notes, he was awarded incapacity benefit. By the time the claim settled, benefits exceeded £30,000. Both sides' medical experts agreed that the claimant had never been incapable of work and he was never formally assessed by the DSS.

    Manifest injustice

    I appealed against the CRU certificate, but the appeal failed. The tribunal concluded that it could not overturn the original decision to pay benefit.

    It is difficult to conceive of a more unjust outcome than this last case. The only conclusion one can reach in the light of such decisions is that the regulations, as currently interpreted, require the insurance industry to pay for the mistakes of the DSS.

    Apply for a review of the certificate as soon as possible. A survey of colleagues has demonstrated a wholly inconsistent approach to requests for review by the DSS. You may be fortunate enough to convince them that one or other of the review grounds is satisfied.

    Write to the paying Benefits Office as soon as you obtain evidence suggesting that a particular benefit is being paid incorrectly. The evidence should be provided to the DSS with a demand that the benefit is either stopped, or it is recorded that any future payments are not being paid as a consequence of the accident or disease which is the subject of the claim. This may or may not succeed, but in any event, a failure by the DSS to take notice of the request may assist when an appeal is ultimately made.

    Pay particular attention to the benefits position when deciding whether a case is one to settle or fight. Cases should not be settled on the basis that a CRU certificate will be successfully appealed. The prospects of a successful appeal must be weighed very carefully.

    It may be possible to obtain a declaration from the court that the accident in question resulted in symptoms limited to a specified period of time. Section 12 of the 1997 Act requires the Appeals Tribunal to “take into account any decision of a court” regarding this matter. If this is obtained at an early stage it can be used to help persuade the DSS to stop the benefit.

    The true impact of the 1997 Act is only recently coming to light as appeals, often two years in the waiting, begin to be heard. It is essential that insurers are properly advised. This means that the solicitors they instruct must be fully conversant with the provisions of the Act and familiar with the appeals procedure. They must, in other words, be rather more expert in this field than has hitherto been the case.

    We have known since the 1997 Act was introduced that it would result in increased payments to the DSS following settlement of claims. What was not appreciated so clearly, was how the wording of the Act could be interpreted to produce manifestly unjust decisions.

    One consideration is whether or not the recoupment regulations are in breach of the (soon to be enacted) Human Rights Act, insofar as the compensating insurance company is being required to pay benefits back to the DSS without an opportunity to be heard at the time the decision to pay the benefit is first made.

    For the time being, however, no objective observer can seriously suggest that the current system operates justly.