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Partner and Head of Family Law, Rugby
A spinal cord injury compensation case we settled recently for more than £11million, highlights a point of considerable significance to claimants who settle their claims on a periodic payments basis. Jon Rees, Partner and Head of the Spinal Injury Team explains why.
Most of the spinal injury cases we deal with involve compensation awards of seven and eight figure sums. Often, in those cases, compensation awards are a combination of a lump sum with a periodic payment arrangement.
Periodic payments are generally awarded where a person’s care needs are on-going and lifelong. To ensure those needs are always met annual payments, of the part of the compensation award relating to care, are made for life. The amount paid takes into account the care needed and complex formulae tracking carer’s wages.
Periodic payment awards bring claimants some peace of mind in knowing that the money needed to pay for their care will always be paid. Those who have to pay for future and on-going care from a lump sum can encounter difficulty: some use up the money too soon whilst others, worried that they will have insufficient funds for care when they are older, hoard the lump.
There have been roughly 600 periodic payment orders made and a considerable number of settlements have been reached without Court proceedings being issued. In light of our recent case those cases might merit a review.
Should the Defendant’s Insurer ever fail to make a periodic payment (unlikely but certainly not impossible) the government’s Financial Services Compensation Scheme (FSCS) could be called upon to make payment instead. However, and here is the important bit, the FSCS have made it clear that they will only guarantee payment where the periodic payment arrangement formed part of a Judgment ordered by the Court.
So, no court order (in a settlement that includes periodic payments) means there is no FSCS guarantee. That is potentially catastrophic for a claimant if the Defendant’s Insurer can’t meet its payment obligations. They still need care for life (which in a spinal injuries claim might well be a six figure sum) but with no FSCS to call on, the claimant will be left high and dry. Presumably their solicitor (or the solicitor’s successors) might then expect a professional negligence claim for failing to ensure the periodic payments were properly guaranteed.
The solution then is to secure judgment. Clearly if proceedings have been issued in the course of pursuing the claim that will not be a problem, but for those who settle the claim without issuing proceedings and on terms that include periodic payments, it is vitally important that proceedings are issued (via Part 8) in order to secure the judgment that buys the FSCS guarantee.
The expert witness we appointed to deal with form of award in our case came across the FSCS position when it was referred to in passing in a separate case he was dealing with at the time of our joint settlement meeting. When we presented the case at the High Court, the Senior Master herself at the RCJ said she had never previously seen the situation arise.
An unusual but hugely important point then: any case involving periodic payments needs to be enshrined in a judgment.