Periodical Payments

Lawyers know that only one thing is certain in a personal injury case.  The chances of you actually receiving your correct compensation are about nil.  How much you receive can be greatly influenced by the quality of your legal representation, but whether this amount is correct is another thing.

Sooner or later a value has to be placed on a claim for damages.  You cannot be put back as you were before the accident, so this is the only way the law can compensate you.  In every claim there is speculation about any future effect the accident may have on you.  Added to this is the fact that ongoing losses are multiplied to take account of how long you are likely to live.  Hardly anyone lives to an "average" age, so the 2 factors together mean that you will either receive too much or too little compensation.

Future losses are generally calculated using a discount rate of 2.5%.  In the current economic climate the assumed returns on an investment that this is based upon are unrealistic.  As a result Claimants either have to take greater risks in investing their money or the money will run out.  To get round this the Court can Order a Defendant to pay periodical payments rather than a lump sum.  The most obvious item of loss that this would cover would be the costs of providing ongoing care.

The power was only introduced from 1st April 2005 and is contained within section 2 of the Damages Act 1996.  Any final decision on whether an award should be a lump sum or periodical payments is for the Court to make.  However, if the matter is settled before proceedings are issued the Court will have no role to play.  Also, where it settles prior to trial the Court may approve a settlement Order without considering the issue any further.

The wishes of the person receiving the damages are supposed to hold great sway.  Claimants are generally reluctant to agree to periodical payments due to concerns over whether the Defendant insurer will stay in business and the fact that they like to have control over their own money.  The system has also been criticised as not providing properly for inflation.  It was originally based on the Retail Prices Index, but it has been accepted that the Average Earnings Index may be a better measure for updating the award, particularly for damages .

What has become clear is that periodical payments are likely to be a real consideration for all claims in excess of £250,000 where the Claimant is expected to live at least another 10 years.  It is also clear that the Claimant needs expert help from a lawyer and also, possibly, a financial adviser on how best to proceed.