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Periodical Payments and Post Settlement Obligations: A Clean Break?
Background
It’s one of the worst kept secrets in the world of high value Personal Injury Claims; Defendant Insurance companies do not like Periodical Payment Orders or “PPOs”. When accepted in principle, they will seek to limit the Heads of Loss contained within the annual payment. This is in contrast to the NHSLA who are more likely to acquiesce to PPOs as this can have the effect of passing the PPO parcel down the line, occasionally to an incoming Government.
The reasons for Insurers’ resistance to PPOs are twofold. Like any commercial business, Insurance companies would prefer to settle their debt at the earliest opportunity. Where PPOs can provide invaluable lifetime security for Claimants, particularly those with normal life expectancies, they can also make maintaining accurate reserves a headache for the compensator and their shareholders. Secondly, with PPOs being inflation proofed by linking the annual payment to the appropriate index (e.g. RPI, ASHE 6115), PPOs can result in Insurers paying in excess of what would have been payable if capitalised at the point of Settlement.
Wallace v Follett [2013] EWCA Civ 146
I was recently involved in a brain injury Claim on behalf of a young male who was seriously injured in a Road Traffic Accident. The case was settled, subject to Approval, on the basis of a lump sum and PPOs for the remainder of the Claimant’s life – the latter having been initially resisted by the Insurer. As the Final Order was drafted, I came across the 2013 Court of Appeal decision in Wallace v Follett – it having been raised by the Insurer as authority for the requirement that our client be compelled to undergo medical examinations at their request for the rest of his life – which indeed it is, largely.
Having considered Wallace one is struck by the Appeal Judges’ apparent disregard for a clean break between the Claimant and his compensator. The decision is singular in its rationale, that is to protect the Insurer’s financial interest in being able to monitor the Claimant’s life expectancy, so it can review its reserves from time to time. From my experience, Claimants involved in Personal Injury Claims for several years having sustained serious injuries are as grateful for the opportunity to move on from under the cloud of litigation as they are for the security a substantial award of Damages can bring. What this continuing obligation does, in my view, is unnecessarily preserve the relationship between victim and compensator when a simple letter from the Claimant’s GP and/or Professional Deputy can provide confirmation of life.
Despite Wallace, Claimant solicitors should not readily accept the proposal without further scrutiny. Wallace involved a catastrophically injured Claimant whose life expectancy was limited and in dispute. Where a Claimant’s life expectancy is unaffected and not in dispute one should consider whether regular medical examinations for the sole purpose of providing an Insurer with up to date life expectancy figures are necessary and perhaps seek to negotiate the frequency of future examinations. Indeed, even Lord Justice Leveson conceded that there would be cases where no medical examination was justified.
