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Key rate for personal-injury awards to change

The Minister for Justice says that she has accepted the recommendations of two groups set up to examine how compensation payments for personal-injuries cases are determined by the courts.

One report has recommended changes to the indexation rate for periodic payments orders (PPOs), an alternative to lump-sum payments to catastrophically injured people that provide for an ongoing annual payment over the lifetime of a claimant.

A second report has recommended that the discount rate, which is used by the court to determine the size of a lump-sum award needed to compensate a person for future losses, should remain unchanged.

High Court ruling

The Department of Justice says that claimants in catastrophic-injury cases have been pursuing lump sum payments, rather than PPOs, after a ruling by the High Court in 2019 that the indexation rate set out in legislation would result in under-compensation for claimants as it did not take account of wage inflation.

The current rate is based only on the rate of inflation in the broader economy, as measured by the Harmonised Index of Consumer Prices (HICP).

At a hearing in the High Court in 2019 Ms Justice Murphy said that there was “overwhelming evidence” that a PPO linked to the HICP would result in under-compensation, as expert evidence indicated that the annual amount needed to be linked to a wage-based index to ensure full compensation for future care needs.

The report from the Indexation Rate Interdepartmental Group has recommended that the rate should be based on a combination of the HICP and the annual rate of change (ARC) in hourly earnings in the health sector.

It states that the amount of a yearly periodic payment should be based on a rate comprising 80% of average ARC in health earnings, added to 20% of the HICP.

Discount rates

The discount rates for lump-sum payments currently stand at 1% for future care costs, and 1.5% for other financial losses.

The Discount Rate Independent Working Group has recommended that the rate should remain unchanged from the rate set by the High Court in 2014 and subsequently confirmed by the Court of Appeal. Its report has found “no material evidence” to change either of the discount rates.

It adds, however, that an expert group should meet at a maximum of every three years to reassess the discount rates.

The group also calls for the introduction of a ‘trigger’ mechanism to enable a review if there is a marked change in economic circumstances, or if the rate is successfully challenged in court.

Certainty

The Minister for Justice Helen McEntee said that survivors of catastrophic injuries deserved compensation that was fair and adequate to meet their needs, adding that PPOs were the most suitable option to achieve this balance.

She added that such payments provided certainty for recipients, their loved ones, and the State.

The minister said that work was underway on preparing the necessary regulations to implement the two reports’ recommendations, while she was also looking at how the ‘trigger’ mechanism recommended by the discount-rate report could be brought into operation.