Tuesday, 2 October 2012

PPOs for Dying Claimants

Final settlement of a personal injury claim precludes claims under the Fatal Accidents Act should the claimant later die of the injuries caused by the defendant - Thompson-v-Arnold. There are several means of protecting future claims by the dependants of living claimants who have a reduced life expectancy. Where liability is not disputed and death is likely within a short period, interim payments could be agreed or ordered, with final resolution to be determined following the claimant's death. Alternatively, some heads of claim could be determined, with others, including future care or earnings, stayed. When the claimant dies, those stayed claims become the dependency claims of the bereaved relatives. Provisional damages might be claimed - an award of provisional damages does not preclude future claims arising out of the death of the claimant.

In some delay in diagnosing cancer cases which I have handled we have settled the PI claim to include recovery of damages which would be claimed under any future Fatal Accidents Act claim. However, the courts do not have the power to order compensation under the FAA if the Claimant is still alive! Or do they?

Under CPR 41.8(1)(c) a Periodical Payment Order must specify that the claimant's future pecuniary losses are to be paid for the duration of the claimant's life, or such other period as the court orders. It is clear from 41.8(3) that this "other period" could be a period longer than the Claimant's life: "Where the court orders that any part of the award shall continue after the claimant's death for the benefit of the claimant's dependants, the order must also specify the relevant amount and duration of the payments and how each payment is to be made during the year and at what intervals." 41BPD.2(1) confirms that such an order may be made when the dependant would have had a claim if the claimant had died "at the time of the accident" (presumably "accident" includes "injury caused by negligence" in say a clinical negligence claim).

Since PPOs can be stepped (different periodical payments at different stages in the future), it would theoretically be possible to make an order for payment of say £50,000 per annum during the claimant's life and £40,000 per annum to their dependants after the claimant's death until the youngest dependent is, say, 21 years old, or until the surviving spouse dies.

I confess that I have never seen an order to that effect. I would be interested to know if anybody else has (please leave comment below). I wonder whether there has ever been an order or settlement on those terms. But if not, why not?

Many potential problems would need to be addressed in any such order:

 -   Under CPR 41.8(3) a step change in the periodical payment has to be made on a specified date. Since the date of the claimant's death cannot be predicted then presumably it is acceptable to provide for a step change upon the claimant's death whenever that might occur. Thereafter there would have to be changes in payments as the dependency changes (e.g. as each child reaches 21).

-   What if the claimant later dies for some reason other than the negligence of the defendant (e.g run over by a bus the day after the order is made)? Provision would have to be made to ensure that all PPs will cease on the claimant's death where that is due to a reason other than the defendant's negligence.

-   If the date of death is not known, how can the level of dependency be predicted in advance of death? How do you draft the order such that the payments after death are at a level which will fairly reflect the dependency at that time, when you do not know when death will occur or what the financial circumstances of the family will be at that time? Any order would be riddled with conditions: "if the claimant's death should occur between 2018 and 2020, and provided that dependant A is in full time education between those dates, the periodical payments after 2018 shall be ...."

-   To whom are the dependency payments to be made after the claimant's death? FAA awards are usually apportioned. I presume that periodical  payments would have to be apportioned and the order would have to specify the amount to be paid periodically to each dependant, whether the payments are to be made into court, or to a trustee or to the dependant directly.

-   In some cases there may be future dependants who are not yet born at the time of the settlement of the PI case.

-   The tax position needs careful consideration : whilst PPOs during the claimant's lifetime are exempt, the exemption does not continue after their death.

Notwithstanding the potential difficulties with drafting an order of this kind, the great advantages of using a PPO in such cases include:

-   not only protection of the dependants' claims, but resolution of them, together with the claimant's own claims, during the claimant's lifetime, thus giving peace of mind to the dying claimant and his or her family and saving costs.

-   provision for non-financial dependency could be secured - the law as it stands may not support a claim for loss of services in the lost years - Phipps-v-Brooks Dry Cleaning. 

-   a carefully tailored PPO could address and meet all the future uncertainties in a way in which a single lump sum settlement can only do with a broad brush.

I see no reason to avoid PPOs in such cases merely because there are compromises on liability which prevent 100% recovery.  

PPOs could be used in cases where the claimant is likely to die prematurely as a result of the defendant's negligence. They will not suit all cases, but there may be advantages of using them for the purpose of a once and for all resolution of present and future claims, even where damages are not of the highest level.

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