Health Authorities and the Payment of Damages by Means of a Pension
| Date | 01 November 1993 |
| Author | Richard Lewis |
| Published date | 01 November 1993 |
| DOI | http://doi.org/10.1111/j.1468-2230.1993.tb01910.x |
Health Authorities and the Payment
of
Damages
by
Means
of
a Pension
Richard
Lewis
*
Introduction
A
radical change has occurred in the way in which common law damages may be
paid for personal injury or death. Instead of offering compensation only in the
form of a lump sum, a structured settlement allows a series of payments to be made
over a period of time.’ Most of the structures which have been put in place have
involved liability insurers. In such cases, the defendant’s insurer, usually after
having informally agreed a lump sum figure with the plaintiff, will agree to
convert part of the damages into a series
of
periodic payments.
To
fund the
arrangement the insurer purchases an annuity from a life office. The payments are
‘structured’ to meet the plaintiff‘s needs and are free of
tax
in his hands. This is
because the Revenue have accepted that they may be considered instalments of
capital rather than income. In return for making this arrangement, the insurer will
bargain for a discount on the conventional lump sum figure. The advantage of this
is that both parties gain financially: the insurer is able to purchase an annuity for
less than the amount he would otherwise have to pay as a lump sum; and the
plaintiff, in the longer term, receives more money than if he had invested the lump
sum himself. Most important is that the plaintiff can be assured of a continuing
stream of payments which, if necessary, may be inflation-proofed and continue for
the rest of his life. The plaintiff, or his representative, is able to make detailed
plans for the future without the fear that the money will run out.
Judges, including the Master of the Rolls, have strongly supported the
development.2 Leading Counsel have described a structure as ‘a powerful
instrument in the hands of experienced
adviser^.'^
In spite of the dearth of
academic literature on the ~ubject,~ the basic concept behind the structure is now
well known to leading personal injury practitioners. Indeed, it is sufficiently well
established for the subject to have been referred to the Law Commission. A
consultation paper has already been issued and a full report is expected in
1994.5
*Senior Lecturer, Cardiff Law School.
1
The concept and the advantages it offers has been analysed in detail elsewhere. See Lewis, ‘The Merits
of a Structured Settlement: The Plaintiffs Perspective’
(1993)
OJLS
530,
and ‘Pensions Replace
Lump Sum Damages’
(1988) 15
JLS
392.
2
See, for example,
Butler
v
Vann
(unreported), transcript
9
July
1991,
and
Moxon
v
Senior
(unreported), transcript
10
July
1991.
Considered by the author
(1993) 9
PN
126.
3
Glasgow
et al,
‘A Response to the Proposals on Structured Settlements’
[1993] (1)
Quantum
4.
4
Apart from the author’s own work, see Allen, ‘Structured Settlements’
(1988)
104
LQR
448,
and
Scott, ‘Structured Settlements’
(1988)
7
CJQ
99.
For the views of practitioners,
see,
for example,
Frenkel, ‘Salvaging the Wreckage and Healing the Wounds’
(1992) 136
Sol J
8,
and Whitfield, ‘The
Basics and Tactics of Structured Settlements’
(1992) 142
NLJ
135.
Two books have just been
published on the subject:
I.
Goldrein and
M.
de Haas,
Structured Settlements
(London: Buttenvorths,
1993),
and R. Lewis,
Structured Settlements: The Law and Practice
(London: Sweet
&
Maxwell,
1993).
5
Structured Settlements and Interim and Provisional Damages,
Consultation Paper No
125,
November
1992,
reviewed in
(1993) 12
CJQ
251.
However, very little space is devoted to Health Authority
structures: see paras
3.65
and
3.66.
0
The Modern Law Review Limited
1993
(MLR
566,
November). Published by Blackwell Publishers,
108
Cowley Road,
Oxford
OX4
1JF
and
238
Main Street, Cambridge. MA
02142,
USA.
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