For many years now, compensation awards paid by insurance companies in personal injuries cases have been reduced to take account
of the payment of social welfare benefits arising out of accidents. The rationale relied upon by insurers was that claimants should not be compensated on the double.
The Department of Social Protection and its predecessors looked on in frustration as it unwittingly subsidised insurance companies in the multi-million euro business of personal injuries compensation.
There was no legal provision to allow it claw back the payment of welfare benefits used by insurance companies to keep compensation to a minimum.
From August 1st, this situation is going to change significantly.
On that date, the Social Welfare and Pensions Act 2013 will come into effect and with it, the Recoverable Benefits and Assistance Scheme. From then on, compensators – typically insurance companies – will be under a legal duty to refund certain welfare payments to the Department of Social Protection prior to paying out compensation to claimants in non-fatal personal injuries cases.
The Department expects to be refunded approximately €22 million in recovered benefits.
Insurance companies will have to apply to the Department of Social Protection for a statement of welfare payments – also known as a Recoverable Benefits Certificate – made to a claimant arising out of injuries sustained in any individual case. The certificate will be provided to the insurance company within 28 days after which the appropriate payment must be refunded to the Department. Only then can the claimant be paid compensation for general damages and loss of earnings or profits.
The insurer may offset the refund of recoverable benefits against the amount of compensation for loss of earnings or profits but not against general damages.
The Department of Social Protection will require a full refund of the amount specified in the Recoverable Benefits Certificate unless the Court gives an Order indicating that there was an apportionment of liability between the parties.
For example, where the indemnified party is found to be 75 per cent responsible and the claimant 25 per cent, the Department will seek a refund of 75 per cent of the relevant benefits paid.
On the face of it, it will mean that all of the compensation for a personal injury will be paid by the guilty party or its indemnifier and without any veritable supplement from the Exchequer.
According to Department of Social Protection briefing documents seen by this writer, the purpose of the new arrangement is “to avoid ‘double compensation’ – to ensure that a person is not compensated twice over in respect of the same accident, injury or disease”.
The Department believes that the new scheme is broadly in line with recommendations made by the Law Reform Commission and are similar to provisions in place in Britain, including Northern Ireland.
In reality, it will have major implications for the resolution of personal injury claims across the board. Most significantly of all, it will bring to an end the practice – much favoured by insurance companies – of all-in settlements.
All-in settlements
Up until now, insurers saw great advantages in all-in settlements.
They could pay personal injuries claimants a single sum to include general damages for pain and suffering, any loss of earnings and legal costs and the costs of expert witnesses.
In doing so, they avoided costly disputes over the level of fees to be paid to lawyers, doctors and consultant engineers. Often, these all-in settlements pitted the lawyers and expert witnesses against the claimants between whom the single award had to be divided.
Under the new legislative landscape, the level of compensation to the claimant must be clearly specified in any settlement. Not only that but the general damages must be differentiated from loss of earnings or profits claimed.
It is likely to make the resolution of claims more cumbersome and from the standpoint of insurance companies, the cost of settling claims is likely to increase.
The new measure will apply only to personal injury litigation. Excepted from the obligation shall be compensation payments made by historical redress boards and tribunals such as the Residential Institutions Redress Board and the Hepatitis C and HIV Compensation Tribunal.
The Department of Social Protection’s entitlement to recover payments will be limited to six categories: illness benefits; partial capacity benefits; injury benefits; incapacity supplements; invalidity pensions; and disability allowances.
The limitation period for the recovery of benefits and assistance is five years and begins at the date of the incident giving rise to the social welfare entitlement and ends when the insurance company pays the injured party a sum in full and final settlement of the claim.
Where a claim is being examined by the Injuries Board, it will apply to the Department of Social Protection for the benefits certificate and assistance before it makes its assessment of damages.
The Injuries Board will then direct the insurance company to make the due refund to the Department and separately, to pay general damages and other appropriate compensation to the claimant. Mark O’Connell is a practising barrister who specialises in public liability and employer liability litigation.