The recent release of the latest ASHE data is an annual reminder of how periodical payments are accurately proofed against earnings inflation.
The vast majority of cases settled inclusive of periodical payments, are based on those payments meeting the cost of Claimants’ future care needs. Less common are settlements with other heads of loss being paid annually, although in my experience, periodical payments for deputy costs and loss of earnings feature on occasion.
Many years ago, at the outset of the periodical payments regime, all heads of future loss were in scope, and bearing in mind that this method of compensating claimants is tax free and comes with a lifetime guarantee, perhaps minds should always remain open to investigating their inclusion to losses other than future care. One such area might be the future cost of prosthetic devices, which involves recurring cost cycles relating to replacement and servicing, and could therefore be readily annualised.
In relation to this head of future loss, usually a very substantial proportion of the overall claim, my preliminary comment is that that I do not know of a Court making an Order for periodical payments to cover the ongoing costs in relation to prosthetic devices. As outlined above, costs could be structured on an annualised basis, but the problem is how properly to protect those annual costs against inflation. Case law in relation to periodical payments is clear as to the requirements for indexing annual payments so, if arguments were advanced for periodical payments and the Court was unable to make such an Order, that scenario might have significantly adverse costs consequences for any Claimant taking that position.
As regards prosthetics, the principal problem is one of identifying a correct measure to provide meaningful inflation proofing. For example, in an historic case, the prosthetics expert, when pressed, suggested an annual figure of 3% inflation in relation to the cost of prosthetic devices. Because of the Court’s insistence of some rigour behind the approach to inflation proofing, my view was that the expert should provide more detail as to how the 3% figure had been ascertained For example, if that figure is an average, over how many years was that average taken? Also, did the suggested figure apply across the board to all prosthetic devices, or just to a particular type of device?
Further, increases in the cost of prosthetic devices is likely to follow advances in technology, which could be difficult to measure in any event. Applying a fixed annual uplift might be a wholly inappropriate approach, totally unsuited to tracking increased costs which may spike significantly in the face of new technology, then perhaps reducing gradually over time as availability of that technology becomes more commonplace.
The need for sufficient detail is so that the criteria as set out in the landmark case on periodical payments (Thompstone) could be met, otherwise the Court would be unlikely to be able to make a periodical payments Order. The requirements are as follows;
- (i) Accuracy of match of the particular data series to the loss or expenditure being compensated.
- (ii) Authority of the collector of the data.
- (iii) Statistical reliability.
- (iv) Accessibility.
- (v) Consistency over time.
- (vi) Reproducibility in the future.
- (vii) Simplicity and consistency in application.
With that in mind, I have undertaken some research on the website of the Office for National Statistics (ONS). There is an index to measure inflation in relation to medical equipment, however, unhelpfully, the ONS will not reveal how that index is made-up in terms of what equipment is taken into account, therefore I am unaware how the data within that measure was collated and what it reflects. For example, the Retail Prices Index measures many things that make-up the average household budget. Unsurprisingly, prosthetic devices do not feature within the 600 odd items that comprise the RPI. When considering the measure in relation to medical equipment in the light of the above criteria, (ii) to (vii) inclusive, would be met but, crucially, (i) would not.
On a speculative basis, I would expect that measure to be made-up of all types of different equipment, ranging perhaps from MRI scanners to scalpels. It would be important to know if prosthetic devices are included and, if so, the weighting given to them within the index as a whole. It may be that they do feature, but that the weighting is very small and, in any case, the prosthetics involved might be those used by the NHS, and would therefore be irrelevant as private provision would take the form of more advanced and expensive equipment. Any index that includes many different items is aggregated in nature, and non-specific. Contrast this with periodical payments for care needs which can be referenced to ASHE 6115, a disaggregated measure concerned solely with tracking the earnings of home carers.
It would seem therefore, that the cost of prosthetic devices is difficult, if not impossible to proof against inflation in a manner that would be attractive to a Court. Even if that were possible, such protection would only work in the context of today’s technology. Periodical payments on that basis would be highly likely to tie Claimants to what is available now, and would effectively deny them the opportunity of purchasing new technology in the future, probably at greater cost which could improve quality of life to a significant extent. That opportunity requires flexibility and would probably be better preserved, in the event that Claimants are compensated by a lump sum award of damages.
There is however another argument. Claimants are not of course all the same, and the ability to access new technology may be more attractive to those at the younger end of the age spectrum. Some older Claimants might take the view that what is available today is sufficient for their purposes, hence the peace of mind that periodical payments bring, is more suited to their needs. In any event, if it is the case that the Court cannot order periodical payments due to inherent risks over proper inflation proofing, that leaves Claimants relying on defendants’ willingness to agree to that type of settlement.
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