Economic aspects of personal injury compensation in Ireland

Victims of events including road accidents, workplace injuries and medical negligence are compensated in the Irish legal system through once-off lump-sum awards. In cases where victims have suffered incapacitating injuries but have extended life expectancy, these awards include provision for loss of earnings and life-long medical care that can run into millions. Where liability is contested, significant litigation costs also arise, but even where liability is admitted, the determination of quantum is complex, requiring evidence about future medical care costs, loss of earnings, life expectancy and the returns to be expected from the investment of the lump sum award. The once-off lump sum system of compensating successful plaintiffs has been criticised over the years from both legal and economic perspectives, and change was recommended in a Law Reform Commission report in 1996. Mr. Justice Nicholas Kearns, President of the High Court, established recently a working group to consider the issues involved and charged it to report by November 2010. Since 1995, courts in the United Kingdom have been free to award periodic payments, as distinct from once-off lump sums, where the parties agree, and since the passage of the 2003 Courts Act, whether or not they agree. It is opportune to consider whether periodic payments should be introduced in Ireland and this paper reviews the principal economic aspects of the issue. The paper also considers whether a move to periodic payments would require changes to the government bond market, specifically the issuance of long-dated index-linked Exchequer debt. -- Compensation awards ; Catastrophic injury ; Lump-sum compensation ; Periodic payments ; Index-linked annuities