The Gazette 1989

GAZETT INCORPORATE D LAWSOCIETY OF IRELAND Vol.83 No. 10 Octobe r 198 Viewpoint

GAZETTE

OCTOBER 1989

In gjb? this Issue fÉgff

Viewpoint

339

Statutory Deductions from Damages in Tort

Structured Settlements Much has been said about the inadequacies and problems associ- ated with the single lump sum me t hod of compensa t i on in personal injury claims and yet insurance compan i es haven 't shown the slightest interest in remedying the situation. The concept of "structured settle- men t s" has become very popular in other jurisdictions and could have benefits if adopted in this country. When a plaintiff receives a lump sum of compensation it may well be the single largest amount of money he or she has ever received. For somebody who is not used to dealing wi th money there is a danger that it will be spent foolishly, rather than invested wisely. This is borne out by statistics in England and America which indicate that, even in the case of fairly substantial awards, half of the successful claimants will have spent the compensation within three years of receiving it and the vast majority will have done so within five years. A further problem is that if the person is very seriously injured he is unlikely to get much advantage or pleasure from a large lump sum and it may well cause jealousy and resentment between him and his loved ones. It may put him in the position where he has to buy their affection by giving them presents of money or loans which will never be repaid. Unless the lump sum is very skillfully invested inflation will erode it and may cause real hardship. In the United States structured settlements have become very popular. In the United Kingdom the concept has recently received judicial approval. Essentially the idea is that the defendant agrees with the plaintiff that because he is so badly injured he will need an income of so much per week for the rest of his life. In many cases the Defendant's

Insurers buy an annuity to cover these payments. The annuity provides an income to the Plaintiff for life and the income can, within limits, be index-linked. The primary advantage to the Defendant is that the cost of the annuity may well be less than a lump sum settlement. Statistics show that many seriously injured Plaintiffs do not live a long time. On the other hand the Plaintiff can outlive his lump sum wi th resultant financial hardship. Under the concept of Structured Settle- ments he would be entitled to the continued income no matter how long he lives. A key element in the success of "structured settlements" is that tax should not be payable on the payments received by the Plaintiff. This has been agreed wi th the US Revenue authorities for many years and has also been agreed in the UK between the Association of British Insurers and the Revenue. Some structured settlements are of a sophisticated nature providing for payment of lump sums at intervals when it is anticipated the Plaintiff will have particularly significant fin- ancial demands upon him. Struc- tured settlements can provide a great sense of security for the claimant. Because the money is being rationed to him he does not have a lump sum to invest and will not incur the costs associated with investment nor is he in a position to squander the money or give it away to family and friends. Essen- tially he is protected from his own generosity and foolishness. It is obvious that structured set- tlements have many advantages over the present system where a claimant is very seriously injured and will require ongoing attention for the rest of his life. It is therefore surprising that so little interest has been shown in Ireland in this concept which has financial, social and moral advantages which could benefit Plaintiffs, Defendants and their insurers. •

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From the President Judging the World

Younger Members News New Facilities at Four Courts

357

People and Places 358 Solicitors Computer Systems What Next? 361 Set-off and Counterclaim — Deciphering the Irish Rules 367 Practice Notes 370 Medico Legal Society 371 Statutory Self Assessment for CAT 373 Professional Information 376 * Cover Photo: Younger Members Com- mittee Network launch (left to right): Justin McKenna, YMC, Maurice Curran, President of the Law Society, Miriam Reynolds, Chairman of the YMC, Sandra Fisher, Secretary to the YMC. See also pages 355, 356. * Executive Editor: Mary Gaynor Committee: Geraldine Clarke, Chairman Eamonn G. Hall, Vice-Chairman John F. Buckley Gary Byrne Patrick McMahon Charles R. M. Meredith Advertising: Seán Ó hOisín. Telephone: 3 0 5 2 36 Fax: 3 0 7 8 60 Printing: Turner's Printing Co. Ltd., Longford. * The views expressed in this publication, save where otherwise indicated, are the views of the contributors and not necessarily the views of the Council of the Society. The appearance of an advertisement in this publication does not necessarily indicate approval by the Society for the product or service advertised. Daire Murphy John Schutte

Published at Blackhall Place, Dublin 7. Tel.: 710711. Telex: 31219. Fax: 710704.

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