Lord Chancellor's consultation paper advocates structured settlementsby Christine Seib

The Lord Chancellor's Department consultation on structured settlements will allow insurers to campaign for a system that is beneficial to themselves and claimants, a leading personal injury lawyer has said.

Last week the Lord Chancellor, Lord Irvine, announced consultation on the paper - `Damages for future loss: giving the courts the power to order periodical payments for future loss and care costs in personal injury cases'.

James Chapman senior partner Kevin Finnigan said periodical payments, or structured settlements, particularly "bottom-up" settlements, were usually cheaper for insurers.

But he said they provided greater annual income for claimants.

Finnigan, who runs James Chapman's catastrophic injury unit, said bottom-up payments enabled insurers to give annuity providers the capital needed for claimants' correct annual income, while still giving claimants an initial lump sum for large purchases.

Normal structured settlements set an amount of capital which is then invested with annuity providers.

The lump sum payment scheme makes one payment to a claimant, leaving them to invest the money.

In the paper, Lord Irvine said structured settlements were the most appropriate means of paying compensation for significant future financial losses.

"Lump sums invariably provide under or over-compensation, resulting in an injustice to one of the parties," Irvine said.

"Periodical payments should ensure that injured people receive the compensation to which they are entitled for as long as it is needed, without the worry of the award running out if they happen to live longer than expected."

The consultation, open until 7 June, will look at:

  • whether there should be a statu tory presumption that periodical payments were preferred in high value cases,
  • in which cases they would be more appropriate
  • how defendants and their insurers might fund the payments
  • whether the payments should be reviewable
  • the effect on tax and benefits.

    Finnigan said insurers were currently setting up committees to put together their submissions to the consultation.

    "We and other leading catastrophic injury lawyers will be putting together our own submissions," he said.

    "We welcome the consultation paper as a move in the right direction for claimants and insurers."

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