Health Authorities and the payment of damages by means of a pension
A radical change has occurred in the way in which common law damages may be paid for personal injury or death. Instead of offering compensation only in the form of a lump sum, a structured settlement allows a series of payments to be made over a period of time.' Most of the structures which have been put in place have involved liability insurers. In such cases, the defendant's insurer, usually after having informally agreed a lump sum figure with the plaintiff, will agree to convert part of the damages into a series of periodic payments. To fund the arrangement the insurer purchases an annuity from a life office. The payments are 'structured' to meet the plaintiffs needs and are free of tax in his hands. This is because the Revenue have accepted that they may be considered instalments of capital rather than income. In return for making this arrangement, the insurer will bargain for a discount on the conventional lump sum figure. The advantage of this is that both parties gain financially: the insurer is able to purchase an annuity for less than the amount he would otherwise have to pay as a lump sum; and the plaintiff, in the longer term, receives more money than if he had invested the lump sum himself. Most important is that the plaintiff can be assured of a continuing stream of payments which, if necessary, may be inflation-proofed and continue for the rest of his life. The plaintiff, or his representative, is able to make detailed plans for the future without the fear that the money will run out. Judges, including the Master of the Rolls, have strongly supported the development.2 Leading Counsel have described a structure as 'a powerful instrument in the hands of experienced advisers.'3 In spite of the dearth of academic literature on the subject,4 the basic concept behind the structure is now well known to leading personal injury practitioners. Indeed, it is sufficiently well established for the subject to have been referred to the Law Commission. A consultation paper has already been issued and a full report is expected in 1994.5