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.