From Deductible to Recoverable: The Recoverable Benefits and Assistance Scheme
02 July 2014
The Department of Social Protection (the 'Department') has confirmed that the recoverable benefits and assistance scheme (the ‘RBA’) will come into effect on 1 August 2014. The Minister is due to sign the commencement order in the near future and sections 13 and 14 of the Social Welfare and Pensions Act 2013 (the ‘Act’) and, as we understand it, the sections will be commenced without amendment.
In a nutshell: from 1 August 2014 defendants must reimburse the Department of Social Protection for certain illness related benefits received by a plaintiff in every personal injuries case concluded after that date.
Social Welfare and Pensions Act 2013
The crux of the RBA is that a defendant, called a compensator, must reimburse the Department directly for any ‘recoverable benefits’ received by a plaintiff from the Department. The recoverable benefits are: illness benefit, partial capacity, injury benefit, an increase in disablement benefit, invalidity pension, and disability allowance.
This is a significant change from the current position which allows a defendant to deduct the value of certain ‘deductible’ benefits received by a plaintiff from the loss of earnings claim, without having to reimburse the Department. Currently, what is, or is not, ‘deductible’ depends on the nature of the accident, and the type of benefit received. This classification of deductible benefits will no longer exist, and all of the above recoverable benefits can be deducted.
Offsetting benefits received against the plaintiff’s claim for loss of earnings
The defendant can still offset the value of any recoverable benefits against the plaintiff’s claim for loss of earnings. However, the full amount of benefits received by the plaintiff must be reimbursed to the Department, even if the plaintiff’s total claim for loss of earnings is less than the benefits received.
Increased difficulty settling claims
The Act does not take liability, or causation, into consideration. In the absence of an Order of the Court to the contrary, the defendant must reimburse the Department in full, regardless of any liability issues.
The draw of ‘all in’ or ‘nuisance value’ settlements, in claims where liability is hotly contested, is significantly reduced. As there is no specific procedure in place enabling parties to seek an Order of the Court ruling a liability split in a settlement without a hearing, akin to minor rulings, these types of claims may now be defended in full resulting in increased costs, and delays.
Benefits are recoverable for the shorter period of five years from the date of accident, or to the date of settlement. On the plus side, there is therefore an increased incentive to settle claims as soon as possible so as to reduce the value of the benefits to be reimbursed.
If a plaintiff recovers illness benefit at the current rate of €188 per week for the maximum period of five years, the defendant would be required to pay €48,880 to the Department. For insurance companies, this will mean an increase in overall reserves.
Merits v Drawbacks
The merits of the RBA are obvious: it ensures against double compensation and means that illness related benefits are reimbursed to the State. In fact, the RBA shadows, even in terms of the definitions used, the Compensation Recovery Scheme in place in the UK, and Northern Ireland since 1997.
The drawbacks are also clear: defendants must compensate the Department in full even if they are not fully liable – in essence overcompensating; or alternatively, more cases being defended in full, thereby increasing costs, and delays in an already overloaded personal injuries list.
For more information, please contact a member of the Insurance team.
The content of this article is provided for information purposes only and does not constitute legal or other advice. Mason Hayes & Curran (www.mhc.ie) is a leading business law firm with offices in Dublin, London and New York.