Judge awaits Minister’s view on taxpayer footing part of insurers’ compensation bill

The Minister for Social Protection’s view on whether the taxpayer should foot a large part of an insurance company’s bill in a settled compensation claim will be revealed to the High Court at the end of this month.

This is because Mr Justice Michael Twomey said he wants to know the Minister’s view before formally refusing the insurance company’s application to approve a procedure under which the judge said the taxpayer has for years been effectively paying what are essentially insurers’ “business expenses” in such cases.

This practice is estimated to amount to €20 million annually, the judge noted.

The procedure has also been criticised by another judge and by the Law Reform Commission, which made it clear it is wrong for taxpayers to subsidise insurance companies in this way.

It happens in the settling of personal injury cases when judges are asked by both sides to give a “consent order” under the 2005 Social Welfare Consolidation Act.

Mr Justice Twomey gave the example of the notional “Sean Citizen” who claims he was injured in a shop that has insurance.

Sean makes a claim against the shop in which it is alleged the shop was 100 per cent responsible for his “pain and suffering” resulting from his injuries and fully liable for his loss of earnings

The Department of Social Protection has paid Sean disability and other benefits of €80,000 when he is out of work arising from the accident – which it is claimed the shop’s insurer has full responsibility for.

These payments are known as “recoverable benefits” of €80,000, since they are ‘recoverable’ by the taxpayer/Department from the insurance company which, by settling, can be said in general terms, to be accepting responsibility for causing the injuries, the judge said.

The insurance company offers Sean €100,000 (to include his legal costs of €20,000) to settle and he is happy with this sum.

As a condition of the settlement, the insurance company says that Sean must agree to the court order striking out the claim with the settlement containing a term that says that Sean was 90 per cent liable for the accident and the shop/insurance company was only 10 per cent liable.

This “consent term” enables the insurer to claim it has an “order of a court” to the effect that the insurer was only 10 per cent liable for the accident.

On this basis, it will be able to claim that it will only have to pay back 10 per cent, or €8,000, of the €80,000 in benefits paid by the Department/taxpayer, he said.

This simply means the insurance company will save €72,000, which it would otherwise have to repay the Department, he said.

Without this “subvention from the State’’ of €72,000, the settlement payout might be just €28,000 to Sean and his lawyers, he said.

In the case before Mr Justice Twomey, in which a man sued over an accident at a tyre shop where he was injured while changing a tyre on an agricultural vehicle, the case had been settled with the defendant tyre shop/insurance company on the basis that the man was paid €90,000 in disability benefit by the Department while he was out of work.

The insurance company initially sought a consent order on the basis of a 50/50 liability split, meaning the insurer would have to pay €45,000 to the Department.

When the judge said he intended to refuse to insert this order, the insurer withdrew the application but asked if it could return to court if it got the consent from the Minister for Social Protection for the order involving a 50/50 liability split.

On the basis the insurer was to ask the Minister for permission for the consent order, the judge was adjourning the formal refusal until the end of April and he will revisit the decision if this is forthcoming.

The judge directed that a copy of his judgment in this matter be sent to the Minister in advance of the April date.

Among a number of observations in relation to this issue, the judge noted no appeal against the handful of refusals of consent orders – as most judges grant them – had ever been brought by an insurer. It was an issue that could be clarified in an appeal court, he said.