John FitzGerald: State needs to invest smarter to meet the cost of claims

There has been a dramatic increase in the Government’s liabilities arising from individual claims against the State in recent years. In some cases, like the compensation scheme for homes damaged by mica, it is not clear that the State was even to blame, but it chose to pick up the tab.

The scale of payments arising from claims is an increasing draw on the national budget, leaving fewer resources to improve healthcare or to invest in housing.

Medical negligence claims account for a big share of the €4.5 billion in claims on the State Claims Agency’s books at the end of 2021, up from €2.7 billion in 2017. Settlements made by the agency last year came to over €500 million, an increase from €170 million in 2017. In capitalising a stream of future payments to individuals, for example to meet their care needs, the size of awards shot up.

In the medical area, while there have been some well-documented cases of failures in care, not all poor outcomes are the result of negligence. Sometimes it is just down to random bad luck, or the inherent risk in the procedure concerned. This is a reason why claims made are so often contested.

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Normally the State can only make payments where it has Dáil or statutory authority to do so, or is legally liable. However, even where the State is confident it has a sound defence against a claim, there cannot be 100 per cent certainty as to the outcome of a case. Hence, the State may choose to settle some cases without admission of liability.

The State Claims Agency figures show that, in 2017, legal costs represented a third of payments to claimants. With greater resort to mediation, by 2021 legal costs had fallen to 25 per cent of the value of awards. The overall amounts are substantial – the €140 million paid to lawyers on claims in 2021 by the agency represented approximately 15 per cent of the profession’s income that year.

[ State facing 121 compensation claims relating to nursing home care during Covid-19 pandemic ]

The practice in the courts had been to make once-off payments designed to cover the lifetime costs of damage suffered by individuals. This may be appropriate where the claim is against a company or a private individual, as there is no guarantee that the defendant will be around to pay over the lifetime of the injured party. However, the State will always be there. And for all involved, lump sum payments are a most unsatisfactory way of providing appropriate care for individuals with serious disabilities.

Predicting future costs over a lifetime, and likely investment returns, is subject to huge margin of error, which could either see a claimant losing out or the State significantly overpaying. It cannot be known how long the injured party will live, so a lump sum could run out years before they die. Managing the lump sum to maximise returns, and protect future care, can be seriously stressful. Where the resources run out, the individual, in any event, will be dependent on the State for care.

The 2010 report of a working group to review these issues suggested that, instead of paying a lump sum, the State should make periodic payments over a person’s lifetime to cover their care costs. It also recommended that such payments should be linked to a suitable price index.

These proposals were implemented in 2017 but, by 2019, they had already been rejected by the courts because the price index used to estimate future inflation was deemed inappropriate. As a result, each time the periodic payments need to be reviewed, claimants have to go back to court. Repeat court hearings every few years are seriously stressful for all involved and unnecessarily costly.

[ Ten legal firms shared €31m costs in medical negligence cases from State Claims Agency ]

Under the “fault” principle underlying our system, people who can establish medical negligence (or where cases are settled without admission of liability) may receive very large lump-sum payments, whereas others with equal or greater catastrophic problems due to random chance get no such payments. In equity, the State should be in a position to give equal levels of support to those with equivalent needs, irrespective of the cause of the impairment.

To be able to do that, the State will need to invest considerably more in disability support services so that individuals and families get the services they need, and can be reassured that appropriate supports will be there for them as their needs change over their lifetimes.

Instead of direct payments, a guarantee of decent services, on a no-fault basis, could cut out the legal costs that characterise claims litigation. That’s €140 million that could go towards the cost of better care services.