Practice of taxpayer picking up part of personal injury settlement bill could end after judge’s ruling

A costly practice where the taxpayer picks up part of the bill for personal injuries settlements could come to an end due to a High Court ruling published Friday.

Mr Justice Michael Twomey said the taxpayer has for years been paying what are essentially insurers’ “business expenses” in personal injuries cases where a court grants a “consent settlement order” that purports to relieve some liability from an insurer.

The Minister for Social Protection confirmed to the court that she does not accept such an order frees an insurer from its obligation to reimburse the taxpayer for social welfare benefits paid to a plaintiff, he said, paving the way for a potential change.

The financial shortfall faced by the taxpayer due to the procedure is significant when one considers some 15,000 personal injuries cases were brought in 2021 alone, he said. He noted that 97 per cent of these actions settle.

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The procedure was criticised by another judge and by the Law Reform Commission, which described in very stark terms that it was “wrong”, Mr Justice Twomey noted.

Yet, the mechanism is used “on a daily basis” when a consent settlement order, made by a court when a personal injuries case settles, is used by an insurance firm to claim it is not legally obliged to reimburse the State the amount it paid to a plaintiff in social welfare benefits, he said.

Illness, disability or other social welfare benefits are recoverable by the State from the insurance company which, by choosing not to contest an action, can be said, in general terms, to be accepting responsibility for causing the injuries, the judge said.

A “consent term” enables the insurer to claim it has an “order of the court” to the effect that the insurer was only liable for the accident to whatever degree has been agreed between it and the plaintiff. On this basis, it would only have to reimburse the public purse to the percentage it has agreed in liability under the settlement.

The judge awaited the opinion of the Minister for Social Protection before refusing to make such a consent order in the case of a man who sued over alleged injuries sustained while changing tyre on an agricultural vehicle.

The action was settled with the tyre shop and its insurance company and the insurer sought a consent order from Mr Justice Towmey on the agreed basis that liability would be split 50/50 between the parties.

The Department of Social Protection had paid him €90,000 in disability benefits while he was out of work, so, if the judge made the order, the insurer would only have to repay €45,000 to the State.

When the judge said he intended to refuse to insert this order, the insurer asked if it could seek the Minister’s consent for the 50/50 liability order.

In a judgment published on Friday, Mr Justice Twomey said insurance companies have argued that a consent order resulting from an agreement about liability had the same status as a court making a liability finding after hearing all the evidence.

Although not used in this case, the judge noted a similar mechanism is frequently availed of when an agreed reference to “no claim for loss of earnings” is inserted into a consent order in a case where a plaintiff was paid State unemployment assistance.

Mr Justice Twomey said the Minister has now confirmed she agrees with his interpretation that a “consent settlement order” is not an “order of a court” for the purposes of a section of the Social Welfare Consolidation Act 2005.

The Minister did not consent to the insertion of the 50/50 liability split in the tyre shop case.

The judge struck out the proceedings without inserting the apportionment of liability requested by the plaintiff and the insurance company.

The case illustrates the important role of the Law Reform Commission and the Irish Judicial Studies Journal in bringing matters of “significant public interest” to the attention of the judiciary and the public at large, he added.