Cost of settling State claims surpasses €3bn

The estimated cost of settling outstanding claims made against the State has increased dramatically in recent years, from €1 billion to more than €3.15bn, a report from the State’s independent spending watchdog found.

An increase in the number of claims, and a legal ruling affecting how large awards are calculated, has led to a near threefold increase in the estimated liability of outstanding claims.

In 2012, the liability of the State Claims Agency’s (SCA) outstanding cases stood just over an estimated €1bn. By the end of last year, the estimated liability for outstanding claims had climbed to €3.15bn, according to a report published by the Comptroller and Auditor General (C&AG) on Monday.

Last year the agency paid out €354 million in awards and associated costs, an increase on €316m paid out in 2017.

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The number of active claims has steadily increased over the past six years, with 10,658 claims on the books at the end of 2018, the report said. More than 2,600 claims had been resolved last year, an increase of 17 per cent compared to 2017, it found.

The health sector accounted for 90 per cent of the €3.15bn estimated liability, between the Health Service Executive, Tusla, and the Department of Health. This is due to the multi-million euro settlements or awards in cases where individuals may have lifelong healthcare needs, arising from medical negligence.

The C&AG report said a Court of Appeal ruling in 2015, on the formula used to calculate such awards, was a “key factor” in the increase in the State’s estimated liabilities.

The court case related to an award granted to a severely disabled boy, Gill Russell, who suffered brain damage at birth in a Cork hospital, and was awarded €13.5m towards care for the rest of his life.

The judge in setting the award, said he would assume a rate of return from investing the money of one per cent per annum, well below the three per cent rate previously used in Irish courts.

When awards are made towards the long term care of a person in medical negligence cases, the formula includes an estimate of how much return would be expected on the invested settlement. Lowering the expected rate of return from three to one per cent, means the overall initial lump sum award must be increased, to meet the lifelong care needs of the individual.

The Department of Justice, and Department of Defence accounted for €242m of the State’s legal liabilities, the report said. This included claims related to the Prison Service, Defence Forces, and An Garda Síochána.