Sowden One Year On - Who Is Footing The Bill?

Originally published in The Insurance Law Quarterly: Winter 2005

Insurers dealing with catastrophic injury claims have seen a relentless rise in the level of damages awarded as claimants display ever-greater ingenuity in the formulation and presentation of claims. Sowden appeared to offer a means by which the care element of such claims might be reduced. How in practice are the courts reconciling the principle that the defendant should compensate for the loss which he has caused with the duty of local authorities to provide care for those in their area who need it?

In Sowden the defendant achieved a substantial saving as a result of the contribution to the claimant’s care costs made by the local authority. Although the onus is on a defendant to prove that local authority provision is adequate and meets the claimant’s reasonable needs, the Court of Appeal concluded that if this is achieved, then a claim for private care costs will fail. Further, if the claimant’s needs exceed local authority provision (here, the Court was keen to point out that there may be a difference between what a claimant reasonably requires - which can be claimed as damages - and what a local authority or PCT would be likely to provide in discharging its statutory duty), then defendants will only be required to meet the excess. Also welcomed by insurers was the seeming willingness of the court to take into account the power to compel a local authority to perform its statutory duties.

Although the decision is a positive one for insurers, a note of caution was sounded by the conjoined appeal of Crookdake v Drury (2004) which illustrated the importance of defendants being able to adduce the necessary evidence to prove the availability, and likely continuation, of local authority funding. Here the defendant failed to discharge that burden and so was held liable for the entirety of the claimant’s future care costs.

A fly in the ointment for insurers is the advent of the power to impose periodical payments. These have brought the need for the courts to assess accurately the local authority/PCT’s likely future contribution to care costs into sharper focus. Care costs may be the only item covered by a periodical payments order and if the wrong assessment is made, the extent of the resulting over-compensation or under-compensation will be starkly apparent.

Claimants are likely to argue that the power under Section 2(9) of the Damages Act 1996 to order periodical payments which will escalate at a rate greater than RPI (Retail Price Index) should be exercised. This section enables claimants to re-run the argument (rejected in Cooke v UBHT (2003)) that a reduced discount rate (or higher multiplier) should be used for the quantification of future care costs. The issue of quantification of future care costs is expected to come before the courts again in the forthcoming months and claimants will no doubt argue that Section 2(9) provides an express statutory power of a kind which the claimants in Cooke could not rely on. Periodical payments therefore have the potential to increase not reduce future care costs.

In Walton v Calderdale Healthcare NHS Trust (2005), the court opted to award periodical payments to cover the claimant’s future care costs. The care experts on each side agreed an annual figure. The defendant’s argument that there should be a reduction in that figure to take account of the likely contribution from the local authority was rejected on the basis that the defendant had failed to produce evidence to prove that the local authority was likely to contribute. The judge also remarked that even if the onus had been on the claimant, he might well have discharged it because of the risk that non means-tested benefits from the local authority may not remain available in the future.

More strikingly, in Godbold v Mahmood (2005), the court again opted for periodical payments for future care. The judge in that case rejected the defendant’s Sowden argument for a number of reasons which, rather surprisingly, included a lack of evidence about the extent to which the local authority concerned would discharge its statutory duty, and taking judicial notice of the fact that some other local authorities had shown reluctance to discharge their duties. Rather more compellingly, the judge was not satisfied that local authority funding would remain available throughout the time that the claimant needed it.

By contrast, in L.B. Islington v UCL Hospital NHS Trust (2005), in which a local authority (rather than an injured claimant) sought to recover the cost of providing residential accommodation to a patient who had been injured by the defendant’s clinical negligence, the court decided that the local authority must bear the care costs because that was where Parliament had determined that the costs burden should lie.

These decisions illustrate just how difficult it will be for defendants to obtain sufficient evidence to persuade courts to take state funding into account in the assessment of future care costs.

One year after Sowden, the benefits which insurers hoped to derive from it appear to be illusory rather than real. In the new era of periodical payments, that trend is likely to be more pronounced. The complex web of statutory provisions regulating the duties and powers of local authorities/PCTs cries out for some overhaul. In Sowden, the Court of Appeal suggested that only legislation could bring any "rationality" to this area of the law. If Parliament does intervene, it is difficult to imagine that it will result in any improvement of the position of defendants or their insurers. The trends elsewhere in personal injury litigation suggest that the burden of funding appropriate care is likely to fall more onto those who caused the need for such care and less onto public funds (e.g. section 150 of the Health & Social Care (Community Health & Standards) Act 2003 - not yet in force). If Parliament does not intervene, it seems that the courts will treat the tortfeasor’s duty to compensate as taking precedence over the local authority/PCT’s duty to provide.

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