Care payout victory for insurers leaves councils facing huge bills

Councils are facing huge unexpected long-term care bills due to a legal loophole allowing personal injury insurers to make dramatically reduced payments at their expense.

After two landmark cases (see Landmark cases), insurance companies are successfully arguing that councils and the NHS are legally required to pay for claimants’ basic care needs and getting the value of this subtracted from their payouts. This is leading to massive unexpected bills which in the long-term will cost the state millions.

Jill Greenfield, a partner in the personal injury department at law firm Field Fisher Waterhouse, said lawyers acting for insurers were getting councils to do assessments on claimants and then using them in court to show the value of care the local authority was prepared to provide.

In some cases, she said, lawyers had costed a claimant’s liftime care bills from an assessment for one year of care, despite individuals’ annual care costs varying in line with councils’ changing eligibility criteria and other factors.

“Local authorities have got to be very careful because letters they have written five years ago are finding their way into court bundles,” she said.

Neil Sugarman, an executive committee member of the Association of Personal Injury Lawyers (Apil), said the loophole existed due to poorly-drafted laws and that this needed to be amended by the government.

“When the insurance companies structure how much they charge for premiums they have obviously factored those [potential claim costs] in so this is a real windfall for them,” he said.

The Association of Directors of Adult Social Services is currently developing its position on the issue, but joint-chair of the disabilities committee Jeff Jerome said that it would probably back Apil’s stance. He said: “It’s likely that we will push for a change in the law. We aren’t funded to deal with this.”

Landmark cases

● Sowden vs Lodge 2004

This was the first time an insurance company managed to successfully argue that a claimant was entitled to council or NHS care and that the value of this should be subtracted from any payout.

● Croften vs NHS 2006

In this High Court case the claimant suffered severe brain injury due to not being treated for a heart defect quickly enough. The judge ruled that the amount the NHS had to pay out should be reduced by £68,000 a year to account for local authority contributions to the cost of care. The claimant appealed this decision. In February 2007 the Appeal Court ruled the High Court judge was correct to take the council’s care into account in deciding on the payout, but at the same time referred the issue back to him for “further consideration”.

Further information
Association of Personal Injury Lawyers
Association of Directors of Adult Social Services

Contact the author
 Amy Taylor

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