Consultation Paper on Section 2 of the Civil Liability (Amendment) Act, 1964: The Deductibility of Collateral Benefits from Awards of Damages

By Órla Gillen, Thursday, 9th September 1999 | 0 comments
Filed under: 1999.



The Law Reform Commission publishes Consultation Paper on Section 2 of the Civil Liability  (Amendment) Act, 1964: The Deductibility  of Collateral Benefits from  Awards of Damages

Where a person is awarded a sum of money as compensation for a loss sustained in an accident although they have already been compensated for that loss by some other means, that person is in effect doubly compensated for the same loss. In a legal system which follows the principle that compensation should, as far as possible, place an accident victim in the same position as before the accident, double compensation is unjustified; furthermore it increases the overall costs of accidents which society as a whole must bear.

It is this potential for double compensation which the Law Reform Commission examines in its Consultation Paper on Section 2 of the Civil Liability (Amendment) Act, 1964: the Deductibility of Collateral Benefits from Awards of Damages published  today.

The Consultation Paper is the first stage of the Commission's response to a reference from the Attorney General which requested that section 2 of the Civil Liability (Amendment) Act, 1964 be examined with a view to removing the possibility of double compensation in awards of damages for non-fatal personal injuries. The final stage will involve the publication of a Report with the Commission's ultimate recommendations.

In its essence section 2 lays down the rule that sums of money payable to plaintiffs in respect of non-fatal personal injuries shall not be deducted from awards of damages to those plaintiffs in civil actions. These sums of money may include, insurance payments, charitable donations, social welfare payments and certain pension payments and forms of sick pay. They have come to be known as 'collateral benefits'.

The general rule of non-deduction encapsulated in section 2 can give rise to double or over compensation. While later statutory provisions exempt certain social welfare payments from this rule, in many cases the costs of accidents are significantly increased. This extra expense is particularly acute in the light of the proliferation of collateral benefits  in  modem  society  and  does  not  occur  in  countries  where  the  regime  of  compensation through the courts does take account of other mechanisms which compensate for loss.

The costs of a system which permits double compensation are borne by all of society in the form of higher insurance premiums, employment costs and the cost of living in general. The Commission is of the view that double compensation is an inefficient and wasteful use of society's resources.

Consequently the Commission provisionally recommends the  enactment  of  a  general rule of deduction, from awards of damages, of collateral benefits which have the effect of compensating for the same loss as the damages awarded, to replace the present general rule of non-deduction.

However to this general rule there are certain exceptions. The Commission provisionally recommends that certain types of collateral benefits, such as some forms of insurance and pension payments and charitable benefits, should not be deducted from awards of damages as to do so would not be in the public interest. This public interest lies in encouraging people to provide for future contingencies by taking out insurance policies for example, and in making charitable donations. Charitable benefits might wane if donors thought that a defendant's liability would be reduced by a charitable payment.

Deducting collateral benefits from awards of damages would have the effect of reducing the amount of the award, and consequently the extent of the financial liability of the defendant since the defendant would be required to compensate only for actual loss suffered. The Commission examines the feasibility of requiring that the provider of the collateral benefit be reimbursed. However it provisionally recommends that the current state of Irish law is not practically suited to the establishment of a system of reimbursement.

Consultation Process

In order to ensure that the Commission's final recommendations can be made as soon as possible, written submissions on the Consultation Paper are welcomed up to 17 December  1999.