Structured settlements are those that are paid over time, rather than as a lump sum. They are becoming increasingly common following a recommendation that they be more widely used and, in particular, that where cases involve children or patients, the court should not approve the settlement of a claim unless satisfied that a structured settlement has been considered. In addition, the costs of reasonable financial advice should be regarded as a cost of the litigation.
It is likely that, over time, the ‘lump sum’ settlement for major claims will cease to be used. The Courts are able to order that where appropriate periodical payments rather than lump sums will be paid to injured parties who bring successful actions in personal injury cases. We have recently started to see examples of this. In the case of Walton v Calderdale NHS Trust, the Trust was ordered to pay the claimant – who was nineteen years old with a life expectancy of 70 years – an annual payment of £50,548 in respect of his annual care costs, rather than a lump sum.
Structured settlements are becoming more common in medical negligence cases, especially where the actuarial calculations indicate that the life expectancy of the injured party is substantial. In 2014, a new record for payment under a structured settlement was set, a cliamant receiving a seven figure lump sum with annual payments of more than £400,000.
There are now companies in the market which will buy for a cash lump-sum the annuity stream agreed under a structured settlement. What is clear is that negotiating an appropriate settlement as a lump-sum or structured settlement should be undertake only with the benefit of high quality legal and financial planning advice.