What are periodical payment orders (PPO) in medical negligence claims?

A periodical payment order or PPO is a structured method of paying compensation, commonly used to provide for the lifelong care needs of a severely disabled child in a cerebral palsy, birth injury, or neonatal brain injury claim.

A PPO requires the defendant to pay the injured claimant a regular income, at a pre-determined, agreed rate, for the remainder of the claimant’s life. PPO payments are based on medical and care experts’ assessments of the claimant’s current and future needs and are usually protected from the long-term impact of inflation by linking them, for example, to the Annual Survey of Hours and Earnings (ASHE).

PPOs are not new. At Boyes Turner we have been using them in appropriate cases to meet our clients’ lifelong needs for almost 20 years.

When should a PPO be considered in the settlement of a medical negligence compensation claim?

Periodical payment orders (PPOs) are most commonly recommended for claimants who have suffered severe permanent disability, such as children with cerebral palsy birth injury or other types of neurodevelopmental disability caused by brain injury around the time of their birth or in their early years.

Claimants with severe, permanent disability caused by birth injury and other types of medical negligence remain dependent on others for their care throughout their life. Boyes Turner’s specialist high value claims lawyers carefully consider with our experts and our client’s family the best way to provide for the injured person’s long-term needs, and whether their settlement should be paid as a lump sum, a PPO or a combination of both.

The difference between a PPO and a traditional lump sum settlement is in the way the compensation is structured, which is why settlements involving PPOs are sometimes called ‘structured settlements’.

Not all claims are suitable for settlement with a periodical payment order, but PPOs should always be considered in cases where a large proportion of a severely injured claimant’s compensation must provide for their lifelong care or other essential long-term needs.

Does a lump sum or PPO settlement make better provision for a severely disabled child’s future care?

A totally dependent, severely disabled claimant’s compensation must provide a lifetime’s worth of nursing care, specialist therapies and equipment, assistive technology and adapted housing in order to put them (in so far as money can) back in the position that they would have been but for the negligence which caused their injury.

The law requires an injured claimant’s lump sum compensation to be calculated according to agreed principles which assume that it should run out on the day the claimant dies, having met all their additional needs that were caused by the defendant’s negligence at the time that those needs arise. This principle of 100% compensation, which governs the way lump sum compensation for future loss is valued, is designed to ensure that the injured person is neither under-compensated nor over-compensated for the negligently-caused injury. In practice, even with careful professional management of the claimant’s compensation, it is impossible to ensure that the claimant’s compensation will last until the date of their death but not a day more.

Our specialist birth injury solicitors are experts at ensuring that every foreseeable element of an injured child’s future loss is identified and correctly calculated when valuing their claim. However, when looking to the future, the valuation of any child’s future loss is based on experts’ estimates of their longevity, future needs and care costs. Following settlement, and throughout their life, the injured person’s health, care needs or circumstances may change or the costs of professional care may increase unexpectedly. Multiple uncertainties at the point where traditional lump sum compensation for future loss is calculated mean that some claimants live longer than expected, with a risk that they run out of money for care whilst still alive. Sadly, others leave money unspent after their death, either because their life was shorter than predicted, or because they or their families held back from spending money on an appropriate level of care out of fear that their compensation fund might run out.

We use periodical payment orders (PPOs) to overcome these problems by guaranteeing that money to pay for care will be available throughout the claimant’s life. In addition to the regular annual income that a PPO provides, ‘stepped PPOs’ can schedule increases in the payments at pre-set future dates to cater for predicted increases in the need for care.

Additional PPOs can also be set to start or finish at specified times in the claimant’s life, such as to pay for special needs educational school placements during the child’s teenage years. The claimant is guaranteed to receive the income provided by a PPO to pay for their care throughout their life, even if they far outlive their predicted lifespan. PPO payments cease on the day the claimant dies.

What are the advantages of periodical payment orders (PPO) in compensation claims?

PPOs provide several advantages for a claimant with severe lifelong disability, if included as part of their compensation settlement:

• PPO payments are guaranteed to continue for the remainder of the claimant’s life, even if they outlive their predicted lifespan. The claimant can use the money from their PPO to pay for their care, knowing that it will not run out.
• PPO payments are calculated based on the injured claimant’s individual needs, ensuring that they get the level of care that is right for their disability.
• PPO payments can be scheduled to increase or boost the claimant’s income at specified times in their life, such as when their need for care and support is expected to increase owing to changes in life-stage, circumstances or level of disability.
• PPO payments are index-linked to protect them from the impact of inflation over time, so the payments increase along with costs of professional care.
• Compensation which is paid as income via a PPO is treated as capital by HMRC, which means that the annual income payments are tax free.

What are the disadvantages of periodical payment orders (PPO) in compensation claims?

Despite the long-term benefits of PPOs there are reasons why a PPO might not be appropriate in every case.

• The major disadvantage of having compensation paid via a PPO is that it limits the claimant’s flexibility as to how their money is spent. In order to fully compensate someone who has suffered severe, lifelong disability, such as cerebral palsy or neurodevelopmental disability, caused by medical negligence, a lump sum may be needed to pay for larger essential purchases, such as a more suitable or adapted house which can accommodate professional carers or a specialist vehicle.
  In practice, we help most of our clients overcome this problem by structuring the final settlement to combine PPOs for care with a lump sum to cover one-off purchases and provide flexibility for unexpected contingencies.
• Where the case is settled on a discounted (proportionately reduced) basis to protect the claimant from a significant risk of losing their case, depending on the level of the compensation that the claimant receives, a PPO might not make the best use of the claimant’s final compensation in meeting their priority needs.
• If the injured claimant’s life expectancy is significantly shortened, they may get better value from having their compensation paid fully as a lump sum which they can use immediately for priority needs, such as an adapted home, rather than as annual income from a PPO which will end on the date of their death.

We work closely with our experts and independent financial advisors to ensure that each of our clients receives expert advice on the most favourable format for their compensation settlement, based on their individual circumstances.

Who decides if a compensation settlement is paid as a lump sum or a PPO?

The courts can order PPOs but in practice in medical negligence claims it is more common for them to approve PPOs in settlements that have been agreed between the claimant’s legal representatives and NHS Resolution, rather than to impose them.

Severely injured claimants are, therefore, dependent upon their own solicitor’s knowledge, experience and expertise to advise them about the possibility, availability and advisability of a periodical payments order. For over 30 years, Boyes Turner’s specialist solicitors have helped the families of brain-injured children to obtain the highest and most appropriate form of settlement for their child. Our medical negligence team regularly achieve top level compensation settlements for our clients, building in inflation-proofed, guaranteed long-term provision for their needs with index-linked periodical payments.

Our medical negligence settlements involving PPOs

Examples of settlements in which PPOs have been used to provide for our clients' future care and other needs include:

• £31.5 million settlement for a teenager with severe cerebral palsy disability from HIE birth injury, combining a £7.1 million lump sum with PPOs rising to £400,000pa for care;
• £18.7 million settlement for a teenager with HIE birth injury and cerebral palsy, including annual PPO payments for care rising to £300,000pa;
• Settlement combining a £5 million lump sum, lifelong PPO care payments rising to £232,750pa plus an additional PPO covering the annual costs of the injured child’s educational placement at Treloar’s to the age of 19;
• $23 million settlement in a kernicterus neonatal brain injury claim combining a $10.3 million lump sum and US inflation-linked PPOs rising to $457,000pa for care;
• £12 million settlement in a severe dyskinetic cerebral palsy birth injury claim combining a £5.35million lump sum with care PPO payments rising to £447,000pa.

If your child has cerebral palsy or neurological disability as a result of medical negligence, or you have been contacted by HSSIB/MNSI or NHS Resolution, you can talk to a solicitor, free and confidentially, for advice about how to respond or make a claim by contacting us.