State disability pensions, sick pay and other "collateral benefits" paid to accident victims should be deducted from damages awarded in court in order to avoid "double compensation", according to the Law Reform Commission.
In a consultation paper published today, it said such compensation was "unjustified" in a legal system which followed the principle that a victim should not benefit from, but, as far as possible, remain in the same position as before, an accident.
Furthermore, the commission said double compensation "increases the overall costs of accidents which society as a whole must bear". These included higher insurance premiums, employment costs and costs of living.
As a result, the commission provisionally recommended a change to the rule of non-deductibility of collateral benefits under Section 2 of the Civil Liability (Amendment) Act, 1964 to one of deductibility, with certain exceptions.
One exception, it said, should be insurance payments financed by the injured party, as deduction would leave the insured person worse off than the uninsured and, therefore, act as a disincentive to people to take out insurance policies. It noted insurance premiums also fulfilled a valuable function in providing an interim payment to the victim before any award was made. It was, therefore, in the public interest to encourage insurance cover, as it reduced the burden on the State and society.
However, the document said insurance payments financed through the plaintiff's employment should be deducted, as the employer might otherwise end up compensating the victim twice over.
The document said charitable donations should also be exempted from deduction "in order to encourage public giving through charity as an expression of social solidarity. Spontaneous acts of benevolence might be chilled if charitable benefits were to be deducted".
In relation to pension payments, the commission said there were compelling reasons to justify their exemption from deduction. However, there was a divergence of opinion as to the limits of this exemption.
Some commissioners said occupational ill-health early retirement pensions which were not entirely financed privately by the plaintiff outside of employment should be deducted. They said only pensions which plaintiffs could show they paid for in full should be exempt.
All agreed, however, that statutory disability pensions, payable prior to normal pensionable age, should be deducted, as well as sick pay or any social welfare payment which compensated for the same loss as an award of damages.
The commission acknowledged that deducting collateral benefits from awards of damages reduced the financial liability of the defendant and recognised the "moral and intellectual attractiveness" of reimbursing the collateral benefit provider to avoid the defendant unjustifiably saving money.
However, it remarked "the current state of Irish law is not practically suited to the establishment of a system of reimbursement". Such a system worked optimally in jurisdictions where, unlike ours, there was an overlap between legal and social compensation systems and where elaborate transfer arrangements existed within the insurance industry.
The commission stressed the recommendations contained within the document, Consultation Paper on Section 2 of the Civil Liability (Amendment) Act, 1964: the Deductibility of Collateral Benefits from Awards of Damages, were provisional. Final recommendations will not be made until the publication of a report concluding the commission's response to a reference from the Attorney General for the issue to be examined.
