Wallace v Follett

The Court of Appeal allowed the insurer's appeal against parts of the order made by His Honour Judge McKenna concerning the terms of a periodical payments order. The court held that it had jurisdiction to determine disputed terms where the parties agreed to a periodical payments structure, consistent with section 2A of the Damages Act 1996 and the overriding objective to reduce issues. The court approved limited powers for the insurer to require medical examination at its cost for two purposes: (i) to obtain medical information sufficient to obtain an annuity quotation and (ii) to review reserves not more frequently than once every seven years, with a right for the claimant to apply to the court if there is a reasonable concern about scope. The court also approved an annual GP confirmation procedure, with the insurer entitled to suspend payments until seven days after receipt of the confirmation dated within the permitted period rather than being required to obtain a court order to suspend payments.

Background and procedural history:

• On 18 April 2007 the claimant, David Follett, suffered catastrophic injuries in a road traffic accident. Judgment in liability was entered on 15 March 2010 subject to a 30% discount for contributory negligence. The parties prepared detailed evidence on quantum and held a joint meeting on 12 December 2011 to explore settlement by a lump sum plus periodical payments.
• Certain terms of the proposed order could not be agreed. District Judge Baddeley directed the parties to submit alternative drafts and gave the High Court jurisdiction to adjudicate remaining disputes. On 8 May 2012 His Honour Judge McKenna (sitting as a High Court judge) determined two contested issues in favour of the claimant. The insurers obtained leave to appeal to the Court of Appeal.

Nature of the application and issues:

• (i) Whether the trial judge had jurisdiction to determine disputed terms of a proposed settlement embodied in a periodical payments order.
• (ii) Whether the insurer could require the claimant to undergo future medical examinations at the insurer's cost for the purposes of (a) obtaining an annuity quotation and (b) reviewing reserves for funding periodical payments, and if so on what limits and safeguards.
• (iii) Whether the insurer was entitled to suspend payments in default of the claimant providing annual written confirmation from his general practitioner that he had been seen and was alive, without first obtaining a court order.

Court's reasoning and conclusions:

• Jurisdiction: The court found it appropriate for the court to decide outstanding disputed terms because the parties had agreed on a periodical payments order; such an order carries continuing jurisdiction and resolution of continuing disputes is contemplated by s.2A of the Damages Act 1996 and the overriding objective.
• Medical examination: The Court of Appeal recognised the insurers' legitimate commercial need to calculate and update reserves (including regulatory and actuarial obligations) and answered that insurers are entitled to obtain up-to-date medical material. The court modified the insurer's proposed wording and authorised a limited power to require medical examination at the insurer's cost: examinations limited to obtaining a medical opinion for an annuity quotation and/or, not more frequently than once every seven years, for review of reserves. The claimant may apply to the court if there is reasonable concern as to the nature or extent of any such examination.
• GP confirmation and suspension of payments: The court approved an annual process by which, following a written request before 1 November, the claimant must provide GP confirmation by 1 December; failure to provide it permits suspension of instalment payments until seven days after a compliant confirmation is supplied. The court concluded that it was disproportionate to require the insurer to obtain a court order before suspending payments in such circumstances, provided the procedure is made straightforward and the insurer gives reminders.

Result: The Court allowed the appeal on both grounds, substituted and approved the specific clauses set out in the judgment to govern medical examinations and GP confirmations, and invited counsel to agree an order reflecting those terms.

Appeal allowed. The Court of Appeal held that (a) the court had jurisdiction to resolve disputed terms of a proposed periodical payments order; (b) insurers are entitled to require limited medical examinations at their cost for obtaining annuity quotations and for reserve reviews not more frequently than once every seven years, subject to the claimant's right to apply to the court about scope; and (c) insurers may require annual GP confirmation and may suspend payments until seven days after compliant confirmation is provided, without needing a court order to effect suspension. The court substituted and approved specific wording to implement those principles.

Appeal from His Honour Judge McKenna sitting in the High Court (Birmingham District Registry), case no. 9BM09431; the Court of Appeal ([2013] EWCA Civ 146) allowed the insurer's appeal against parts of the High Court's order concerning terms of a periodical payments order.