A LAW REFORM Commission report has found that introducing a cap on damages awarded in personal injury claims would be permissible under Irish constitutional law. 

The Commission report also notes that while it has examined whether capping of damages would be permissible under the constitution, it would be the responsibility of the Government, with advice from others including the Attorney General, to legislate for it. 

The review of damages was prompted by rising insurance premiums for businesses and motorists, which the industry claims is a result of excessive payouts being awarded during personal injury claims. 

A Central Bank report in December revealed that motor insurance in Ireland had risen by 42% in the last decade despite a 2.5% reduction in the average cost of individual claims over the same period.

The Government at the time faced criticism for failing to intervene in rising insurance premiums with Sinn Féin TD Pearse Doherty saying “spiralling premium increases are forcing businesses to close, hitting jobs and hurting communities. For motorists, extortionate premiums are eating into their pay packets”.

The Judicial Council Bill, which will be informed by the Commission’s reports, will seek to cap payouts for injuries such as whiplash during claims. 

The Commission, in concluding that a cap on damages is permissible, examined similar legislation in other jurisdictions including the UK and Australia. 

The Report forms part of the Commission’s Fifth Programme of Law Reform and it follows the publication of a consultative issues paper last December.

Four models

The Commission reviewed four possible models and found that “in principle, legislation capping awards of general damages in personal injuries litigation could be constitutionally permissible”.

The first model involved primary legislation which would set a scale with a maximum cap, similar to sentencing limits in criminal cases but which should include a discretionary option for judges in “exceptional circumstances” in order to withstand a constitutional challenge.

The second model, similar to that in New South Wales, Australia, involved legislation where there is “an upper cap or limit on general damages, and all awards for lesser injuries are indexed to the cap” would involve “legislation providing a fixed sum for general damages that should accompany that level of injury”.

The third model, proposes that “either Models one or two (or any other method of capping) could be enacted, but in which the Act would delegate the details of the cap to, for example, a Minister or some other regulation-making body”.

However, it warned that such a model would be open to challenge “because it involved delegating the setting of caps to a Minister”.

The fourth model, which the report notes was a preference among many figures involved with the commission, “envisages seeing the courts continuing to set a maximum upper limit or cap for general damages in catastrophic cases, and a proportionality test for other cases”.

It said: “The actual amounts chosen in a cap, or caps, will also strongly influence whether the measure is taken to be proportionate under the relevant constitutional tests.

“The Commission also points out that this report is published within the current, fast moving, context of policy and legislative developments since 2018, when the Cost of Insurance Working Group and Personal Injuries Committee first suggested that the Commission should consider examining the subject matter.”

It notes that in Ireland, the courts have, since 1984, developed and adjusted a maximum cap for general damages for the most catastrophic type of injury that, as confirmed earlier this year by the Supreme Court in the Ruth Morrissey case, now stands at €500,000, which was applied in Ruth Morrissey’s own case.

‘Sky-high damages’ 

The Alliance for Insurance Reform has welcomed the publication of the report.

Peter Boland, a director of the alliance, said: “Right now the report changes nothing in that new draft guidelines on general damages are due to be submitted to the Board of the Judicial Council by 28 October.

“But on the other hand it clearly endorses a ‘Plan B’ – the capping of damages by the Oireachtas – if the Judicial Council does not fully reflect the common good in urgently delivering the dramatic reductions in damages for minor injuries necessary if we are to address our current insurance crisis in any meaningful way.”

Eoin McCambridge, another director of the alliance, said small businesses, voluntary groups, charities, sports clubs and cultural organisations “are being seriously damaged by the cost of insurance or, in numerous cases now, unable to obtain insurance at all”.

“As the Personal Injuries Commission clearly identified, sky-high general damages are at the heart of this issue and must be cut to reflect international norms to ensure that legitimate minor injuries attract modest damages.

“Policyholders cannot wait any longer for dramatic, meaningful reductions in awards for minor injuries,” McCambridge said. 

In a statement this afternoon. thee Bar of Ireland said it welcomed the analysis by the Law Reform Commission. 

It said that the report by the LRC fully respects the separation of powers between the legislature and the Oireachtas.

“The assessment and award of damages should remain an independent judicial function; and is the most constitutionally permissible option available,” the statement read. 

With reporting by Órla Ryan and Garreth MacNamee

An earlier version of this article attributed a quote in error to the Competition and Consumer Protection Commission but has been corrected.