Jessica Jarvis

Reverse indemnities require claimants who receive damages for personal injury to avoid “double dipping”—using both damages and state-funded support for care costs. If a claimant seeks state support, they often must repay the defendant. These indemnities aim to prevent overcompensation, ensuring resources are fairly used. However, they can be challenging to enforce, especially as claimants’ circumstances evolve.

Case Summary

In BJB [2024], the claimant’s Deputy sought to release BJB from a reverse indemnity. BJB, who suffered a hypoxic brain injury at birth, was awarded a £1.4 million lump sum and periodical payments for lifelong care. Over time, her needs and costs increased, creating a £5,000 monthly shortfall that could deplete her funds within 10-12 years. The Deputy argued that maintaining the indemnity would compromise BJB’s ability to sustain essential care, while the respondents, Barnsley Hospital NHS Foundation Trust and NHS Resolution, opposed the release on grounds of potential overcompensation.

 

Claimant’s Arguments

Financial Shortfall

BJB’s Deputy presented detailed financial reports showing that her private funds were at risk of depletion within a decade, as her care costs now significantly exceeded her income. This shortfall resulted from rising care costs and the complexities of maintaining a high standard of care as BJB’s needs evolved. The Deputy argued that releasing the indemnity was critical to prevent BJB from reaching a financial crisis where she might have to reduce care quality or go without necessary support.

Restrictive Burden of the Indemnity

The Deputy claimed the indemnity forced BJB to rely solely on her damages, even though these were now inadequate. She argued that this restriction was unreasonable given BJB’s escalating needs and costs. The indemnity’s constraints would effectively drain her resources prematurely, undermining her care quality and forcing difficult choices about what care she could sustain.

Best Interests

The Deputy stressed the importance of acting now rather than waiting until BJB’s resources were critically low. By securing access to state funding before funds were depleted, the Deputy could ensure BJB’s care needs would be met consistently. This approach, the Deputy argued, was in BJB’s best interests, ensuring her long-term well-being by preserving her remaining funds for needs not covered by state support.

 

Respondents’ Arguments

Surplus Income

The respondents contended that lifting the indemnity would enable BJB to receive both private and public funds, allowing “double recovery.” They projected that BJB could accumulate an annual surplus of between £32,000 and £67,000, which they argued would lead to an overcompensation that contradicted the indemnity’s original intent. The respondents believed this surplus would permit a standard of care exceeding what damages alone would cover, placing an unfair burden on public resources.

Implied Mismanagement of Funds

The respondents suggested, without presenting specific evidence, that the Deputy might have mismanaged BJB’s finances, contributing to the financial shortfall. They argued that potential mismanagement should disqualify the Deputy from receiving a release, as it would be unfair to shift funding responsibilities to the state if her funds had not been effectively managed. This argument, however, lacked substantive evidence.

Alternative Funding Structure

The respondents proposed that, instead of releasing the indemnity, BJB’s periodical payments should be restricted to cover only assessed care needs, with any excess returned to the public body. They argued this structure would prevent unnecessary reliance on state funds, ensuring that BJB’s damages were exhausted before state funding became available. The respondents believed this approach would maintain fairness and protect public resources.

 

Senior Judge Hilder’s Reasoning and Decision

Judge Hilder carefully evaluated both sides’ positions, applying a two-step approach to assess the indemnity release application:

1. Financial Sufficiency

Judge Hilder focused first on whether BJB’s funds were sufficient to cover her “reasonable needs.” She found that the Deputy’s projections, supported by detailed financial data, showed an undeniable need for additional funding. BJB’s costs clearly outpaced her resources, and she faced imminent financial depletion. The judge dismissed the respondents’ claim of surplus income as speculative and unsupported by evidence. She also rejected their implication of mismanagement, noting that allegations without concrete proof were insufficient to influence the decision.

 

2. Best Interests

Judge Hilder agreed with the Deputy that it was essential to act before BJB’s funds were nearly exhausted. Waiting would likely lead to a critical care crisis, compromising BJB’s well-being and forcing her to reduce care standards. The judge endorsed the Deputy’s proactive approach, emphasising that early access to state funding aligned with BJB’s best interests. By releasing the indemnity now, the Deputy could preserve BJB’s remaining private funds for needs beyond state-provided care, ensuring stability in her care plan.

 

Guidance for Future Applications

Judge Hilder’s decision in BJB [2024] offered clear principles for similar cases, underscoring the CoP’s role and expectations:

1. CoP’s Limited Role in Double Recovery Issues

Hilder clarified that the CoP’s jurisdiction in indemnity cases is limited to evaluating whether the claimant’s resources meet their reasonable needs. The CoP is not responsible for addressing double recovery concerns—that role lies with the damages court. This distinction aims to prevent CoP from becoming a forum for civil litigation issues, keeping its focus on the claimant’s welfare.

2. Binary Structure of Indemnity Releases

The judge affirmed that the CoP’s role in releasing an indemnity is “binary”—either granted or denied based solely on financial sufficiency. She declined the respondents’ proposal to add conditions, such as restricting periodical payments, which she saw as beyond the terms of the original settlement. This approach maintains simplicity, helping to prevent excessive burdens on Deputies tasked with managing claimants’ finances.

3. Interpretation of ‘Sufficient Resources’ and Practical Needs

Hilder suggested that assessments of “sufficient resources” should be flexible, taking into account changes in care needs rather than adhering strictly to initial settlement assumptions. This perspective recognises the evolving nature of long-term care and allows CoP to consider realistic future needs, focusing on claimants’ financial sustainability over time.

4. Support for Proactive Applications

Judge Hilder praised the Deputy’s forward-thinking approach, noting that early action is often necessary to protect a claimant’s best interests. She encouraged Deputies to apply for indemnity releases if financial projections indicate a significant shortfall, ensuring that funding decisions align with long-term well-being.

5. Expectation for Concrete Evidence in Opposition Arguments

Hilder stressed the need for timely and credible evidence when respondents challenge a Deputy’s projections. She highlighted that the respondents’ last-minute criticism of the Deputy’s evidence lacked substantive backing, weakening their position. Future respondents are advised to submit concrete, evidence-based objections early in the process to avoid similar pitfalls.

6. Reducing CoP’s Role in Indemnity Enforcement

Finally, Hilder indicated her support for limiting CoP’s involvement in reverse indemnities, suggesting that these issues are better addressed in civil courts. By discouraging the use of Peters undertakings, she aligned with previous cases advocating that double recovery should be managed within civil litigation, not under CoP oversight.

 

Conclusion

The BJB [2024] EWCOP 59 (T2) decision marks an important step in how reverse indemnities are handled, with the Court of Protection taking a practical, claimant-centred approach. By allowing Deputies to prioritise claimants’ well-being over strict financial restrictions, the court has shown that access to essential care should be safeguarded, even when state support is needed before private funds are fully depleted.

This ruling provides Deputies with clearer, more adaptable guidance, ensuring that claimants can maintain quality care without being forced into financial hardship. Moving forward, BJB [2024] offers a more balanced path for managing personal injury settlements, one that recognises the realities of long-term care needs while still respecting fair use of resources.