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1. The Law

The law on the Compensation Recovery Scheme is contained in:

• The Social Security (Recovery of Benefits) Act 1997
• The Social Security (Recovery of Benefits) Regulations 1997 as amended by paragraphs 148-152 of Schedule 7 to the Social Security Act 1998
• The Social Security (Recovery of Benefits) (Lump Sum Payments) Regulations 2008
• The Social Security and Child Support (Decision and Appeals) Regulations 1999, regulations 9, 9ZA and 30-58
• The Social Security (Recovery of Benefits) (Northern Ireland) Order 1997
• The Social Security (Recovery of Benefits) (Northern Ireland) Regulations 1997
• The Social Security Act 1998

The main provisions of the Scheme are that:

• a person should not be compensated twice over in respect of the same accident, injury or disease;
• a compensator who is, or is alleged to be, liable to any extent for the accident, injury or disease, makes a compensation payment, agreed on or after 6 October 1997 and listed benefits and or lump sum payments have been paid (or are likely to be paid), to, or for, the injured person in respect of an accident, injury or disease. Where a payment was made on or after 6 October 1997 in accordance with a Court Order or agreement made before that date, the provisions of the Social Security Administration Act 1992 and the Social Security (Recoupment) Regulations will continue to apply;
• a compensator who makes a compensation payment after 1 October 2008 is also liable to repay any lump sum payments paid under the Pneumoconiosis, etc. (Workers' Compensation) Act 1979 and Part 4 of the Child Maintenance and Other Payments Act 2008
• the Scheme applies in the UK or elsewhere, regardless of where the compensator is based, or where the accident occurred;
• the 2008 Diffuse Mesothelioma Scheme applies to those people who have contracted diffuse mesothelioma as a result of asbestos exposure in the UK.
• no person shall make a compensation payment (other than an exempt payment) without first applying to CRU for a Certificate. The compensator will be liable to pay DWP an amount equal to the total amount of the recoverable benefits. Lump sum payment recovery cannot exceed the amount of compensation paid.
• CRU must issue the Certificate within 4 weeks from the date of receipt of a request which contains all the required information.
• if after a Certificate has been issued, CRU become aware that a recoverable lump sum payment has been paid, a revised Certificate will be issued to include the lump sum payment amount and will supersede all previous Certificates.
• under the provisions of the Social Security (Recovery of Benefits) Act 1997, and the Social Security (Recovery of Benefits) (Lump Sum Payments) Regulations 2008, the compensator - the person who caused the injury or, more commonly, their insurer - is liable both to pay damages to the injured person and to repay benefits and or lump sum payments to the Secretary of State for Work and Pensions. In certain circumstances it will be possible for the compensator to deduct some or all of the amount they have had to repay to the Secretary of State from the gross compensation award, a practice known as "offsetting".
• where the amount of compensation relating to a particular head of compensation is less than the amount of the corresponding benefit, the compensator is still liable to repay the total amount of benefits shown on the Certificate.
• under the provisions of the Social Security (Recovery of Benefits) (Lump Sum Payments) Regulations 2008 the compensator must reduce the general damages element of the compensation award before reducing the special damages element of the award.
• under the provisions of the Social Security (Recovery of Benefits) (Lump Sum Payments) Regulations 2008, if the amount of compensation is less than the lump sum payment CRU can only recover an amount up to the equivalent of the gross compensation award.
• the compensator is liable to repay lump sum payments before repaying recoverable benefits
• when making a deduction under Section 8 to the 1997 Act, or to take account of lump sum payment recovery under Regulation 12 of the Social Security (Recovery of Benefits) (Lump Sum Payments) Regulations 2008, the compensator must inform the injured person.
• the compensator, the injured person or their representative may ask at any time for the Certificate to be reviewed. It may only be changed if:
  • a mistake occurred in the preparation of the Certificate
  • the amount of recoverable benefit and or lump sum payment on the Certificate is more than the amount due to the Secretary of State for Work and Pensions
  • incorrect or insufficient information was provided by the person who applied for the Certificate and as a consequence the amount on the Certificate is less than the amount due to the Secretary of State
• if after CRU have looked at the Certificate again CRU find that there is no recoverable benefit and or lump sum payment due to the Secretary of State the Certificate may be revoked.
• a compensator has the right of appeal but only if the claim giving rise to the compensation payment has been finally disposed of, and the liability under Section 6 to the 1997 Act and or Regulation 10 of the Social Security (Recovery of Benefits) (Lump Sum Payments) Regulations 2008 has been discharged.
• an injured person has a similar right, but only where their compensation payment has been reduced to take account of benefit recovery under Section 8 of the 1997 Act, or to take account of lump sum payment recovery under Regulation 12 of the Social Security (Recovery of Benefits) (Lump Sum Payments) Regulations 2008.
• an appeal may be made on the grounds that:
  • any amount, rate or period specified in the Certificate is incorrect; or
  • benefits and or lump sum payments listed in the Certificate have been paid other than because of the accident, injury or disease in question, and should not have been included; or
  • benefits and or lump sum payments listed which have not, and are not likely to be, paid to the injured person have been brought into account; or
  • the compensation payment was not made as a consequence of the accident, injury or disease.

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1.1 The relevant recovery period

The period in respect of which benefits, listed in Schedule 2 to the 1997 Act, may be recovered by DWP begins on:

• the day following an accident or injury; or
• in disease cases, the date that a listed benefit as shown in Schedule 2, is first claimed in consequence of the disease.

The period ends on:

• the day a compensation payment is made in final discharge of a claim; or
• the date an agreement is made between the compensator and injured person under which an earlier compensation payment is treated as having been made in final discharge of any claim; or
• the date five years after the relevant period begins, whichever comes first.

Please note: 'The relevant period' is defined in Section 3 of the Social Security (Recovery of Benefits) Act 1997.

The relevant period does not apply to Lump Sum Payments made under the Pneumoconiosis etc. (Workers’ Compensation) Act 1979 or the 2008 Diffuse Mesothelioma Scheme.

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1.2 Listed benefits recoverable under the 1997 Act

Compensation in respect of loss of earnings during the relevant period may be reduced where the following benefits have been paid to meet the same need:

• Disablement Pension payable under section 103 of the 1992 Act (also known as Industrial Injuries Disablement Benefit)
• Employment and Support Allowance
• Incapacity Benefit
• Income Support
• Invalidity Pension
• Invalidity Allowance
• Jobseeker’s Allowance
• Reduced Earnings Allowance
• Severe Disablement Allowance
• Sickness Benefit
• Statutory Sick Pay paid before 6 April 1994
• Unemployability Supplement
• Unemployment Benefit
• Universal Credit

Compensation in respect of cost of care may be reduced where the following benefits have been paid during the relevant period:

• Attendance Allowance
• Care Component of Disability Living Allowance (DLA Care)
• Disablement Pension increase for Constant Attendance Allowance
• Exceptionally Severe Disablement Allowance
• Living Component of Personal Independence Payment (PIP L)

Nursing care and attendance (including holiday/respite care) and the inability to cook may fall within Schedule 2.

Compensation in respect of loss of mobility may be reduced where the following benefits have been paid during the relevant period:

• Mobility Allowance
• Mobility Component of Disability Living Allowance (DLA Mobility)
• Mobility Component of Personal Independence Payment (PIP M)

Travel to hospital for treatment and additional costs of travel that may fall within Schedule 2 include:

• vehicle costs;
• powered wheelchair costs;
• costs of adaptations to transport;
• taxi and or bus fares (where paid as a result of accident, injury or disease);
• increased cost of a car; and
• additional costs incurred for holiday travel

Payment into court forms require the compensator to list the benefits which have been offset against the above heads of compensation.

Damages not within Schedule 2

It is stressed that the above list is not definitive, nor does it purport to be an interpretation of the law. It is for general guidance only, and should be treated as such.

Where the amount of compensation in respect of a particular head of compensation is less than the amount of a listed benefit to be recovered, the compensator is liable to pay the difference. They may not reduce payment against any other head of compensation to take account of the recovery of a listed benefit.

Examples of offsetting for benefit recovery only:

Example 1

• An award of compensation totalling £100,000 is agreed and broken down as follows: £40,000 in respect of general damages (pain and suffering), £30,000 in respect of loss of earnings and £30,000 in respect of loss of mobility.
• A CRU Certificate lists Incapacity Benefit totalling £5,000, Income Support totalling £10,000 and Disability Living Allowance (Mobility Component) totalling £10,000.
• A compensator may not under any circumstances offset against the general damages element of the award. Incapacity Benefit and Income Support can be offset against the loss of earnings head of compensation, as set out in Section 8 and Schedule 2 to the Recovery of Benefits Act. Therefore a total of £15,000 can be deducted from the loss of earnings sum, leaving £15,000 to be paid to the injured person.
• Similarly, the compensator may offset the £10,000 DLA (Mobility) against the loss of mobility head of compensation, leaving £20,000 to be paid to the injured person.
• The injured person has settled their claim for a total of £100,000. Following offsetting, they receive £75,000 from the compensator in addition to the £25,000 they have already received from the state benefits system, thus avoiding double compensation.

Example 2

• An award of compensation totalling £100,000 is agreed and broken down as follows: £40,000 in respect of general damages (pain and suffering), £30,000 in respect of loss of earnings and £30,000 in respect of loss of mobility.
• The CRU Certificate lists Incapacity Benefit totalling £20,000, Income Support totalling £50,000 and Disability Living Allowance (Mobility Component) totalling £30,000.
• A compensator may not under any circumstances offset against the general damages element of the award. Incapacity Benefit and Income Support can be offset against the loss of earnings head of compensation, as set out in section 8 and Schedule 2 to the Recovery of Benefits Act. Therefore a total of £30,000 is deducted from the loss of earnings sum, leaving nothing to be paid to the injured person, but the Certificate shows that £70,000 should be repaid to the Secretary of State. As the compensator can only offset £30,000 they are still liable for the total amount shown on the Certificate and must pay the difference (£40,000) themselves.
• The compensator may offset the £30,000 DLA (Mobility) against the loss of mobility head of compensation, again leaving nothing to be paid to the injured person.
• The injured person has settled their claim for a total of £100,000. Following offsetting, they receive £40,000 by way of general damages, thus avoiding double compensation.

Please note:

• In assessing damages in respect of any accident, injury or disease, the amount of any listed benefits paid or likely to be paid is to be disregarded.
• Where the amount of compensation in respect of a particular head of compensation is less than the amount of a listed benefit to be recovered, the compensator is liable to pay the difference. They may not reduce payment against any other head of compensation to take account of the recovery of a listed benefit.

Heads of compensation are defined in Schedule 2 to the Social Security (Recovery of Benefits) Act 1997

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1.3 Lump sum payments recoverable under the 1997 Act

Lump sum payments recoverable under the 1997 Act include those made under:

• the Pneumoconiosis etc. (Workers’ Compensation) Act 1979
• the 2008 Diffuse Mesothelioma Scheme
• any ex-statutory payment that was paid because the person didn’t qualify for a payment under the 1979 Act.

Example of offsetting for lump sum payments and benefit recovery

• An award of compensation totalling £60,000 is agreed and broken down as follows: £15,000 in respect of general damages, £25,000 in respect of loss of earnings and £20,000 in respect of loss of mobility.
• The CRU Certificate lists lump sum payments totalling £20,000, Income Support totalling £15,000 and Disability Living Allowance (Mobility Component) totalling £10,000.
• The compensator must offset the £20,000 lump sum payment from the general damages first, which would leave an outstanding balance of £5,000. Offseting may then be applied to any of the remaining heads of compensation, that is, the compensator may offset the outstanding balance of £5,000 plus the £15,000 Income Support from the loss of earnings head of damage and the £10,000 DLA (Mobility) from the loss of mobility head of compensation.
• The injured person has settled their claim for a total of £60,000. Following offsetting, they receive £15,000 from the compensator in addition to the £45,000 they have already received from the state benefits system, thus avoiding double compensation.

NOTES

1. If the claim is settled for general damages only, the compensator is still liable to repay the full amount of listed benefits and or lump sum payments shown on the Certificate (s17 of the Social Security (Recovery of Benefits) Act 1997).
2. The compensator cannot deduct any amount in respect of a listed benefit from the compensation awarded for general damages (pain and suffering). However they can deduct any amount in respect of a lump sum payment from any part of the compensation award, including general damages
3. Lump sum payments must be offset against general damages (pain and suffering) first.
4. Attendance Allowance was replaced by the care component of Disability Living Allowance (DLAC) from 6 April 1992.
5. Mobility Allowance was replaced by the mobility component of Disability Living Allowance (DLAM) from 6 April 1992.
6. Personal Independence Payment (PIP) (Living and Mobility components) is being introduced in a phased approach from 8 April 2013 under the Welfare Reform Act 2012.
7. Unemployment Benefit and Income Support for unemployed people was replaced by Jobseeker’s Allowance on 7 October 1996.
8. Incapacity Benefit replaced Sickness and Invalidity Benefit from 13 April 1995.
9. Statutory Sick Pay – 100 per cent of SSP paid before 6 April 1991 and 80 per cent of SSP paid from 6 April 1991 to 5 April 1994 is recoverable. Payments made after 6 April 1994 are no longer subject to recovery.
10. Disabled Persons Tax Credit, now Working Tax Credit, replaced Disability Working Allowance from 5 October 1999.
11. No new or non-linking claims to Severe Disablement Allowance (SDA) may be accepted with an entitlement date after 6 April 2001. Customers currently in receipt of SDA will remain entitled as long as they continue to satisfy the qualifying conditions.
12. Employment and Support Allowance replaced Incapacity Benefit, and Income Support on the grounds of incapacity, for all new claims from 27 October 2008.
13. Universal Credit (UC) is being introduced in a phased approach from 29 April 2013 under the Welfare Reform Act 2012.
14. State Pension is not a recoverable benefit. However any of the benefits listed above which continue to be paid after retirement age will be subject to recovery.
15. Where a lump sum payment has been made to a dependant(s) of P and the compensator is making a compensation payment in respect of P under the Fatal Accidents Act to that dependant(s), CRU will recover the lump sum amount equal to the amount of compensation paid to that dependant(s).
16. Pensions awarded by the Service Personnel and Veterans Agency are not a recoverable benefit, but may be adjusted to take account of a compensation payment.
17. Bereavement benefits are not recoverable; however any other benefits listed in Schedule 2 to the Social Security (Recovery of Benefits) Act 1997 which have been paid to the bereaved person may be recoverable.

 

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1.4 Exempt payments in respect of the recovery of listed benefits and lump sum payments.

Recovery will not be made from the following types of payments as listed in Schedule 1 to the 1997 Act:

1. Any small payment (defined in Part II of this Schedule).
2. Any payment made to or for the injured person under Section 35 of the Powers of Criminal Courts Act 1973 or Section 249 of the Criminal Procedure (Scotland) Act 1995 (compensation orders against convicted persons).
3. Any payment made in the exercise of a discretion out of property held subject to a trust in a case where no more than 50 per cent by value of the capital contributed to the trust was directly or indirectly provided by persons who are, or are alleged to be, liable in respect of:
   1. the accident, injury or disease suffered by the injured person, or
   2. the same or any connected accident, injury or disease suffered by another.
4. Any payment made out of property held for the purpose of any prescribed trust (whether the payment also falls within paragraph 3 above or not).
5. Any payment made to the injured person by an insurance company within the meaning of the Insurance Companies Act 1982 under the terms of any contract of insurance entered into between the injured person and the company before the:
   1. date on which the injured person first claims a listed benefit in consequence of the disease in question, or
   2. occurrence of the accident or injury in question.
6. Any redundancy payment failing to be taken into account in the assessment of damages in respect of an accident, injury or disease.
7. So much of any payment as is referable to costs.
8. Any prescribed payment.
   
   

The following trusts are prescribed for the purpose of paragraph 4 of Schedule 1 and may be found in Regulation 2.1 of the Social Security (Recovery of Benefits) Regulations 1997, and Regulation 7 of the Social Security (Recovery of Benefits) (Lump Sum Payments) Regulations 2008:

• the Macfarlane Trust established on 10 March 1988 partly out of funds provided by the Secretary of State to the Haemophilia Society for the relief of poverty or distress among those suffering from haemophilia;
• the Macfarlane (Special Payments) Trust established on 29 January 1990 partly out of funds provided by the Secretary of State for the benefit of certain persons suffering from haemophilia;
• the Macfarlane (Special Payments) (No. 2) Trust established on 3 May 1991 partly out of funds provided by the Secretary of State for the benefit of certain persons suffering from haemophilia and other beneficiaries;
• the Eileen Trust established on 29 March 1993 out of funds provided by the Secretary of State for the benefit of persons eligible for payment in accordance with its provisions;
• a trust established out of funds provided by the Secretary of State in respect of persons who suffered, or who are suffering, from variant Creutzfeldt-Jakob disease for the benefit of persons eligible for interim payments in accordance with its provisions; (Statutory Instrument 2001 No. 1118, which amends the 1997 Regulations);
• a trust established out of funds provided by the Secretary of State in respect of persons who suffered, or who are suffering, from variant Creutzfeldt-Jakob disease for the benefit of persons eligible for payments, other than interim payments, in accordance with its provisions. (Statutory Instrument 2001 No. 1118, which amends the 1997 Regulations);
  • the UK Asbestos Trust established on 10 October 2006 for the benefit of certain persons suffering from asbestos-related diseases;
  • the EL Scheme Trust established on 23 November 2006, for the benefit of certain persons suffering from asbestos-related diseases.

The following payments are prescribed for the purposes of paragraph 8 of Schedule 1 to and may be found in Regulation 2.2 of the Social Security (Recovery of Benefits) Regulations 1997 and Regulation 7 of the Social Security (Recovery of Benefits) (Lump Sum Payments) Regulations 2008.

• any payment made under the Vaccine Damage Payments Act 1979(c) to or in respect of the injured person;
• any award of compensation made to or in respect of the injured person under the Criminal Injuries Compensation Act 1995(d) or by the Criminal Injuries Compensation Board under the Criminal Injuries Compensation Scheme 1990 or any earlier scheme;
• any payment made to the injured person in respect of sensorineural hearing loss where the loss is less than 50 dB in one or both ears;
• any contractual amount paid to an employee by an employer of theirs in respect of a period of incapacity for work;
• any payment made under the National Health Service (Injury Benefits) Regulations 1995(e) or the National Health service (Scotland) (Injury Benefits) Regulations 1974(f);
• any payment made by or on behalf of the Secretary of State for the benefit of persons eligible for payment in accordance with the provisions of a scheme established by him on 24 April 1992 or, in Scotland, on 10 April 1992;
• any payment made from the Skipton Fund, the ex-gratia payment scheme administered by the Skipton Fund Limited, incorporated on 25 March 2004, for the benefit of certain persons suffering from hepatitis C and other persons eligible for payments in accordance with the scheme's provisions;
• any payment made by MFET Limited, the company limited by guarantee (number 7121661) of that name, established for the purpose in particular of making payments in accordance with arrangements made with the Secretary of State to persons who have acquired HIV as a result of treatment by the NHS with blood or blood products;
• any payment made from the Caxton Foundation, the charitable trust of that name established on 28 March 2011 out of funds provided by the Secretary of State for the benefit of certain persons suffering from hepatitis C and other persons eligible for payment in accordance with its provisions;
• any payment made from the London Bombings Relief Charitable Fund, the company limited by guarantee (number 5505072) and registered charity of that name established on 11 July for the purpose of (amongst other things) relieving sickness, disability or financial need of victims (including families or dependants of victims) of the terrorist attacks carried out in London on 7 July 2005.
• for Northern Ireland only, any payment made to or for the injured person under Article 14 of the Criminal Justice (Northern Ireland) Order 1994 (compensation orders against convicted persons).

Please note: where it is clear that the compensation claim falls into one of the above categories, you do not need to send form CRU1 to CRU.

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1.5 Exempt trusts and payments, which only apply to the recovery of listed benefits

Recovery will not be made from the following types of payments:

• any payment to the extent that it is made -
  1. in consequence of an accident under the Fatal Accidents Act 1976(a); or
  2. in circumstances where had an action been brought, it would have been brought under that Act – if any of the action is brought under the law Reform (Miscellaneous Provisions) Act 1934, a CRU1 needs to be completed.
• any payment to the extent that it is made in respect of a liability arising by virtue of Section 1 of the Damages (Scotland) Act 1976(b);
• any payment made under the Fatal Accidents (Northern Ireland) Order 1977(c)
• any compensation payment made by British Coal in accordance with the NCB Pneumoconiosis Compensation Scheme set out in the Schedule to an agreement made on the 13 September 1974 between the National Coal Board, the National Union of Mine Workers, the National Association of Colliery Over-men Deputies and Shot-firers and the British Association of Colliery Management;

A form CRU1 must be completed to enable a Certificate to be issued which will provide details of any lump sum payments paid where compensation is paid under any of the above, for any of the following diseases:

• mesothelioma
• pneumoconiosis (including silicosis, asbestosis, kaolinosis)
• diffuse pleural thickening
• primary carcinoma of the lung
• byssinosis

Please note: The Social Security (Recovery of Benefits) Act 1997 Schedule 1 Part 1, the Social Security (Recovery of Benefits) Regulations 1997 Regulation 2 and Regulation 7 of the Social Security (Recovery of Benefits) (Lump Sum Payments) Regulations 2008 lists all exempt payments and trusts.

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1.6 DWP right to inspect records

The Social Security Administration Act 1992 Section 110 gives DWP inspectors the right to examine the records of compensators and employers to verify that they are complying fully with the provisions of the Social Security (Recovery of Benefits) Act 1997.

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1.7 How the compensation recovery scheme works

The main process for compensators are:

1. Compensator receives a claim for compensation
2. check the details to be given to CRU (name, address, date of birth, National Insurance number etc)
3. notify CRU of the claim within 14 days. A form CRU1 is provided for this purpose (also available electronically in section 11. CRU GB electronic communications;
4. CRU will automatically issue a Certificate in cases where the required mandatory information has been provided and no recoverable benefits have been identified
5. receive acknowledgement of notification (form CRU4)) if a Certificate cannot be issued automatically;
6. when ready to make an offer of compensation, return form CRU4 to apply for a Certificate;
7. receive acknowledgement of application, CRU 5 (if not received within 14 days contact CRU immediately);
8. receive Certificate (if not received by date given on acknowledgement contact CRU immediately). A copy of the Certificate will be sent to the injured person or their representative;
9. pay compensation and, if any deductions have been made in accordance with either the 1997 Act or the Social Security (Recovery of Benefits) (Lump Sum Payments) Regulations 2008, you must inform the injured person;
10. notify CRU of the result of the claim, even if it is unsuccessful, by returning the form CRU102 that accompanies the Certificate. Ensure that any changes to your reference number are clearly noted;
11. notify CRU of the date the compensation payment is made in final discharge of the claim. The date of agreement does not end the relevant recovery period;
12. the compensator becomes liable to pay the total amount of the recoverable benefits and or lump sum payments to the CRU immediately before making the compensation payment;
13. pay the total amount of recoverable benefits and or lump sum shown on the Certificate to the DWP. The CRU may enforce this debt through the courts at any point from the fifteenth day following the date the compensation was paid.

Please note - payment should not be sent to CRU if the injured person has not been paid compensation.

The CRU Process

1. CRU receives form CRU1 from Compensator
2. Compensator completes a form CRU1 and sends it to CRU
3. CRU will automatically issue a Certificate in cases where the required mandatory information has been provided and no recoverable benefits have been identified
4. Form CRU4 sent to Compensator by CRU if a Certificate cannot be issued automatically
5. Compensator is ready to settle claim and returns CRU4 requesting a Certificate
6. CRU gathers benefits and or lump sum payment information, relating to the injured person and the relevant accident, injury or disease
7. Certificate showing benefit and or lump sum payments issued to the Compensator and copy issued to injured person or their representative
8. Compensator pays final compensation to the injured person
9. Compensator notifies CRU of the date the compensation payment was made in final discharge of the claim and repays the total amount of benefits and or lump sums payments shown on the Certificate to CRU. CRU may enforce this debt through the courts at any point from the 15th day following the date the compensation was paid.

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