The Court of Appeal's long-awaited judgment in Wells is likely to herald an era of increased multipliers and put personal injury damages on an actuarial footing.

As a result, structured settlements are likely to become more attractive.

Regardless of whether or not this happens, structured settlements are set to become more popular through a series of recent statutory provisions that have made them more user friendly, particularly for insurers.A structured settlement is the receipt by a plaintiff of periodic payments for life.

In any substantial claim for damages in a personal injury or medical negligence action, the plaintiff's solicitors, with other advisers as necessary, should consider how best to provide for the plaintiff's financial future.

Structured settlements are one of the options available.

A structured settlement can be more than merely a bolt-on option to consider at the end of a case.

It can be used as a flexible tool to help achieve settlement of a case.

There are two main approaches.

The 'top-down' structure is where the value of a case is agreed and the parties decide to put some of the damages into a structure.

The 'bottom-up' approach concentrates on the plaintiff's actuarial needs and explores the cost of annuities to fund these needs.Bottom-up structures are sometimes favoured by defendant-oriented intermediaries, on the basis that they provide an opportunity for the defendant's insurer to purchase an annuity at a lower price than the plaintiff might have received from a conventional award.

Some plaintiffs' advisors consider that the bottom-up approach can be usefully adopted where there is significant dispute between the parties and it is necessary to find a way to bridge the gap.

The bottom-up structure is illustrated in Begum v Camden and Islington Health Authority (The Personal and Medical Injuries Law Letter, vol 12, No 4, 1996, p 30).

The co-operative bottom-up approach might be described as very much in the spirit of the less adversarial style of litigation advocated by Lord Woolf.Since the Law Society published guidance for the profession on this form of settlement in 1992, subsequent developments include:-- the Law Commission's report 'Structured settlements and the interim and provisional damages' (Law Com No 224);-- the Law Commission's report 'Personal injury compensation: how much is enough?' (Law Com No 225);-- the Finance Acts 1995 and 1996;-- the Damages Bill 1996.The Society has reviewed these and other developments.

Its publication 'Structured settlements: guidelines for solicitors', which discusses these, is referred to in this note as 'the guidelines'.

The Society's further review arises, in part, from a specific suggestion by the Law Commission that the relevant professional bodies consider whether they need to amend their rules.The guidelines are intended to update practitioners on the main features of structured settlements and to address the practical, ethical and financial questions posed by structures.

They do not purport to be a comprehensive text.

The Finance Act 1995 is a very significant development for structures and the guidelines explain its impact.

The Act removes from defendants and insurers some of the administrative burdens that had formerly been associated with structures.

It does this in two ways.

First, by enabling annuities purchased for a plaintiff to be paid gross of tax by the life office.

This obviates an existing need for defendants' insurers to gross up payments with the consequent loss of cash-flow pending the refunding of the tax.

Secondly, by permitting the life office to make payments direct to the plaintiff, the defendant no longer has to administer the structure for the duration of the plaintiff's lifetime.

The Act makes structured settlements a more attractive option financially and administratively to defendants and insurers.

It should reduce or remove the justification for a substantial discount on a conventional lump sum award as the quid pro quo for agreeing to a structure.

The Act increases the security of structured settlements for plaintiffs by amending the Policyholder Protection Act to give total protection if the life insurer were to go into liquidation.The position of intermediaries -- as the advisers on structured settlements are often called -- is also examined by the guidelines.

Should the plaintiff's adviser agree to the defendant instructing the intermediary, or to joint instructions, or should they always seek independent advice? Are intermediaries who accept joint instructions putting themselves in the position of a potential conflict of interest? The Law Commission suggested that the professional bodies provide guidance on these areas.

The Law Society's view is that joint instructions can sometimes work satisfactorily, not least by encouraging a climate of co-operation.

However, great care is required.The practitioner advising a plaintiff will need to be particularly careful to consider a number of matters, such as the following:-- is a broker whom the defendant has in mind independent, or is it someone from the life office, or one of its tied agents?-- will it be appropriate for all of the plaintiff's medical evidence, such as life expectancy, to be disclosed to an intermediary instructed by the defendant?-- is an intermediary who is jointly instructed likely to provide impartial advice on the advantage of a structure compared with lump sum damages or on the range of options available within the structure?The guidelines mention additional considerations.

If joint instructions are given, the plaintiff's solicitors should also consider carefully whether to obtain independent and separate advice on the intermediary's report as an additional safeguard.

The Law Society's view is that this should be the preferred option in the majority of cases.

Plaintiffs need to have complete confidence that they are receiving impartial advice in their best interest.The payment of an intermediary is a subject that has excited comment for some time.

Some intermediaries charge on a time basis.

Others work for a fixed fee and others wish to be paid by way of a commission, usually a small percentage of the annuity purchase price.The problem with payment by commission is that it comes out of the fund used to purchase the annuity and, therefore, reduces the annuity.

The Law Commission and the Law Society have concluded that it is not appropriate to make any specific recommendations on the basis on which intermediaries should be paid, and that it is better to leave the matter for negotiation between the parties.Different intermediaires offer different levels of service and it follows that, when comparing fees, the levels of service should also be compared.

It should also be borne in mind that structured settlements are still a relatively new development and that the area is changing quickly.

Often, when preparing to settle a case on the basis of a structure, many complex matters have to be considered in a very short time span.

It is of great importance that the intermediary instructed has experience of structure settlements.The guidelines deal with many other matters, including: a current view on the advantages and disadvantages of structures; when it may be most and least appropriate to structure; the time when a structure should be considered; the difference between a bottom-up and a top-down approach; and the implications of these different approaches.

The guidelines also contain specific information on:-- medical negligence cases;-- Court of Protection cases;-- Criminal Injuries Compensation Board cases;-- Motor Insurers' Bureau cases;-- structuring interim and provisional damages; and-- pitfalls: the main banana skins.Further advice is available from the Law Society.

Contact the professional ethics division; tel 0171 242 1222 or 01527 517141, for advice on ethical and investment business issues.

Contact Susanne Burn, secretary to the civil litigation committee; tel 0171 320 5739, for advice on procedure.'Structured settlements: guidelines for solicitors' costs £7.50 and is available from Shirley Knight, the Publications Department, 50/52 Chancery Lane, London WC2A 1SX.THE MAIN FEATURES OF A STRUCTURED SETTLEMENT ARE: -- payments are usually funded by one or more annuities, purchased by the defendant or the defendant's insurers;-- periodic payments are tax free;-- structures are available in actions settled by consent, but cannot be imposed on parties by the court; and-- once a structure is in place, it cannot be altered.A STRUCTURED SETTLEMENT MAY BE APPROPRIATE OR ATTRACTIVE WHEN:-- the injury is serious and the potential damages are high;-- the plaintiff's life expectancy is disputed;-- the plaintiff is a minor or patient, or vulnerable to pressures to spend damages other than in his or her best interests; and-- it is necessary to replace a lost income stream, such as in a fatal accident claim.A STRUCTURE MAY NOT BE POSSIBLE OR ATTRACTIVE WHEN:-- either party does not wish to structure;-- the damages award is likely to be small -- in the past, defendants have been unwilling to structure cases worth under £100,000, although this may change under new, simplified arrangements;-- there is a young plaintiff with some, but uncertain, future earning capacity and uncertain needs -- a flexible investment strategy may be more appropriate because once a structured settlement is made it cannot be altered; and-- the plaintiff wishes to use the damages as a lump sum for a specific purpose, such as capital to establish a new business.