One of the most difficult issues that personal injury and medical negligence lawyers currently face on large value claims is attempts by defendants to force claimants to accept a reduction in their claim value to reflect the availability of local authority care. In the main, we are talking about those who have suffered a severe brain injury or spinal cord injury and who will require a significant level of care.

The principle of 'the guilty party pays' is being challenged on a very regular basis. When it is considered that a substantial part of the damages at this level will, of necessity, be for future care then these challenges can be worth millions. Only two weeks ago, the High Court was preparing to consider such arguments raised by a defendant in a case, White v Eastman, worth several million pounds. The case settled with an undertaking from the claimant to make reasonable endeavours to use local authority funding if and where available and to reimburse the defendant if obtained. The case therefore settled reflecting the cost of the private care package.

The problem derives from the National Assistance Act (NAA) 1948 and the duty of a local authority to provide residential care and care services in a person's home. The provisions of the Act were described by Mr Justice Munby in 2002 as "some of the worst, if indeed not the worst-drafted, and most confusing subordinate legislation it has ever been my misfortune to encounter".

Section 21 of the NAA gave local authorities the power to provide residential care for those who, by reason of age, illness, disability or any other circumstance, are in need of care and attention which is not otherwise available to them. The power only became a duty pursuant to the Local Authority Circular (93) which came into force in 1993. Section 29 of the NAA regarded the domiciliary care to be provided in a claimant's own home. This became a duty by Section 2 of the Chronically Sick and Disabled Persons Act 1970.

Various cases in 2000 and 2002 confirmed that a local authority could not recoup the money they spent in setting up a care regime from the claimant. This was on the basis that often the money would be held in trust or administered by the Court of Protection, and as such could not form part of any means assessment. The combination of a duty on the local authority to provide care and accommodation and the inability of the local authority to, in effect, charge for these services has led defendants to attempt to reduce their liability to compensate those who have the most serious injuries and of course, the most desperate needs.

Sowden v Lodge [2004] is the definitive case. The key rationale from this case was that in principle, an award of damages could be made on the basis that residential care and accommodation provided by the local authority could be topped up by a payment for the provision of further care from the insurers.

While it was said that there was no legal duty on the claimant to disprove that statutory provision would be adequate, the reality was that insurers were given a way to reduce the potential value of large care claims and pass the burden onto the local authority.

This position was reinforced in Louise Walton v Calderdale Health-care NHS Trust [2005]. Here, the NHS tried to prove that the local authority could wholly or partly satisfy the claim-ant's reasonable needs, therefore preventing the NHS from having to pay for that care. The claim value was £3.8m. The defendant valuation was £854,000. The court held that there was an onus on the defendant to show that the local authority could wholly or partially satisfy the reasonable needs of the claimant. Again the defendant had failed to dis-charge the onus upon them.

However, what did happen, and is still happening, is that insurers and their legal teams have sought to use this as a negotiating tool. How would the claimant know if the defendant had truly discharged the onus until the view of the court at trial was sought? Local authorities have no doubt received many requests for assistance in this regard and if compliant, may have paid a very heavy price indeed.

The position became temporarily worse in the decision of Crofton v NHS [2006]. The claimant suffered a severe brain injury, it was said, due to the failure to provide adequate treatment for a cardiac problem. The annual care cost was £122,000. In his assessment, the judge considered the defendant's argument that the local authority should pay for the care. Specific criticism was aimed at the care expert for the claimant for not considering local authority provision, the judge commenting: "It is not unjust to the claimant to take the prospect of obtaining local authority assistance into account in assessing damages."

The court decided to take into account evidence that indicated that the local authority were duty bound to pay £54,000 worth of care per year. The balance, £68,000 was to be paid by the NHS. It is clear that the NHS was moving some of the financial burden onto the local authority and did so successfully. I understand that this case is being appealed.

Most recently, the court looked at the whole issue again in Freeman v Lockett [2006]. The claimant was paralysed in a road traffic accident and the claim value was £5.5m. The insurer sought to reduce the value of the claim by £1m to reflect available local authority care. What was interesting about the judgment was the echo of public debate regarding the availability of care. Mr Justice Tomlinson referred to local authorities striving to balance their desire not to unduly increase council tax against the ever-increasing demands made upon their resources.

The defendants had sought to argue that the claimant would in essence have a double recovery if they paid for the preferred private care regime, and that after the case the claimant then claimed local authority benefit. The court no doubt took notice of the fact that the claimant was willing to provide an undertaking confirming that she would not seek local authority support following the conclusion of the case, unless absolutely necessary.

In fact, Mr Justice Tomlinson felt that no such an undertaking was necessary and unfair to the claimant. His view was that there was a lack of security in relying on local authority funding, commenting: "Ministerial guidance is essentially ephemeral in nature, subject to change without any form of legislative process."

It is also notable that he had no doubt that the local authority would withdraw funding for the claimant once they had seen a copy of the judgment. Double recovery was not, in his view, an issue to be considered.

The defendants had suggested that the claimant had failed to mitigate her loss if she did not apply for continued local authority funding. Mr Justice Tomlinson disagreed, saying: "I recoil from the notion that a failure to avail oneself of state benefit could in the circumstances be characterised as an unreasonable failure to mitigate loss. I should have thought that such conduct was praiseworthy and moreover calculated to contribute to the sense of wellbeing of the person concerned."

It is difficult to see why the insurance industry should be able to use the loophole of poorly-drafted legislation to further their aims and their profits. To do so places the burden local authorities who can ill-afford the cost of such significant care regimes.

The position must be clarified. One way to deal with this issue would be for the poorly drafted legislation to be revisited. Another might be to extend the recoupment provisions, allowing local authorities to recoup the cost of past and future care from the insurer. Either way, claimants should not have to face such arguments on such a regular basis. The Government should also recognise the very significant local authority budgetary savings that could be made.

Jill Greenfield is a partner in the personal injury department at Field Fisher Waterhouse.