What are the benefits of a structured settlement or periodic payment of damages?

There is a good deal of commentary on the advantages of structured settlements or periodic payments over traditional lump‑sum damage awards. The authors of Remedies in Tort, Volume 4 at 99.1, note that lump sum awards of damages "pose problems due to the effects of inflation, fluctuations in investment rates and tax liability as well as the inherent difficulties in speculating as to the future needs and life expectancy of the plaintiff." In Andrews v. Grand & Toy Alberta Ltd., 1978 CanLII 1 (SCC), [1978] 2 S.C.R. 229, Dickson J. (as he then was) said, for the court at para. 236: The lump sum award presents problems of great importance. It is subject to inflation, it is subject to fluctuation on investment, income from it is subject to tax. After judgment new needs of the plaintiff arise and present needs are extinguished; yet, our law of damages knows nothing of periodic payment. The difficulties are greatest where there is a continuing need for intensive and expensive care and a long‑term loss of earning capacity. It should be possible to devise some system whereby payments would be subject to periodic review and variation in the light of the continuing needs of the injured person and the cost of meeting those needs.

By contrast, under a structured settlement, the plaintiff receives the damage award "in the form of tax‑free periodic payments, thus avoiding the possibility of dissipation of a large lump sum payment." (Remedies in Tort). As McLachlin J. (as she then was) said, for the court, in Watkins v. Olafson, 1989 CanLII 36 (SCC), [1989] 2 S.C.R. 750, [1989] S.C.J. No. 94, at paras. 7-8: The imperfections of a lump sum, once‑and‑for‑all award, as a means of providing for a plaintiff's cost of future care have often been noted. Where the injury is serious and the period of time for which care must be made lengthy, a large number of variables enter into the calculation. Should the plaintiff live longer than projected, or earn less on his capital than expected, he will run out of funds for his care. On the other hand, should chronic illness force him to live in an institution rather than his own home, or should he die earlier than forecast, the funds provided may turn out to be excessive, resulting in a windfall for him or his heirs at the defendant's expense. Considerations such as these support the conclusion that in cases where care must be provided for a long period in the future, periodic payments are more consistent than the lump sum rule with the fundamental principles upon which the assessment of damages for personal injury are founded ‑‑ the basic concepts of restitutio in integrum and full but fair compensation. The whole basis of the claim advanced by the appellant is that in order to provide adequately for his future care he requires a monthly stream of income indexed for inflation for the rest of his life. Periodically paid sums capable of adjustment in the event of changed circumstances best ensure that this need will be met, given the impossibility of predicting the future with any real accuracy. At the same time, it is urged, the result would be fair to defendants, ensuring they pay only what is actually required.