During its three-day 2021 Annual Conference in late February, the Society of Settlement Planners (SSP) hosted 20 separate virtual presentations addressing a variety of settlement planning topics and featuring many industry experts.
For conference attendees, SSP has made the video presentations available on a privately accessible online site for convenient asynchronous viewing and/or re-viewing. For Independent Life, this online repository has also encouraged us to continue our series of supplementary discussions about selected topics featured during the SSP conference.
The “Let’s Talk About” Series
This series, titled “Let’s Talk About”, began prior to the SSP conference with the intention of promoting the conference but also encouraging ongoing, and more in depth, discussion of important industry issues. To date, the series has addressed:
- Privacy of Medical Records and Other Personal Data
- Adding Value and Protecting an Attorney’s Practice
- Structuring Attorney Fees
- Mass Torts
- Product Suitability
The SSP Panel
During an SSP conference panel discussion moderated by Stephen Halterbeck titled “Life Company Basics”, panelists Eric SoHayda, Samantha Webster and Betty Gregware provided a valuable one-hour overview of the following topics – from a life company perspective:
- Beneficiary protection
- Rated ages
- P & C approved lists
- Quoting process
Presumably each panelist could have spoken for an hour on each topic and offered perspectives from multiple structured settlement and settlement planning stakeholders. The one-hour time limitation also restricted the number of topics the panel could address.
Using a somewhat wider lens, the purpose of this article is to highlight some issues which, if not overlooked by the SSP panel, could benefit from further discussion and analysis during subsequent SSP or NSSTA educational conferences.
The assignment for the SSP panel presumed a life company perspective. The co-brokering topic, however, deserves more detailed discussion in some educational context – especially for SSP, an association of settlement planners “Striving to Become a Profession” – as last year’s SSP conference keynote address was titled.
A good place to begin, in this writer’s opinion, would be Professor Stephen A. Saltzburg’s 2006 Memorandum to “The Academy of Catastrophic Injury Attorneys” titled “Use of Structured Settlement Experts by Plaintiff Counsel.”
Although Professor Saltzburg’s Memorandum has circulated within the structured settlement and settlement planning communities for 15 years, neither SSP nor NSSTA has fully addressed, in an educational setting, the “commission sharing” issues raised therein.
Professor Saltzburg’s provocative Memorandum focuses its primary analysis upon the duties of plaintiff attorneys. However, he also discusses related duties of plaintiff structured settlement brokers which, in the context of commission sharing agreements, could potentially impact defense brokers as well.
For many structured settlement and settlement planning stakeholders, the term “beneficiary protection” evokes stories of abusive business practices by factoring companies. Indeed, NSSTA’s Legal Committee devoted its most recent “Law and Order” panel entirely to factoring abuse cases.
Surprisingly, however, in its discussion of “beneficiary protection”, SSP’s “Life Company Basics” panel did not address the role and responsibility of annuity providers to protect payees and beneficiaries against factoring abuses.
This omission was more noticeable as a result of James Gordon’s Note titled “Enforcing and Reforming Structured Settlement Protection Acts: How the Law Should Protect Tort Victims,” published in the December 2020 issue of the Columbia Law Review.
In his Note, Gordon argues that annuity providers violate their contractual obligation of good faith to a personal injury payees when they accept an administrative fee from a factoring company to waive an anti-assignment clause.
Gordon mentions Independent Life’s Payee Protection Policy in highlighting “major players in the market” having “already established transfer petition objection policies that both illustrate how these duties could manifest and demonstrate that insurance companies are fully capable of investigating whether a tort victim is being abused.”
One of the “Life Company Basics” panelists made two important observations about rated ages: 1) not all structured settlement annuity providers offer rated ages; and 2) rated ages are expensive to set up and administer.
What was not discussed during the “Life Company Basics” panel is that medical underwriting standards have, in general, changed dramatically within the structured settlement market since 2008 and this change has had a significant negative impact on structured settlement pricing.
Among the reasons Independent Life was formed in 2018 was a recognition that the structured settlement market needed better medical underwriting. In fact, we are the only structured settlement annuity provider that offers a Tier 2, in-depth, medical evaluation with peer review for select cases, at considerable expense to Independent Life, using Fasano Associates, a leading independent medical underwriting firm.
P & C Approved Lists
Property & Casualty insurers have established “approved lists” of structured settlement annuity providers since the first structured settlement was written. Of course, they have every right to do so. Just as they have every right to refuse to enter into, or agree to, any particular structured settlement.
The important questions, however, should be: 1) what is their justification, in particular for injury victims represented by attorneys – other than “we can do it if we want to” and 2) are these “approved lists” good for structured settlements?
If and when a defendant remains liable for future periodic payments, an obvious justification does exist for defendants (and/or its insurer) to approve the company funding the periodic payments. However, when defendants obtain a full and final contractual release using a qualified assignment (or a qualified settlement fund), their justification for “approved lists”, which are typically based on financial ratings, historically abbreviates to paternalistic “best interest” for the injured plaintiff.
Any such “best interest” justification of “approved lists” seems unjustified. First, approved lists challenge, and may obstruct, the plaintiff’s own wishes (the person who will bear any risk associated with the future periodic payments) as well as the recommendations of the plaintiff’s advisors, who presumably understand the “best interests” of the plaintiff better than the defendant.
But also, any “approved list” of life companies based exclusively on financial ratings ignores a number of important (for the plaintiff) “best interest” considerations - including but not limited to: 1) medical age ratings; 2) payee protection policies; 3) policyholder services; and 4) annuity rates.
Therefore, are “approved lists” good for structured settlements? Perhaps, if you believe in maintaining the historic industry status quo. Absolutely not, if you want to encourage industry growth and innovation and believe in the “best interest” of the injury victims and their families.
“Best interest” was not included among the “Life Company Basics” panel topics. SSP, however, did devote a separate breakout session to the topic “Settlement Planning in the Client’s Best Interest.”
One of the questions John Stone, the moderator of that breakout session, asked this writer and fellow panelist Jake Duval, was: “as settlement planning professionals or product/service providers, what are we doing to ensure that we act in the best interest of the settlement recipient?”
Among the takeaways from the discussion that followed: the “best interest” of injury victims and their families impacts the duties, standards and best practices of plaintiff attorneys, trustees, guardians, judges and settlement planners. That same “best interest” should also represent one of the most important “Life Company Basics” for structured settlement annuity providers.
Also note: this material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.