Since it was first published in 1986, "Structured Settlements and Periodic Payment Judgments" (S2P2J), has provided structured settlement stakeholders with an authoritative reference guide, consisting of 16 chapters with extensive footnotes and Appendix documents, to help them understand historical development as well as current issues and fashion settlements and judgments utilizing periodic payments.
Co-authored and updated semi-annually by Daniel W. Hindert, Joseph J. Dehner and Patrick J. Hindert, S2P2J features an online version as well as the traditional hard copy. Online S2P2J includes a search feature and download capability as well as link features to access individual book sections, appendices, footnotes, cases and statutes.
Next month, publisher Law Journal Press will distribute hard copy supplements of Release 68 with online subscribers receiving their update simultaneously with no additional subscription charge.
“Best interest” is a term used frequently in the context of structured settlements as well as personal injury settlement planning and financial planning.
In the context of the structured settlement secondary market, “best interest” is a statutory requirement of both IRC 5891 and many of the state structured settlement protection acts. Under IRC 5891, to avoid the excise tax, a qualified order must be “in the ‘best interest’ of the payee, taking into account the welfare and support of the payee’s dependents.”
Earlier this year, when the National Association of Insurance Commissioners (NAIC) updated its Suitability in Annuity Transactions Model Regulation “to require producers … to act in the best interest of the consumer when making a recommendation of an annuity” (emphasis added), they exempted structured settlement annuities.
The “logic” and/or “justification” of the NAIC structured settlement exemption is highlighted in the original regulation drafting history: [a] regulator pointed out that [a structured settlement] did not generally result from a recommendation by an insurer or producer but agreed that it did not hurt to have the exemption there.”
These two applications (or lack thereof) of “best interest” (secondary market structured settlement payment rights and non-structured settlement annuities) raise interesting and important questions, for the primary market, which have rarely, if ever, been addressed during national association educational conferences.
For examples: despite the NAIC exemption, should a “best interest” product suitability standard be applicable to structured settlements annuities in the primary market, and if so, what criteria should be applied, and by whom, to determine if that standard has been met?
What Judges Need to Know Before Approving a Structured Settlement Plan
Structured Settlements and Periodic Payment Judgments Release 68 addresses these questions with a new § 8.06 – at least as they apply to state and federal court judges when sitting in review of petitions to approve a settlement affecting the interests of a minor or other protected person, and ruling on whether a settlement plan is in the “best interest” of the protected person.
The underlying concern is twofold: (1) that judges lack specialized knowledge or expertise, and luxury of time, to inform themselves as to details of complex settlement arrangements having a lifespan well into the future; and (2) that, to date, there is no uniform or standardized set of disclosures required to be made by the proponents of a structured settlement plan.
In response, new book § 8.06 proposes that judges address this responsibility (a) by relying on a sample checklist of questions to be answered by the proponents of a structured settlement plan, and (b) by using the court’s inherent judicial authority to mandate applicable disclosures – in writing and under oath – in advance of hearing on such petitions and as a condition for approval of structured settlement plans under review.
This proposal, of course, could also encourage others (attorneys, settlement planners, structured settlement consultants and any other professionals) responsible for structured settlement plans (or settlement plans more generally) to begin to develop their own model lists of uniform or standardized “best interest” sets of disclosures – or risk having others legislate or regulate rules as occurred in the secondary structured settlement market.
Additional Release 68 Highlights
- Previously Transferred Structured Settlement Payment Rights
- This section has been retitled, reorganized and updated to account for the dramatic decline in interest rates that has transformed the overall investment landscape. In the wake of the 2008-2010 market crisis, liquidity was prized and long-term capital relatively scarce. This translated to higher discount rates charged to individual claimant sellers in the primary market. In subsequent years, as capital scarcity eased, interest rates in general trended lower and, as competition among factoring companies intensified, rates offered to claimant-payees by factoring companies have dropped sharply. Although specific examples of high rate transactions may still be reported (especially in relatively small short duration transactions), rates typically offered to consumers in 2019/2020 averaged at or below the 7.4% figure reported as “the low” in 2011.
- What Should be Included – and Excluded – from the Plaintiff Attorney’s Scope of Representation
- Consistent with the cautionary warnings in Jason Lazarus’ new book - , Release 68 includes a new subsection highlighting state bar association advisory opinions declaring that trial lawyers must “consider the tax implications of the settlement” and tell clients “about the options of structured settlements, trusts and the effect of the judgment or settlement on [each] client’s public benefits eligibility.” The alternative, obtaining the client’s “informed consent,” requires educating the client about the material risks and available alternatives. Release 68 offers some additional educational resource recommendations for plaintiff attorneys.
- Lowe v. Mercy Clinic
- A 2019 Missouri medical malpractice case points out the problems of many existing state periodic payment of judgment statutes which lack the comprehensive procedural guidance of the Uniform Periodic Payment of Judgments - and can therefore result in post-judgment confusion and controversy. In this case, the judgment of $12,820,990 for a 63-year-old male did not consider the impact of the plaintiff’s death on unpaid future medicals and resulted in an award that was contrary to Missouri law.
- Secondary Market Update
- Release 68 updates the book’s extensive coverage of structured settlement secondary market issues. Chapter 16 (“Transfers of Structured Settlement Payment Rights”) features eight sections of materials. In addition to the updated analysis of “previously transferred structured settlement payment rights”, Release 68 discusses recent Florida cases addressing two important issues requiring judicial review: 1) contractual anti-assignment restrictions (Cordero v. Transamerica Annuity Service Corp); and 2) conflicting interests in payment rights (FinServ Casualty Corporation v. Symetra Life Insurance. Co).
- Previously Transferred Structured Settlement Payment Rights