by John Darer CLU ChFC CSSC RSP
LifeHealthPro.com bills itself as one "distinct and vital information source for all life and health insurance industry professionals". Unfortunately the November 7, 2012 effort of its writers Bill Coffin and Jason Woods to educate on structured settlement annuities get off to a false start right out of the gate. In my opinion what is presented by the insurance trade journal is irresponsible, editorially deficient and inaccurate.
The structured settlement watchdog presents his "catch of the day"
A. Life Health Pro says: "Structured settlement annuities are complex products, paid out to injured parties in lieu of one large lump sum. They are unique in that the the (sic) payee never owns the annuity; the defendant's insurance company does"
- It is true that the the payee never owns the annuity BUT in most cases since the mid to late 1980s the the annuity is owned by the qualified assignment company, not the Defendant or the Defendant's insurance company.
- A settlement does not have to be all or nothing. A structured settlement annuity can be one part of the settlement allocation and is often a core vehicle for those who need stable, secure, guaranteed income.
- The guaranteed income can be for a period of years, lifetime, in lump sums, or any combination. For more information click types of structured settlement payments
B. Life Health Pro says: 'In the case of a catastrophe like ELNY, the payee's ability to continue receiving payments is determined by the type of annuity the insurance company has purchased"
All ELNY payees will continue receiving payments, but some payees will have shortfalls. the type of structured annuity has nothing to do with whether or not a payee will receive a shortfall under the ELNY liquidation plan.
C. Life Health Pro says: "Tara sues Len but really she is suing his car insurance company which provides len with his liability insurance".
- What is being described is a third party claim.
- Unless the case is in Louisiana or a jurisdiction that permits bringing in an insurer a party, Tara sues Len.
- Len's insurance company would have a duty to defend him with respect to a covered claim and pay only in accordance with the terms of his policy.
D. Life Health Pro says: "What happens if the life insurance company that fund's Tara's annuity goes bankrupt". with a buy and hold annuity...then Len's insurance company is required to make up the difference. If a "Guaranteed Assignment Annuity" then unfortunately Tara is out of luck.
- Insurance companies cannot file Chapter 7 bankruptcy under Federal Law. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA") amended the bankruptcy code and continued the long standing bar against insurance company bankruptcies . for further reference please read my July 23, 2010 post. Insurance Company "Bankruptcy": Insurers CANNOT File Chapter 7 or Chapter 11 (With Few Exceptions)
- There is no such thing as a 'guaranteeed assignment annuity". however there is something common to post 1983 structured settlement transactions called a "qualified assignment'. A structured settlement annuity is a form of "qualified funding asset" as set forth in Internal Revenue Code Section 130(d)
- As part of the opening salvo in its expose on the ELNY Liquidation, well over 18 months since structured settlement experts Mark Wahlstrom, Patrick Hindert and John Darer started covering the topic (and YEARS after Peter Bickford), LifehealthPro fails to explain that Buy and Hold is a flawed strategy that exposes the annuitant to potentially greater risk as a general creditor of the Defendant or the liability insurer.
I sure hope that the rest of the LifeHealth Pro analysis the important ELNY story is a little less amateurish.
Executive Life of New York -3 _ Why Were All Their Eggs in One Basket? June 2012
Executive Life of New York -2 December 2011
Executive Life of New York -1 April 2011