Structured Settlements 4Real™ Blog: Structured Settlements | Settlement Planning News and Commentary

Way Not To Impress When Submitting a Writing Sample to The Editor

If you're seeking a writing job, shouldn't you proof read before you send? Here's an excerpt from an email I received from "Jonathan" at A1securedloans:

"This is Jonathan, I went through your blog (structuredsettlements)
while surfing in Google, am very Much impressed with your site's
unique information's.

I work as a content writer in many financial communities and love the
Opportunity to guest post for your readers. I would like to give you a
Unique article on any finance related topics.

No duplication or copying of the article is done. I assure you that the
article will be published only on your site.

The best part is I won?t be charging you a penny, but in return all I need
is just one link within the article".

Any of my readers who feel the urge to "get out the red pen"  should feel free to add comments.

Needless to say Jonathan won't be hired. The company domain associated with Jonathan's email is registered anonymously. Our current business practice is to avoid doing business where the owner of the domain cannot be immediately verified.

Glenn Neasham Case: From Successful Insurance Practice to Food Stamps

California's insurance department has revoked the insurance license of Glenn Neasham, who was convicted of felony grand theft of an elder for selling an Allianz Masterdex 10 indexed annuity to an 83-year-old woman with dementia.

On February 29, 2012, the California Superior Court in Lakeville, CA sentenced Neasham to 300 days in jail, which the judge in that court reduced to 60 days.

Neasham is scheduled to report to jail April 18, 2012, with an interim hearing. March 20 to postpone serving jail time while an appeal is heard.

Neasham has paid a heavy price for selling a single annuity in which the victim purportedly made money. He said the case has destroyed his business and his family is subsisting on food stamps. He can no longer afford the cost of his defense and expects to qualify for a public defender, according to report in Insurance News. A fund seeks contributions for his defense.

It has been argued that Neasham's case is significant because (1) Whether or not the product was one I would recommend as a partial CD replacement, Neasham purportedly did take steps to determine suitability and the customer did not lose any money (she actually made money) and denies he did anything wrong. The adequacy is called into question (2) apparently it was a single incident; does the punishment fit the crime he was convicted for? (3) the case has received notoriety because the result makes causes agents to be more skittish of working with senior customers, leaving that market underserved.

In a previous post I drew a parallel to the structured settlement industry and used the findings in the Neasham case to underscore the need for suitability regulations with teeth, mandatory training and continuing education for the sale of structured settlement annuities to plaintiffs who have mental incapacitates, or are seniors, and the like, that is similar to the standards for sale to seniors in states like California.

Furthermore, sale of re-marketed structured settlement payment rights (rights that are acquired in the secondary market and resold to investors (including the potentially and actual use by some with personal injury plaintiffs) is ripe for potential abuse IF there is a lack of  up-front disclosure and understanding of the person's role and actual or potential conflicts are not addressed.

Insurers Are Under No Obligation to Pre Fund Structured Settlements

While some insurers choose to pre-fund structured settlements before they have a signed release, and/or before Court approval of the settlement has been obtained, they are under absolutely no legal obligation to do so.

The New York State Insurance Department stated in its opinion released April 21, 2011 (OGC Op. No. 11-04-01) there is nothing in the New York Insurance Law or regulations promulgated thereunder that prohibits an insurer from requiring a third-party claimant to execute a release before the insurer will pay a settled claim, as long as the release comports with § 216.6(g) of N.Y. Comp. Codes R. & Regs. tit. 11, 216 (2003) (Regulation 64), which prohibits the insurer from requiring execution of a release on a first or third-party claim that is broader than scope of the settlement.

In its analysis the Office of General Counsel wrote " Claimants and insurers often resolve disputes through settlement. Settlement is most commonly achieved through a binding contract in which a party with a potential legal claim is compensated in exchange for executing a release or covenant not to sue. See 1 Dunham, New Appleman New York Insurance Law, Second Edition § 7.02[1][b] (Matthew Bender). By settling, a party achieves finality, avoids the time and costs of litigation or arbitration, and eliminates the risk of an adverse judgment in litigation or arbitration. See id.

While there is nothing in the Insurance Law or regulations promulgated thereunder that requires an insurer to use a release in settlement of a third-party claim, there is also nothing that prohibits it. As stated previously, an insurer often requires a third-party claimant to execute a release when settling a claim to achieve finality and ensure that the third-party claimant will not subsequently sue the insured. Thus, an insurer may require a third-party claimant to execute a release before the insurer will pay a settled claim as long as the release comports with 11 NYCRR § 216.6(g), which prohibits the insurer from requiring execution of a release on a first or third-party claim that is broader than the scope of the settlement (emphasis added)

Often insurers DO prefund structured settlements as a convenience BUT, for example:

1. Structured settlement involving City of New York may take 90 days from the time all its requisite documents have been submitted
2. Structured settlements involving the New York State Liquidation Bureau may take up to 9 months following receipt of the required settlement documents.
3. The State of New York will not prefund structured settlements, although it will require the qualified assignee to sign the qualified assignment before it will release funds.
4. One insurer will stagger funding
5. One self insured defendant negotiated a 90 day from receipt of documents structured settlement funding date.
6. Even If a qualified settlement fund were used in a minors or death case, where Court approval or decree is required prior to any distributions, the funding of the structure is contingent on the approval of the QSF, the funding of the QSF, approvals for Supplemental Needs Trusts (if applicable) and any subsequent distribution orders.

The single most important point that needs to be made (and I can't emphasize this enough) is this...It's common sense, but needs to be said. make SURE your broker is not an a**hole. Bullying insurers or their claims adjusters to prefund a structured settlement is not the answer.  It's the matter of education and trust. More importantly, it is the matter of planning accordingly.

"Date Slide" language inserted into a Court Order and settlement documents may be helpful in cases where a funding date has been anticipated but timing of funding is not completely certain, whether due to the reasons above, or in consideration of the workload and workflow of the plaintiff lawyer to submit papers for Court approval and the concomitant workload and workflow of the Courts. Most of the structured annuity issuers I have encountered have shown the propensity to be flexible in this regard.

 

Guaranty Fund Advertising: Readers of NSSTA's Latest Blog Must Exercise Caution

The National Structured Settlement Trade Association states that "as a nonprofit organization that does not sell insurance products in New York or any other state, the NSSTA is allowed to inform the public about the role of insurance regulation in protecting structured settlement beneficiaries.  This author agrees that the association plays a vital role in this regard.

The NSSTA blog page states that NSSTA "has published a free hand-out, which you can access by clicking this link." The link brings you to an NSSTA document which includes a statement about guaranty funds and structured settlement payments. If a member of the public goes there seems fine.  If the agent or broker member downloads for their own personal use, fine. But if the broker downloads the brochure and hands it to a client and/or directs them to that part of the NSSTA website, there may be a problem.

On December 14, 2010  NSSTA notified its members through Facebook that the "New York Insurance Department Offers Guidelines on Mentioning Guaranty Funds".  Click on the link leads to the NSSTA website blog and the downloadable brochure

Ironicaly the opinion dealt with the propriety of guaranty funds in social media and was very clear that "mentioning" the guaranty fund is taboo.

I have obtained several opinion letters from the New York State Insurance Department over the years in an effort to help establish best practices. Among them, the November 22, 2010 opinion of which NSSTA has provided a short excerpt and a January 21, 2009 opinion ,which addressed a financial security brochure published by NSSTA in response to the 2008-2009 financial crisis that included similar references to the guaranty funds as the instant downloadable brochure/leaflet. The New York Insurance Department cited to that opinion in its November 22nd opinion.

Relevant Opinions

1. Download NY Insurance Department 11222010 Opinion on Propriety of Guaranty Fund Ads in Social Media

I strongly suggest that NSSTA members read the entire opinion.

2. Opinion-about-use-of-ligcny-in-solicitation-of-structured-settlement-annuities-1-26-2009.pdf

CLOSING WORDS OF CAUTION: The New York State Insurance Department stated the following in a September 24, 2007 opinion also obtained by this author.

" Nor may an agent or broker evade the prohibition set forth in the Insurance Law by enlisting the aid of the not-for-profit organization to do what the agent or broker cannot do lawfully"

If there's still any doubt of how a reasonable impartial person could interpret this look no further than Allison Bell of National Underwriter who pulls out her best Archie Bunker with  Shush! Stifle Your Post About the Guaranty Funds

Settlement Consulting: Heed NY Insurance Dept Circular Concerning Service Fees and Inducements

Some settlement consulting firms offer ancillary services that extend beyond the sale of annuities or other insurance products and charge a fee for those services. Where discounts may be offered to members of associations, large groups or individuals such  settlement consulting companies need to be aware of Circular Letter No. 9 (2009) which was issued by the New York State Insurance Department and deals expressly with such matters.

From personal observation a large number of settlement consultants, structured settlement brokers and settlement planners conduct business in New York with life agent licenses.  Life agent licenses begin with the letters "LA" followed by a sequence of numbers. What they may not be aware of is that life agents may not charge fees. Only life brokers can charge fees.  A life broker license commences with the letters "LB" followed by a sequence of numbers.

However, the department states that the fees charged should be reasonable, and like insureds (or potential insureds) should be charged the same amounts for the same services. Is this happening in practice?

Here is an excerpt from the Circular Letter No. 9

"Of course, under the Insurance Law, an insurance broker, but not an insurance agent, may charge an insured a service fee for providing insurance-related services, provided that the broker obtains a written service fee agreement in accordance with Insurance Law § 2119(c). Further, both an insurance broker and an insurance agent may, in accordance with Insurance Law § 2119(a) and (b), charge a fee for insurance consulting services pursuant to a written consulting agreement. However, the fees charged should be reasonable, and like insureds (or potential insureds) should be charged the same amounts for the same services. See Circular Letter No. 9 (2006) (discussing service fee agreements)."

Permissible services of insurance agents and brokers; rebating and inducements  New York State Insurance Department March 3, 2009

Structured Attorney Fee Malpractice Looming

Having been contacted for a number of second opinions recently , I am increasingly troubled by the number of cases where I've observed that those who hold themselves out as competent advisers to plaintiffs are convincing (or attempting to convince) a plaintiff attorney to take an ultra short term structured legal fee over say 2-3 years, the result being that the attorney actually loses money because of the very low to non existent ultra short term rates. The only person that appears to be making money is the structured settlement broker and that's NOT right!

If the attorney wants to structure $1,000,000 the broker will make or split commissions of close to $40,000. So on a 2 year structure where the the total gross payout shows attorney comes out lower than what the attorney has allocated to the deferral is mostly a losing proposition, enriching the insurance agent at the expense of the attorney. The picture is dramatically worse after one takes into account the taxes that the attorney must pay in the tax year he/she receives the money.

In theory, structured attorney fees are advantageous because during the deferral period, there is implicit interest on that portion of the gross amount that would otherwise have gone to the IRS. While the plaintiff attorney may ultimately pay taxes on that money the net after tax amount MAY possibly be better than simply paying the taxes in year 1. It depends on the cash flow. One should not always fear paying one of life's "certainties".

One structured annuity company told this author today that it WILL NOT accept money to fund a structured attorney fee with one of its annuities in which the projected total payout is less than the premium paid to the company.

Until short term interest rates make a meaningful rise to support better pricing, an ultra short term structure would only have a modicum of benefit if the incremental amount being deferred pushes the attorney into a different tax bracket, or if a large gap in the case pipeline presents a near term projected income void that needs filling and the lawyer or firm is willing to accept losing money for the peace of mind.

For a few years a number of industry colleagues are marketing "companion" loan deals against structured attorney fees. The gist of it is (1) the attorney structured fees over a period of time; (2) shortly thereafter, in an actually separate transaction, the attorney takes a loan from a specialty finance company which is in substance "appears" to be tied in someway to the structured attorney fee. The sales pitch is that you avoid taxes recognition of income now, but "get use of a percentage of the money" via the loan. The transaction obviously depends on a healthy spread to work financially. Where are those spreads coming from today?

There are still plenty of good reasons to structure attorney fees. In addition to the reasons stated in the link to the left, my colleague Dan Finn alerted me to an article appearing in Kiplinger's Retirement Report on October 7, 2008 entitled A Ladder of Annuities Can Hedge Your Bets. The article, published during the 2008 financial meltdown, provides foundational support to systematic structuring of attorney fees by correctly suggesting that staggering purcbases or laddering annuities can smooth out highs and lows of interest rates, and payouts.

Attorneys who wish a consultation on structured attorney fees please contact this author, John Darer, at (888)325-8640,  (203)325-8640 from within Connecticut.

Improving the Unemployment Rate-How NOT to Apply For a Job in a Down Economy

So I receive this "email" from someone I don't know earlier today and felt compelled to respond.

 

In a message dated 01/05/10 09:48:50 Eastern Standard Time, XYZZZZ writes:

I am looking for a MSCC position...see resume

 

 

 

My response:

 

Dear Ms. XYZZZZZ,

 

Thank you for your resume. While we are not seeking someone with your qualifications I would like to give you some constructive feedback.

 

1. Your approach is a MAJOR turn off. Correspondence to a prospective employer or client should not be reduced to the form and substance of a "tweet"

2. You have done nothing to distinguish yourself- no introduction, no referral source, no sense of commonality (only by opening your attachment does one notice that you took a NAMSAP course-but not that you are even a member)

3. Consider that we live in days where attachments may contain harmful viruses. Few will risk downtime on their computer.

4. Proper sentence construction would be nice

5. So would a proper sign off identifying who you are

 

In these economic times where many are seeking work, it would be prudent to put one's best foot forward.

 

Good luck to you.

 

 

 

 

 

 

How Not To Kill Your Client's Structured Settlement By Fumbling At The Goal Line

Epitaph for a would-be structured settlement:

Documentation that says in pertinent part  " For the consideration of Five Hundred Thousand ($500,000.00) the receipt and sufficiency of which is hereby acknowledged, plaintiff hereby releases, remises...

" Plaintiff has been advised by counsel...

Followed by client's signature

Action Followed by fax to defense counsel.

CONSTRUCTIVE RECEIPT...Two big words. One fatal tax principal.  Possible E&O Claim.

Practice Tip: If your client is going to structure then the consideration must include the periodic payments as consideration, not the cost of the payments.

What Do 4structures.com, LLC and Forge Consulting Have in Common?

Check this out! I can praise as well as I can bash.

In this post I would like to acknowledge that 4structures.com, LLC and Forge Consulting, LLC now share being in compliance with New York Insurance Law § 2122(b) entitled "advertising by insurance agents and brokers"  The statute provides:

"Every agent of any insurer and every insurance broker shall, in all advertisements, public announcements, signs, pamphlets, circulars and cards, which refer to an insurer, set forth therein the name in full of the insurer referred to and the name of the city, town or village in which it has its principal office in the United States".  (underlines for emphasis)

A quick survey of structured settlement websites shows that 4structures.com, LLC and Forge Consulting may be the ONLY firms posting a list of structured settlement annuity companies that are actually in compliance with the statute.

On May 13, 2009 this author sent Dan Durbin and Joseph Ricci, respectively the President  and Executive Director of NSSTA, the following email:

"Dan & Joe,

 

Is compliance with state insurance law an issue for our members, including companies represented by several board and committee members?

 

http://structuredsettlements.typepad.com/structured_settlements_4r/2009/05/a-number-of-structured-settlement-industry-websites-continue-to-skirt-new-york-insurance-law.html

 

**Of course I could just mind my own business, but there is the matter of Principle VI of the NSSTA Code of Ethics which was adopted 12 years ago and is being used in advertising (by NSSTA members). In this respect I believe that NSSTA has a duty to (1) inform its members (2) take a proactive role to assure that at the very least those professional members ( and the organizations they represent) who serve on its board and committees make an effort to set an example in this area**.

 

Shouldn't we strive to make Principle VI actually mean something?  What can NSSTA do to inform and assist its members?"

 

Per Durbin, the topic was to be added to the June 3, 2009 Board of Directors meeting. to have a full discussion of this matter. I was asked to identify the number of agencies that may be out of compliance with the aformentioned statute, which I did. Those agencies include websites of certain NSSTA Board members.

As I write this post I continue to question why the websites of at several members of NSSTA Board of Directors are not in compliance with the above statute and have not been for some time? While the alleged non compliance with the New York statute may seem insignificant (1) non compliance is symbolic (2) the statute exists for a reason and (3) the correction to each website to bring it in compliance requires minimal action.

I strongly suggest that each and every member of the NSSTA re-read Principle VI of the NSSTA code of Ethics and the asterisked paragraph of my email to Durbin/Ricci. 

It is vital that the Board of Directors of NSSTA uphold the NSSTA Code of Ethics, in my opinion. How about yours?"

Given that about 4 months have now passed since the letter to Durbin and RIcci and the inexplicable fact that member websites represented by members of the NSSTA Board of Directors are still not in compliance with the New York statute, despite 4 prior notices, the simplicity of bringing a web site into compliance, the advertised code of ethics, the lack of notice to its members provided by NSSTA,  the relevant Board members and the other non compliant folks go into this week's Structured Settlement Advertising Wall of Shame.

 

Peach Holdings Gets S&P Upgrade to CCC+ (Outlook Negative), Senior Secured to CCC-

Standard & Poors  issued new credit ratings on Peach Holdings, the parent of cash now pusher Peachtree Settlement Funding on August 26, 2009.

As stated on the Standard & Poors website, an obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business,financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

This author would never suggest anyone sell their structured settlement payment rights to Peachtree Settlement Funding in the first place.

1. The company has engaged and continues to engage in false advertising. Simply read the tab on Peachtree Settlement Funding to the right of this blog for our archive.
2. The company does not have a reputation for competitive discount rates. While riding the gravy train, Peachtree charged rates in the mid to high teens when others were considerably lower. Great for investors, sucks for consumers  with structured settlements in need of the type of service Peachtree and others offer.
3. Upon information and belief the company engages in the servicing of structured settlement payments.

Questions

• Should annuitants whose payments are being serviced by Peachtree Settlement Funding be worried?
• Should any life insurance companies who entered into servicing agreements with Peachtree Settlement Funding be rethinking their strategy not to split payments?
• At one point Peachtree Settlement Funding was a member or sponsor of the Society of Settlement Planners ( see Download Peachtree Still in SSP 10-10-2006 Google)  Did any SSP members refer their clients, or any annuitant to Peachtree Settlement Funding during the time that Peachtree was a member of the SSP, or at any other time?
  
• Given that the S&P ratings for Peachtree , the JG Wentworth "close call" and the fact that Bentzen Funding Solutions (one of its "friends") business inevitably ends up in servicing agreement,  doesn't  the SSP and/or those members of the SSP feel it might be a good time to legally determine what happens to their client in the event the servicer goes belly up?
  

"Peach's funding options remain strained because the company has no access to revolving warehouse lines.The outlook is negative, reflecting the company's funding of new originations with forward flow arrangements"  Standard & Poors (on Peach) August 26, 2009