Structured Settlement Factoring Referrals Raise Privacy Issues

by John Darer® CLU ChFC CSSC

1. Under what circumstances Is the structured settlement annuitant your client?  Consider: (a)you were sole broker in the underlying transaction representing the defense (b) you were co-broker with plaintiff representative, but represented the defense in the underlying transaction (c) you were sole broker in the transaction representing the former plaintiff/annuitant
2. Under what circumstances can you share such "protected information" of an annuitant with a  third party (factoring company representative)?
3. Does your sharing such information with a third party, without your defense client's consent (where a confidentiality clause exists) constitute (a) a breach of confidentiality or (b) a breach of ethics?
4. Does your sharing such information, with a third party about a party who was not your client in the underlying transaction, without the annuitant's consent (where a confidentiality clause exists) constitute (a) a breach of confidentiality or (b) a breach of ethics?

Say you're a seasoned "defense" structured settlement veteran with hundreds or even thousands of closed structured settlement files sitting in storage. These files contain the personal and private information of annuitants and closed cases involving your defense clients. Some of these cases may even contain a confidentiality clause. For example, a copy of a Settlement Agreement and Release will have the name of a physician, hospital or product manufacturer on it. You've read the blogs or heard the voices of Matt Bracy and Pat Hindert,who say that if your clients are going to do it (factor or sell their structured settlement payment rights) anyway, you may as well save them from going to the wrong place by informing them of their rights now.

These are important questions that must be considered. Many of these issues also apply to plaintiff representatives. Access to these records is of course a factoring representative's "pot of gold at the end of the rainbow" and filled with profit potential for the referrer of such business.

One could argue that it is in the "best interest of the client" (if the annuitant is in fact your client), but best practices suggest one has to consider the overlay of privacy laws and the questions posed above. I would like to hear the thoughts of others on this subject.

Resources:

Gramm Leach Bliley-Texas Department of Insurance FAQ

Gramm Leach Bliley Act-Federal Trade Commission website

Comments

[Henry L Strong]

Excellent subject, John and I think something all practitioners should examine very carefully. At our firm we have always considered the information "privileged" whether a confidentiality provision was executed or not. We have never and will never disclose that information voluntarily to any third party, period. I personally believe that any broker who does risks not only an ethical breach, but, in this new world of informational security, likely legal risks as well. Perhaps this will be the route shafted claimants will go to get back the 72% interest charges paid by some: sue any and all parties who disclosed such information in the first place. Bravo.