by John Darer CLU ChFC MSSC CeFT RSP CLTC
Mark Wahlstrom's Structured Settlement Brokers Drafting Settlement Documents, Are You Nuts? raises some good points, asks interesting questions and inspires me to share some of my own observations and questions.
What Has Changed?
Judging by the range of content offered on the Settlement Channel and knowing my friend Mark, I'm sure that he would agree that the settlement planning profession, and what people might refer to as the structured settlement profession, has in many cases moved considerably beyond a simple distribution of a single financial product such as a structured settlement annuity. Depending on the circumstances , and who retained your services, the structured settlement annuity might be part of a settlement transaction and settlement plan that involves (but not limited to) one or more of the following:
One or more cash flows going to a single payee or to multiple payees, supplemental needs trust, special needs trust, settlement preservation trust, settlement conservation trust, United States Treasury Bond Trust, "130X" trust, commutation rider, elimination of liability rider, reinsurance, Medicare set aside trust, life insurance, conservatorship, qualified settlement fund, structured attorney fees to one lawyer, to a lawyer in a partnership or a lawyer in a corporation, one party release, two party release, multi party release, one or more types of qualified assignment, non qualified assignment and release, issues of guardianship, determining whether a will exists and if so, what is says and when it was last updated.
Naturally once a case has settled the claims adjuster wants to close his/her.their file, and the plaintiff attorney wishes to get his or her client and his/her/their firm paid, as soon as possible. The settlement planner or structured settlement professional can help facilitate that process, in essence as the "fiber" that keeps things moving. While the claims adjuster or trial lawyer can draw on the experience and input of the settlement planner or structured settlement professional, it's critical that there is a recognition that the responsibilities remain where they properly should.
Ostriches Need Not Apply
While sometimes you should stay in your lane, it's also important that the settlement planner NOT simply keep his or her head in the sand. A foundation of the settlement planner's or structured settlement professional's education is, and should be, an in depth understanding of the structured settlement transaction and the legal, economic and tax principles behind it. Conceptually this is no different than the knowledge required of an insurance agent who sells a life insurance policy to fund a buy-sell agreement, deferred compensation transaction or split-dollar. Armed with this knowledge, I'm not sure that the settlement planner or structured settlement broker should sit idly by and say nothing. If such input is provided however, this does not dissolve the ultimate responsibility of the lawyers or claims adjusters who take this input to actually read the document, exercise independent thought and advise their clients properly.
With settlement documents one common example of "bad cholesterol" is the improper reflection of consideration when a structured settlement is part of the resolution of the case. Those of us in the structured settlement industry know (hopefully) that the consideration for the structured settlement is the periodic payments themselves, NOT the cost of such payments.
A sample of some of the other issues that I've seen:
- Documents in cases requiring Court approval that are signed before the Court approval
- Documents that improperly reflect the sequence of events in the structured settlement process (e.g "defendant will purchase annuity and then assign it")
- Inconsistencies between the settlement agreement and the qualified assignment
- Life companies who won't permit the name the party to whom payments are due as the secured party on a qualified assignment release and pledge when the payee is a special needs trust.
- A general release for cash and a separate structured settlement document
- Parties want to do set aside allocation on a liability case and the annuity issuer wants a copy of workers comp board approval. Yeah...
In support of Mark's post I believe there is considerable danger when inexperienced settlement professionals, or even law firm employees, cut and paste sections of documents without the foggiest clue of the impact of what they are doing. Throw that before a lawyer or adjuster who does not take the time to review the document, thereby not discharging their duties properly, and you have a real mess. Most settlement documents contain something similar to the following:
"In entering into this Settlement Agreement the Plaintiffs represent that they have relied upon the legal and tax advice of their attorneys, who are the attorneys of their own choice, and the terms of this Settlement Agreement have been completely read and/or explained to them by their attorneys, and that those terms are fully understood and voluntarily accepted by them.
When providing sample documents or comments to attorneys or adjusters, as to the structured settlement related aspects, it would be wise for the settlement planner or structured settlement professional to include a a disclaimer which states something to the effect that the sample "documents are provided as a convenience and that the responsibility for legally binding documents rests where it properly should, with respective counsel."
A handful of "nuts" a day is said to be a healthy source of protein and fiber and other minerals. The health message is moderation and that same message applies to the broker or settlement planner's role in the settlement documents.