Occasionally a defendant's or insurer's negotiating tactics may involve trying to stuff a structure down the plaintiff's throat. Motivation for the tactic aside, the settling plaintiff, through resignation, may end up with a structured settlement that just does not suit his or her needs. We all know what potentially happens next. I recall one matter when the father of someone called me because his son was forced to take a structure paid out over 5 years. I've seen others where a seemingly arbitrary percentage had to be structured.
Every settlement option has its pros and cons, but is there a social or public policy imbalance when someone is forced to structure over 5 years for a negligible return and have them run the gauntlet of "cash now"/factoring temptation that effectively would put them in a negative return on their settlement? Some factoring companies have no compunction about approaching a tort victim before the ink is even dry on their structured settlement. Frankly those cases fan the flames of those who say that structured settlements are too easily factorable and the resultant lost business hurts the overall structured settlement industry regardless of who your client may be.
Has anyone thought about the absolute PR disaster*** for a P&C Company if the following happened:
- A case was resolved where the structured settlement was essentially "stuffed" down the plaintiff's throat without taking into account the plaintiff's needs.
- Unbeknownst to the tort victim or his lawyer, the claims adjuster's quarterly or year end bonus was increased as a result of "the stuff" or was a contributing factor to the bonus.
- Because the plaintiff's needs were not met at the outset, because of "the stuff", the tort victim ended up deperately needing cash, had no credit and therefore had to consider factoring his or her structured settlement payment rights
- The P&C insurer's structured settlement broker was later found to participate in the structured settlement factoring vig.
- The tort victim knowing no one else, contacts the P&C insurer's structured settlement broker who simply refers them to a factoring company and took undisclosed compensation and/or failed to notify the annuitant that the vig was negotiable, after "the stuff" in number 1.
- How bad would number 5 look if it happened in the first year after settlement?
Who wins?
The Structured Settlement Clean Vendor List is as useful a tool for P&C insurers as it is for tort victims and lawyers when it comes to vendor selection and retention. In addition to your own vendor requirements, those on the Structured Settlement Clean Vendor List have signed the Structured Settlement Business Practices Declaration on Structured Settlement Factoring Compensation, under penalty of perjury. At the very least the P&C insurer and adjusters should consider speaking to each and every one of its vendors and their representatives to get an enforceable clarification.
*** this is a possible scenario intended to be used for educational purposes and not intended as criticism of any particular P&C company.
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