by John Darer® CLU ChFC MSSC RSP CLTC
Not "Pretty Impink"
In the matter of Nicholas Impink, a minor by his parent and natural guardian, Shannon Baldi, and Shannon Baldi, individually v David Reynes, Neil B. Reynes and Maria A. Reynes Docket No. A-3448-06Y5 (935 A. 2d 808; 2007 N.J. Lexis 351), the Plaintiff successfully used a Minor’s Compromise hearing to create a structured settlement in a case where Franklin Mutual Insurance Company had agreed only to pay its policy limits in “cash” in the amount of $300,000.00.
Insurer had only been willing to offer a structured settlement with a discount off policy limits
Franklin Mutual had only been willing to offer a structured settlement if the plaintiff agreed to accept its as part of a lower priced offer of $250,000.00.
Superior Court of NJ, Appellate Division Overturns Lower Court in Favor of Insurer
However, on November 29, 2007 the Superior Court of New Jersey, Appellate Division reversed the decision of the lower court, stating:
“It is clear from the record that the terms of the agreement called for the payment to be made in a lump sum, not in a structure. The motion judge impermissibly ordered a change, therefore, to the terms agreed upon.”
The Court concluded that the only role for the Judge hearing the Minor’s Compromise is to determine whether the cash settlement was fair to the minor.
If not, then the Judge should disapprove the settlement and schedule the case for trial.
For a copy of the Impink Appellate decision Download Impinkcase.pdf
The decision makes it clear that there must be a "meeting of the minds", but what is also interesting are the following observations.
Holy crap! The 16.66% discounted offer to structure ($50,000 as a percentage of $300,000) to cover the Franklin Mutual "risk" is WORSE than the effective discount factor charged by many factoring companies like Peachtree Settlement Funding. How the heck do you think that makes Franklin Mutual look? Wonder what annuity issuer was being used or if this was an arbitrary number? What did Franklin Mutual get for playing hard ball? Added legal expenses, really bad PR and they probably overpaid the case.
If the adjuster was trying to save off the policy limit they might have done better to think about a number that works in today's environment. For example, why did they not at least give a shot to an offer of $285,000 in a structure, which would have meant a 5% discount factor?
If the case were able to have been resolved by way of a qualified settlement fund it is possible the plaintiffs might have been able to achieve their structured settlement objectives. A structured settlement broker or settlement planner would have needed to be on board in advance of settlement discussions to discuss the costs involved of that route.
Under the eventual circumstances the plaintiffs still had other alternative periodic payment options using the full $300,000.00, without regard or concern to Franklin Mutual.