by John Darer CLU ChFC CSSC RSP
The "Grillo case" has been used as the poster child for potential attorney fee liability for failing to consider (or offer) a structured settlement to their client. [see Grillo v Pettiete Cause No. 96-145090-92 and Grillo v Henry Cause 96-167943-96, 96th District Court Tarrant County, Texas.
In that now "dog-eared" legal malpractice case there arose legal questions over whether there is ever a duty to offer a structured settlement. Plaintiff's legal malpractice attorney was quoted as saying "the defendant insurance company offered a structured settlement to the child and plaintiff alleged that the offer was never relayed to the parents and, in fact, never relayed to the court.”
The quote comes from an article about the case " Is Plaintiff Lawyer Liable for Not Offering Structured Settlement?", written by Amy Johnson Carter, published in Lawyers Weekly USA ,and then republished on the website of a Denver based structured settlement planner. The article contains a startling error of fact that I am surprised has been overlooked. (Note: that a Google Search shows in its cache at time of writing, that at the same error laden article appeared on the website of more than one structured settlement firm.
A. Kevin Isern, the plaintiff legal malpractice lawyer, refers in the article to "the defendant insurance company " when there is no direct action against an insurer in Texas. See Why can't I just sue the insurance company of the guy who hit me? by Personal Injury Attorney Doug Goyen "The Injury Warrior" March 30, 2011
B. But the "pink elephant" is this statement, attributed to the plaintiff malpractice lawyer Kevin Isern, and singled out for highlighting by Lawyers Weekly USA “Failing to do the structure lost all the Medicaid and Medicare benefits until (Grillo’s daughter) turned 18.” It's a real doozy!
A. Those who continue to post the error laden Lawyers Weekly USA article promote the inaccurate and easily rebuttable presumption that Medicare is an asset sensitive entitlement program. For further information see "Can I get Medicare if I am under age 65?" as well as how one qualified for Social Security Disabilty at the end of this post below.
B. Those who have posted the error laden Lawyers Weekly USA article, promote the inaccurate and easily rebuttable presumption (again, atttributed therein to the Amarillo, Texas malpractice attorney Kevin Isern) that Christina Grillo lost Medicaid due to failure to structure the underlying settlement.
C. Didn't the loss of Medicaid really have to do with the failure to do a Special Needs Trust as opposed to a Section 142 Trust through Merrill Lynch that was proposed? I cite as my authority noted Special Needs Attorney David Lillesand, partner in Pensacola 'Florida's Lillesand & Wolasky, who stated in "What Personal Injury Attorneys Need To Know About SSI, Medicaid and Special Needs Trusts (2009 update)".
"In 2003, a Texas law firm and the Guardian ad Litem in the case recently settled a claim for
$4.1 Million when the client lost Medicaid as a result of not having a Special Needs Trust, and had
to use settlement moneys to pay for medical care at the “retail” (highest) billing rate, called “fee-for service” rather than the negotiated reductions and free access to medical care through Medicaid.
Grillo v. Pettiete et al., Cause No. 96-145090-92 and Grillo v. Henry Cause, 96-167943- 96, 96th
District Court, Tarrant County, Texas" (emphasis ours)
D. While much has been made by many in my industry about the plaintiff attorney's and guardian ad litem's role influencing Josephine Grillo's decision not to structure her daughter's settlement, it was not the lynchpin to the overall problem.
If things had gone differently and and Josephine Grillo had simply accepted the hospital's structured settlement BUT still not done a Special Needs Trust, Christina Juniker would still have lost Medicaid AND would still have had to "use settlement moneys to pay for medical care at the "retail"(highest) billing rate".
E. Ms. Grillo's testimony in the Minor's prove up hearing in January 1991 shows that Ms. Grillo had concerns about annuities because of access to funds in the event of a catastrophic medical need.
Her testimony also suggested that the whoever she relied on for advice suggested the strategy on the premise that Christina Juniker (Grillo)'s medical expenses would provide an offset against the taxable income generated in the trust. Not necessarily an off the wall strategy if taken out of context of the facts in the Grillo case (I cite a blog post dated June 9, 2011 SSP and NSSTA 2011 Annual Meetings-4, wherein S2KM and TSSG's Patrick Hindert stated that every settlement plan "should include some tax analysis to determine whether "tax-free" products are needed or justified").
F. A copy of the transcript of sworn testimony in the Grillo case (labeled "Statement of Facts")from a January 10, 1991 proceeding about distribution of settlement proceeds (that were previously placed in the Court registry) suggests that there WERE discussions about structured annuities and issues such as diversification.
When questioned by Michael J. Henry, the guardian ad litem, under oath, Josephine Grillo affirmed that
- "Of the $2.5 million settlement, Christina is to receive $1 million of the money"
- "Out of that million dollars we are putting $700,000 of it--or requesting the court for approval of placing $700,000 of it into a trust with Merrill Lynch Trust Company"; then this odd question
- " And this is something that is done and requested with not much--or with a great deal of consideration and foresight, isn't it?"
- "And through discussions you have reviewed the tax consequences of spending one million dollars on an annuity versus placing $700,000 in a trust and purchasing $300,000 worth of annuities, haven't you?"
- "In that regard, in placing the entire million dollars in an annuity your principal concern was catastrophic health costs, or some other expenses Christina might undergo, where you might need, if not immediate, very quick access to the principal is that correct?"
- Your concern was that with an annuity paying you monthly that you would not have sufficient funds in the event of catastrophic health or --health problem, is that correct" (Grillo responded "That or a new technology, yes")
- " Something wherein the best interest of Christina--" (Grillo responded "exactly")
- " You need access to more than $7,000 a month?" (Grillo responded "right")
Then it gets really interesting
- "And the trade-off to that is the concern that the monthly payments may or may not be given the same tax treatment as annuity payments, but in consideration of that, you are willing to accept that because you feel and hope that expenses will be high enough to offset the monthly interest payments for the trust?" (Grillo responded " You are saying that the annuity that you and Mr. Pettiete had proposed would lhave had tax consequences--or no tax consequneces; is that what you are saying?" To which Henry said " I'm saying the tax consequences could have been different to which Grillo responded "Okay repeat your question please")
- Henry then has the tables turned after he asks I'm not asking you to agree with me, let me put it that way to which Grillo replied " It's not that I was going to agree with you. It's that if it was a structured settlement, then that money would have not been taxed; is that right?".. To which he responded "Right" and Grillo stated "Okay". Then after the judge asked Henry to rephrase he asked...
- ..."did you understand that it was my understanding or position that possibly a structured annuity or structured payout would have better income tax consequences than interest from a trust"? (Grillo said "yes")
- " but after consideration, and thoughtful consideration, you would rather have the access to the principal with the income from the trust and work and try to develop expenses to off set the income from the trust...?" (Grillo "Yes")
- " And in that order (for distribution) you are asking the Court or district clerk to pay not only the $700,000 for the establishment of the trust to Merrill Lynch, but is ordering the district clerk to pay $300,000 to Merill Lynch Trust Company to purchase six annuities at $50,000 a piece and a ten year term a slisted in that order, si that correct?" (Grillo "Yes")
- "And you are asking me to approve that portion of the Order?" (*Grillo "Yes ,please)
- "And the other reason you are spreading it among six companies is to decrease the risk of the insurance or annuity company having problems and its effect on you" (Grillo "Exactly to protect her principal $50,000")
- Plaintiff attorneys need to bring in a settlement planner to address settlement issues and options before the case is settled. Your clients deserve to be informed. At the very least the education process should begin before the case is settled.
- If you are a plaintiff, or the plaintiff's guardian, and your attorney has not brought in a settlement planner, do your own research and bring in a settlement planner, who will provide expertise and work in conjunction with your attorney as part of your team. Do not wait or simply rely on the guardian ad litem after the case settles.
- Isn't it time that Kelly Ramsdale Associates and Dakota Structures (and anyone else using it ) to scrap the use of the error laden Lawyers Weekly USA "pink elephant" on their websites?
- San Jose, CA based Settlement Planners.com inaccurately states "The ad litem settled for an additional $2.5 million. In case you don't have your calculator handy, that's more than $4 million, all because the plaintiff was not told about a structured settlement". Powerful marketing, but obviously the "all because" qualifier makes the statement untrue. That company needs to update its website.
- I am all for anything than shows structured settlements in a positive light, but let's keep it real.
- The Court of Appeals for the Second District of Texas in an unpublished opinion dated January 14, 1999 (02-297-163-CV) said (at p 7) 'there is no duty imposed on an ad litem to explain his actions to the minor's parents. Accordingly, we hold that as a matter of law, Henry had no duty to explain Grillo Harris Hospital's offer" (of "a structured settlement with qualified assignment"). Again the structured settlement WAS NOT the lynch pin on the loss of Medicaid benefits.
References and other useful information
1. Can I get Medicare if I am under age 65?
If you are under age 65 and disabled, and have been entitled to disability benefits under Social Security or the Railroad Retirement Board for 24 months, you will be automatically entitled to Medicare Part A and Part B beginning the 25th month of disability benefit entitlement. You do not need to do anything to enroll in Medicare. Your Medicare card will be mailed to you about 3 months before your Medicare entitlement date. Source: Medicare website
2. How Do You Qualify For Social Security Disabilty?
Social Security pays benefits to people who cannot work because they have a medical condition that is expected to last at least one year or result in death. Federal law requires this very strict definition of disability. Source: Social Security Administration website.Certain members of your family may qualify for benefits based on your work. They include:
- Your spouse, if he or she is 62 or older;
- Your spouse, at any age if he or she is caring for a child of yours who is younger than age 16 or disabled;
- Your unmarried child, including an adopted child, or, in some cases, a stepchild or grandchild. The child must be younger than age 18 or younger than 19 if in elementary or secondary school full time; and
- Your unmarried child, age 18 or older, if he or she has a disability that started before age 22. (The child’s disability also must meet the definition of disability for adults.)