by John Darer CLU ChFC MSSC CeFT RSP CLTC
An insurance company or Defendant that funds a structured settlement in advance of receiving a signed Court Order or signed release is doing themselves a favor in addition to the other parties involved in the case.
With a case that requires court approval, it could take months to receive the Court approval. This is most likely due to a backlog in the system. Courts in and around New York City are notoriously slow, particularly Surrogate's Court. One of my clients recently encountered a Court in Connecticut that wouldn't even commit to a date for a hearing. Sometimes delays are the result for the time it takes for the plaintiff's lawyer to draft documents or for defense counsel to review them.
With cases that involve Court approval and a structure, the Court must consider the structured settlement payments it is being asked to approve. In order to fix the benefit the structured settlement consultant must "lock-in" the benefits to preserve the negotiated cost for those benefits.
The problem exists when a combination of the above factors comes into play. Some carriers have free lock ins for 6 months, others for 90 days and still others 30 days or less. When you are dealing with large settlements that often includes prudent diversification, this can present a major challenge as some charge hefty lock in fees after the free lock in period expires.. Talk about being the proverbial balancer of spinning plates on long sticks!
To encourage insurers and defedants to fund structured settlements in advance of a release or court approval, most life insurance companies that issue structured settlement annuities will issue some sort of refund letter that says to the effect that the life insurer will refund the premium paid, if the court does not approve of the settlement. So there is no risk to the insurer or defendant to fund the structured settlement.
This solution has worked with some of the world's major insurers on cases involving significant sums of money in the millions of dollars.
When you're talking small settlements in the $25,000-$50,000 range, the money is sitting in short term reserves, earning little to no interest on what has to be short term money. So why not just pre-fund the structure having previously obtained a premium refund letter executed by the annuity issuer, through your structured settlement broker?