by John Darer® CLU ChFC MSSC RSP CLTC
What is Post Settlement Underwriting?
Post settlement underwriting is a legitimate business practice** that has been alleged to have been abused by some structured settlement brokers representing casualty and liability insurers. The gist of the allegation is that AFTER a plaintiff has agreed to a specific benefit stream from a structured settlement, on occasion, certain "actors" in the structured settlement brokerage community will see if they can get a better rate for the Defendant or Insurer and go to a further step of allegedly concealing this from the unsuspecting plaintiff and plaintiff attorney, sometimes by allegedly barring the Plaintiff from retaining a broker of their own.
**one might consider post settlement underwriting "legitimate" where the case has settled, the global settlement funding amount has been determined, final terms of the structured settlement are being negotiated and additional medical information is submitted to see if a better price can be obtained on the structured annuity or annuities, with full disclosure to both sides. Whatever savings there is on the annuity price has no impact on the global settlement funding amount. Where a Medicare Set Aside is being considered, a better rated age could mean less is needed to fund the MSA, an attractive solution for both sides.
Why the Negative Side of Post-Settlement Underwriting is Nearly Impossible in New York
The alleged negative aspect of post-settlement underwriting is virtually impossible in certain states with structured settlement protection acts, such New York, Florida, Massachusetts, and Minnesota. These statutes in these states require the Defendant or the Defendant's legal representative to disclose costs at the time the structured settlement is negotiated (see New York General Obligations Law §5-1702 and similar statutes in the other states). If post-settlement underwriting were to occur in New York, wouldn't the Defendant and their attorney face significant personal exposure for fraud?
New York General Obligations Law §5-1702 and its Role in Enhancing the Integrity of Structured Settlement Transactions
Listen to or watchd John Darer's podcast on New York General Obligations Law §5-1702, which delves into the New York Structured Settlement Protection Act, examining its impact on the creation of structured settlements and the obligations it places on defendants or their legal representatives.
Undisclosed post settlement underwriting is career suicide for a structured settlement broker. The rogue broker who goes down this path will eventually be found out.
Attorneys for both plaintiff and defense can protect themselves and their clients by utilizing the services of a structured settlement expert.
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