by John Darer CLU ChFC MSSC RSP CLTC
A beneficiary has brought a lawsuit against the annuity issuer and guarantor, qualified assignee and structured settlement brokerage and others in the New Jersey District Court at Camden, in a dispute over payments allegedly due the payees and the contingent beneficiary from a structured settlement that was set up in 2002 to resolve a workers compensation case. In short the Plaintiff claims that $848,000 was used to fund the structure and that only $320,000 (representing a return of principal) was paid out before the annuity issuer stopped making payments, after her mother's death in 2008.
The complaint filed December 6, 2012 in LETZGUS v. AMERICAN GENERAL LIFE INSURANCE COMPANY et al alleges
1. That Barbara Letzgus' father Ronnie Letzgus was severely injured and permanently injured September 3, 1998 during his employment by Bensalem Steel Erectors.
2. That " as a result of personal injury incurred by Mr. Letzgus, certain benefits were paid through PMA Insurance Group under his employer's Workers Compensation policy and certain other benefits to AGL ( American General Life Insurance Company) to acquire and establish an annuity for not only the life of Mr. Letzgus but thereafter to his... spouse, Ida Letzgus, as primary beneficiary..." [ in view of the statement in #5 it appears to this author that the annuity was funded by AIG not PMA]
3. That Mr. Letzgus named his daughter as contingent beneficiary.
What is A Contingent Beneficiary? A contingent beneficiary is an individual or entity specified by an insurance contract holder who will receive the benefits if the primary beneficiary has died when the benefit is due to be paid.
4. "That in or about 2002, an employee of PMA (Pennsylvania Manufacturing Association) Insurance Company advised Mr. Letzgus that he should establish a long term annuity for his settlement benefits and only recommended Ringler Associates for this purpose"
5. "...That Ringler advised and established a structured settlement for Mr. Letzgus", which appeared to be funded by National Union Fire Insurance Company of Pittsburgh Pennsylvania (sic)" "for at least $848,000" "establishing a fifteen year annuity, paying $5,700/00 per month tax-free, to himself or his designated beneficiaries..."
6. The settlement agreement was dated January 11, 2002, the periodic payments under which were assigned to American General Annuity Service Corporation on March 15, 2002.
7. The complaint then alleges (at 13) that on March 15, 2002, the same date as the assignment, Ross Duncan and Jane Speranzi (sic) issued a structured settlement proposal providing that Letzgus or his beneficiaries would receive $5,700 per month beginning April 15, 2002 for 180 months certain and life, with payments to increase "by a minimum of 2% per year and he payments were guaranteed through March 15, 2017"
"Certain Period": The certain period of a structured settlement or retirement annuity, represents payments that will be made whether or not the payee survives the entire payment schedule.
8. The complaint alleges that Letzgus accepted a proposal "under the advisement of Ringler" with amounts that appear to vary between $2.49 MM and $3.49MM although states that the documentation located by the Plaintiff is not easily discerned. The complaint alleges that Letzgus was not represented by counsel, did not have an education in finance or investments and the last grade of education completed was 9th.
9. The complaint alleges that according to records Ronnie Letzgus received payments, through January 2008, in varying amount between $3,400.00 and $3,700.00 per month.
10. Letzgus died March 26, 2008, leaving his wife Ida Letzgus and his daughter Barbara, allegedly as his only surviving intended beneficiaries.Ida Letzgus died 4 months later.
11. Barbara Letzgus alleges that before his death that Ronnie Letzgus told her that he had provided for her mother and her through the annuity "which would pay her at least $5,700.00 per month and it might be mor based on the investment advice of Ringler Assocoates and the funds invested in the annuity"
12. According to the complaint, some time in 2008, American General Life stopped making payments upon learning of the death of Ronnie Letzgus and none have been paid thereafter.
NOTE: A legal complaint contains allegations, which are claims of fact by a party, which the party claims to be able to prove. Allegations remain assertions without proof, until they can be proved.
I. According to our source, Ronnie Letzgus was represented by the now defunct Philadelphia law firm of Litvin Blumberg Matusow and Young at the time the structured settlement was established. Before it was dissolved in 2004, the firm was one of the premier plaintiff law firms in the Philadelphia area.
This aspect of the case allegations raises interesting questions ...
- Does a Defendant or insurance carrier have a duty to provide an advisor for a claimant or a plaintiff?
- Does a Defendant or insurance carrier have a duty to advise a claimant or plaintiff that they should seek independent professional advice concerning the structured settlement?
In New York, the state's structured settlement protection act, promulgated in the New York General Obligations Law, provides at 5-1702 (e) that the Defendant or the Defendant's legal represenative must make " a statement that the claimant is advised to obtain independent professional advice relating to the legal, tax and financial implications of the settlement, including any adverse consequences and that the defendant or defendant’s legal representative may not refer any advisor, attorney or firm for such purpose. No such requirement existed in New Jersey or Pennsylvania at the time the Letzgus structure was created. Moreover, upon information and belief, no such requirement exists in those two states today.
- If the structured settlement consultant that the Defendant is using is one that is known and trusted by plaintiff's counsel and the plaintiff's counsel is content with a single consultant advising both sides in the transaction, then where do responsibilities fall?
II. What was actually sold? Was it a cash refund policy? What documentaton is there to back it up?
III. What does the settlement agreement say? What does the qualified assignmment say? The structured annuity that is issued should match up against the settlement agreement and qualified assignment. In my experience a qualified assignee will not take on a periodic payment obligation that is not specified in the settlement agreement.
IV. Was there a delivery letter sent with a copy of the annuity contract and the fully executed qualified assignmment?
V. Were any structured settlement payments sold to a factoring company such as JG Wentworth prior to Ronnie Letzgus' death?
VI. Not referring to anyone in particular, but in general, in my opinion, the settlement professional of 2013 should be focused on an ongoing professional relationship in in lieu of a brief but intense encounter. Things happen over the life continuum that need attention. People's life circumstances change. They get sick, They get healthy, They get married. They get divorced. They have children, They have grandchildren. They start a business. They sell a business. The business is successful. The business fails. They lose or make money in the stock market. They inherit money. They get a promotion. they lose their job. A tragedy occurs. Force majeure (e.g. Katrina, Sandy).
VII. This author does not know the facts about why the payments were stopped, yet observes that the complaint is notable for naming American General Life Insurance Company pursuant to a theory about its guarantee of the assignment company, American General Annuity Service Corporation. Subject to their terms, such guarantees generally state that the guarantor will pay if the assignee fails to pay, promptly, upon written notice.
Full case cite