by John Darer® CLU ChFC MSSC RSP CLTC
Travelers Insurance Company is a major supporter of structured settlements but Travelers will not participate in structured attorney fees as a long standing corporate policy. Plaintiff lawyers who have cases heading towards settlement involving Travelers insureds should not count on the ability to structure their legal fees those cases [ see my May 5, 2011 post Travelers Insurance Doesn't Structure Attorney Fees, So Plan Accordingly].
But what of other companies? Having seen and heard of a few instances in recent times where other carriers have elected not to participate in structured attorney fees I decided to investigate if this is a growing trend or random isolated instances. On the two recent cases one involved a stand-alone structured attorney fee. In the other structures were contemplated for both the minor plaintiff and the attorney.
In the case where the minor plaintiff structured as well, the defense did not have a structured settlement broker at a 2011 mediation. The broker that was eventually assigned in 2012 did not show up when rated ages were requested on the minor plaintiff by the plaintiff's expert in the year or more preceding the settlement when the case clearly warranted a rated age. Nor did he or she show up when the rated ages were renewed in 2012. I say that not to chastise the unnamed industry colleague (who I greatly respect), but to remind ALL structured settlement stakeholders of the value of having representation early in the game.
The other case was a stand alone case. The plaintiff was not structuring. The plaintiff attorney is a straight shooter and not a jerk by any stretch of the imagination.
Why would an insurer, defendant, run-off company, or TPA adjusting on behalf of them not want to structure attorney fees?
A. They Didn't Offer It
While acknowledging that the defense controls the offer and setting aside blanket policy like Travelers,
- A claims adjuster or defense attorney shouldn't be faulted for not having a corner on all the good financial ideas. But that doesn't mean it does not make sense for it to be part of case resolution if there is no additional cost and the risk is eliminated.
- A claims adjuster or defense attorney shouldn't be faulted for any misperception on any individual case, that the plaintiff or plaintiff attorney might not be interested in a structured settlement because they haven't had the opportunity to spend time with the plaintiff or plaintiff attorney to discuss their financial plans. But that doesn't mean it does not make sense for it to be part of case resolution if there is no additional cost and the risk is eliminated.
- A plaintiff attorney should not be at fault for the case load demands of the claims adjuster of defense attorney that may have meant that a structure was not considered.
B. Toys Thrown Out of The Pram Response
Let's be frank about this, sometimes what is happening is (and you don't have to admit it) someone is casting
- A "Bafongul" to the plaintiff attorney for doing their job.
- A "Bafongul" to the plaintiff attorney because the plantiff attorney "was a jerk" in the eyes of the adjuster during a contentious litigation.
- Ivan Pavlov's research on conditioning "salivation and digestion" did not involve lawyers.
- The idiom " You can catch more flies with honey than with vinegar" applies when you are likely to be seeing the same attorney on other cases. And of course, in the immortal words of the late Vicki Sue Robinson, you can "turn the beat around" too.
C. Perception of Risk in Structuring Attorney Fees
Transactional Risk Fear that if he transaction is not done right it could come back to bite them
Credit Risk Fear that in the unlikely event of an insolvency, that the insurer might have to pay some portuon of the obligation again (the ELNY fallout) after the file has been closed and in excess of the policy limit.
- If the transaction is not done right it could come back to bite. But that's why both sides should retain their own credentialed structured settlement expert.
- The ELNY case is a one off. Buy and holds have not been "de rigueur" since the Periodic Payment Settlement Act of 1982, when a novation using a qualified assignment became available.Other vehicles that support structured attorney fees include the use of reinsurance and non qualified assignments. Structured attorney fees may also be funded using Treasury Funded Structured Settlements
D. Lack of Familiarity with the Structured Attorney Fee Transaction
It is easy to understand that when unfamiliar with something, the safe route is to not do it. But are you missing an opportunity?
- We encourage claims adjusters and lawyers to be armed with a "full deck of cards" when at the negotiating table. Structuring legal fees can help provide lawyers with a secure and stable tax-deferred income for a period of time, or for life. Payments can be used to smooth out law firm cash flows, serve as a supplement to qualified retirement plans, which limit contributions. There is a value to this.
- Plaintiff lawyers should already be working with a structured settlement expert in advance of a mediation and/or settlement negotiations and be mindful to address structured fees as part of the mediation statement.