"Can New York 50A & 50B Cases Be Assigned To An Assignment Company?"

by John Darer CLU ChFC CSSC RSP CLTC

New York CPLR 5041 states "The court, as part of its judgment, shall direct that the defendants and their insurance carriers shall be required to offer and to guarantee the purchase and payment of such an annuity contract"

In order for a qualified assignment to receive the appropriate tax treatment, it must first comply with Internal Revenue Code Section 130(c) which states " for purposes of this section, the term “qualified assignment” means any assignment of a liability to make periodic payments as damages (whether by suit or agreement), or as compensation under any workmen’s compensation act, on account of personal injury or sickness (in a case involving physical injury or physical sickness)—

(1) if the assignee assumes such liability from a person who is a party to the suit or agreement, or the workmen’s compensation....".. 

The guarantee of payment requirement in CPLR 5031/ 5041 appears to preclude qualified assignment of the structured judgment obligation. The qualified assignment is designed to create a novation of a periodic payment obligation which is not the case with a structured judgment.  There is an ongoing obligation

The first decretal paragraph of the typical qualified assignment agreement reads something like this:

"Subject to qualification under section 130(c) of the Code, Assignor hereby assigns and Assignee-Debtor hereby assumes all of Assignor's liability to make the Periodic Payments.  Assignee-Debtor assumes no liability to make any other payment.  Releasor hereby accepts and consents to the assignment by Assignor and the assumption by Assignee-Debtor of the liability to make the Periodic Payments, and upon the Effective Date Releasor releases Assignor from all liability to make the Periodic Payments".(emphasis added)

Notwithstanding CPLR 5031/ 5041, how likely is it that a Defendant or Insurer is willing to guarantee the performance of a third party entity over which it has no control? 

Note that there IS is an assignment provision in CPLR 50-A 5039 and CPLR 50-B 5048. This is not an assignmment to an assignment company, but expressly states that an agreement to assign any right to periodic installments for future damages contained in a judgment entered under this article is enforceable only as to amounts: (a) to secure payment of alimony, maintenance, or child support; (b) for the cost of products, services, or accommodations provided or to be provided by the assignee for medical, dental or other health care; or (c) for attorney's fees and other expenses of litigation incurred in securing the judgment

Other sections of   CPLR 5031-5039  (Artcle 50-A) and CPLR 5041-5049  (Artcle 50-B) that mght be helpful with respect to this question:

CPLR 5032/5042   Security authorized or required for payment of a judgment for periodic installments entered in accordance with this article must be in the form of an annuity contract, executed by a qualified insurer and approved by the superintendent of insurance pursuant to section 5039/5049 of this article, and approved by the court.

 

CPLR 5033/5043

(a) If the court enters a judgment for periodic installments, each party liable for all or a portion of such judgment shall separately or jointly with one or more others post security in an amount necessary to secure payment for the amount of the judgment for future periodic installments within thirty days after the date the judgment is entered. A liability insurer having a contractual obligation and any other person adjudged to have an obligation to pay all or part of a judgment for periodic installments on behalf of a judgment debtor is obligated to post security to the extent of its contractual or adjudged obligation if the judgment debtor has not done so....

 

CPLR 5039/5049

The superintendent of insurance shall establish rules and procedures for determining which insurers, self-insurers, plans or arrangements are financially qualified to provide the security required under this article and to be designated as qualified insurers. 

Note that the question which inspired this post, was posed in a Yahoo search on the day of posting. The question would have been better posed as "Can future payment obligations under a CPLR 50A or 50B structured judgment be assigned to an assignment company through a qualified assignment?" CPLR 5047 provides that nothing precludes the parties from settling.