by Structured Settlement Watchdog
The Tennessee State legislature introduced bills to make various changes to the “Tennessee Life and Health Insurance Guaranty Association Act,” which include excluding from coverage certain persons receiving payments through structured settlements.
The Tennessee bills were filed in January 2019, following the publication of Statutory Issue Paper 160 by the National Association of Insurance Purchasers (NAIC) in December 2018, which made clear that factored structured settlement payments streams are neither annuities nor insurance products.
The Tennessee House and Senate bills excludes from coverage under the Act a person who acquires rights to receive payments through a structured settlement factoring transaction, as defined in federal law, regardless of whether the transaction occurred before or after the federal law took effect.
If the bill passes in Tennessee, if you're an investor, you're screwed in the event of insolvency no matter when you acquired the structured settlement payment rights.
- Some merchants hold these derivatives out as annuities and go one step further to insinuate the possibility of state guaranty funding protection in the event of insolvency.
- Some use the existence of such protection to sell what they call annuities, an unlawful act if selling annuities. Their only defense is to deny that the structured settlement derivatives are annuities which is an admission to lying to the customer.
- The victim is the investor.
- Some of the investors are injury victims directly or via trusts with such investment recommendations being made by settlement planners.
- While liability protection for insurance agents and financial advisers typically excludes insolvencies, insurers should check their policy wordings.
- When presented with a trust containing factored structured settlement payments streams, Tennessee judges should be mindful of this new development when reviewing petitions for settlement approval.
Stay tuned! It seems likely that other states will follow suit.