Can Insurer Enforce This Structured Settlement?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

At the end of a mediation, the mediator conveys a settlement offer from the Insurer or insurer's representative on behalf of its insured, the Defendant, with a fixed dollar amount that supposedly requires, for no rhyme or reason, that a nominal amount be structured "any way the plaintiff wants it". Let's say that number is $100,000. Neither the insurer, nor the insurer's representative, has conveyed any specific structured settlement proposals or illustrations as part of its offer and no specific periodic payments were ever discussed. 

Questions

• Can an offer that simply requires the Plaintiff to structure a fixed amount of money "any way that he/she or they want it" be enforced?
• If so, how would you enforce the structured settlement when the terms of the structured settlement are not specified? 

Elements of a Structured Settlement (assume personal injury case for this example)

1. Promise to Make Periodic Payments as Partial Consideration for a Release of all Claims
2. Qualified Assignment, Substitution of Obligors, pursuant to IRC 130. Defendant or its Insurer pays money to Assignment Company which then
3. Purchases Annuity Contract as Qualified Funding Asset from which payments may be made directly to the Plaintiff, Plaintiff's trust, or Medicare Set Aside account.

The Nature of Settlement Negotiations

The nature of negotiations means that the Defendant or insurer is free to make a settlement offer in any manner they wish, to which the plaintiff is free to accept or reject and/or counter.  The Plaintiff can demand anything they want in any form they want, to which the Defendant or insurer can accept, reject and/or counter.

• A thoughtful, detailed and transparent offer that shows that an effort has been made to understand the plaintiff's situation is an effort to address actual needs is an engaging path on which to build
• Vague offers, such as an unspecified structure with simply a requirement to allocate a certain sum of money could lead to credibility problems, in my humble opinion. There are better ways of "getting to yes"

If the plaintiff has really short-term needs, those needs, if structured, might even produce a negative rate of return in the current environment.  Not only is that bad for the plaintiff now, but if the plaintiff were to subsequently seek to sell structured settlement payment rights in the secondary market to address the short-term needs and a judge approves, it would exacerbate the negative return due to pennies on the dollar erosion from factoring payments.  Not very good for them and not very good PR for the stakeholders.

While the plaintiff can certainly structure it out for a longer period of time to create a positive return, it may not be "any way he/she/they) want"

Then there is the issue of the casualty company approved list of annuity issuers.  If "any way he/she/they want" has restrictions that should be disclosed up front