by John Darer CLU ChFC MSSC CeFT RSP CLTC
In Patterson v. McMickle, 191 S.W. 3d 819 (C.A. Tex 2006), the administrator of the Estate of Daniel Myracle sued the attorney and his structured settlement broker Gary McMickle for negligence, breach of fiduciary duty, fraud, and violations of the Texas Deceptive Trade Practices Act. The administrator alleged that the attorney and broker obtained two annuities for Daniel Myracle, the second of which did not have a guaranteed refund of the premium and was to be deferred for 15 years. However, Daniel died a year after the settlement and 14 years before the second annuity was to begin monthly payments. Because the annuity did not have a guaranteed return of premium, the estate was not entitled to any payment or refund. In granting McMickle’s motion for summary judgment, the trial court found that McMickle owed no duty to Sharnae Myracle, Daniel’s mother, who had been displaced as Daniel’s personal representative before the settlement. McMickle argued that, at most, he owed duties to Daniel’s attorney and personal representative. The Court of Appeals affirmed. Although the Court of Appeals did not have to decide whether McMickle owed a duty to Daniel’s attorney and personal representative, it seems clear that such a direct relationship would be sufficient to survive a summary judgment motion, according to Philadelphia attorney Stephen Harris who wrote the commentary on his law firm's blog.
Split Funding of Structured Settlements is Not Uncommon
My apologies in advance for triggering nightmares of cramming for your last high school geometry test. Euclid of Alexandria, from
his famous book Elements, Book I, Common Notion 5 says, “The whole is greater than the part.” In geometry, the Segment Addition Postulate states that given 2 points A and C, a third point B lies on the line segment AC if and only if the distances between the points satisfy the equation AB + BC equals AC. How does this "classic" phyllo wrapped postulate relate to structured settlements and "McMickle's pickle"?
Depending on the state, there are at least 10 structured settlement annuity issuers, and they all have their pricing sweet spots. Read more about structured settlement quotes. Some insurers are better on short term durations from 5 to 15 years and others may be better on long term cash flows. Some have competitive rated ages and others don't. Daily rates may or may not be available.
Sometimes, by combining two or more segments from different structured settlement annuity issuers the payee will receive more than they would with a single company. In Euclidian terms AB+ BC equals AC plus!
In the "McMickle pickle", it's clear that a 15-year certain annuity was combined with a life annuity to create a "15 years certain and life" cash flow. Instead of 15 plus 0, the combination of annuities could have had a longer certain period (15 and 5, 15 and 10, 15 and 15 for example). The longer combined certain period would have reduced the amount of income to the decedent. Without seeing the entire file, my best assumption would be that McMickle's intention was to maximize the income to the child from the settlement money while the child was living. McMickle
Carefully Document the File When Split Funding Structured Settlements
When using split funding in any combination, whether a mixed duration split, annuity company split, or a product split, it's a good idea to have a simple summary of the documentation delivered to the client.
In 2015, I received a call from a concerned Allstate annuitant whose benefits had been suddenly "cut off". The annuity was the annuitant's share from a divorce settlement and naturally they were concerned. I did not write the policy. Unfortunately, the outsourced customer service rep service at a Phillipine call center was neither knowledgeable nor helpful and set the annuitant into a state of panic. Fortunately, the annuitant contacted me, someone with enough experience to know the history and peculiarity of Allstate's policies, which split the certain and life contingent portions into two separate policies. What happened was the periodic certain policy stopped and the switch to the life contingent policy did not click in as it was supposed to. It took some calling to find someone at the home office of Allstate who could take remedial action but eventually the situation was rectified. It would have been helpful however and have saved the annuitant a bit of agita, if the original broker had placed a summary in with the delivery of the policy.