by John Darer CLU ChFC MSSC CeFT RSP CLTC
While acknowledging that people can change their opinion over time, with all due respect, I've got to call B.S. on Patrick Hindert's most recent lament of an unfavorable opinion for Lujerio Cordero by the New York Court of Appeals to the 11th Circuit's certified question in a serial structured settlement factoring case. Cordero's lawyers opted not to sue the structured settlement factoring companies and instead sought to hold the annuity issuer and qualified assignment company accountable.
Strategic Failure of State Legislatures
The strategic failure by state legislatures, throughout the land, to require and implement the licensing and regulation of structured settlement factoring companies and brokers, including rules of conduct and enforcement of the rules and consequences of non compliance (as many of them have done for life settlements) is a fulminating 22 year disgrace. The lack of regulation of structured settlement factoring companies and brokers, renders the structured settlement factoring industry sub par to other financial services segments. Nothing new here. See my commentary in Darer Structured Settlement White Paper on Secondary Market Constructive Solutions 2015 p 8-14, published September 14, 2015.
Why should a life insurance company, or the life insurance industry, pay for states' legislative failure to mitigate a risk known to the legislature?
Florida, for example, amended its structured settlement protection act in 2016. Florida is the epicenter of structured settlement factoring headquarters. Florida courts were favored destination forum shopping venues for structured settlement factoring companies where Sumter County Judge Michelle Morley was a factoring industry favorite. Morley approved a number of Cordero's transactions. Florida should be leading regulation of sales practices instead of lagging behind West Virginia,Maryland, Maine, Georgia, Louisiana and soon South Carolina in terms of at least requiring registering structured settlement transferees and giving a regulator the ability to fine, suspend or revoke authority.
What if the Cordero Opinion Had Gone The Other Way?
Had the Cordero opinion by the New York Court of Appeals gone the other way, it might have opened the floodgates to legal recoveries against structured settlement annuity issuers and qualified assignment companies, possibly leading to the reduction of opportunities for other tort victims, increased costs, while leaving some structured settlement factoring companies, whose nefarious activities have been publicized, free to continue their pillaging without consequences.
Anyone watching oral arguments would have noticed the eyebrow raising citation of Independent Life's Payee Protection policy in front of two other companies, almost as if it were a product placement in a movie called "Night and Day" (it wasn't).
From a 2021 Independendent Life blog post "Independent Life, with our Payee Protection Policy, is among the examples of “major players in the market” that Mr. Gordon (Columbia Law School '21) mentions having “already established transfer petition objection policies that both illustrate how these duties could manifest and demonstrate that insurance companies are fully capable of investigating whether a tort victim is being abused.” Independent was not in business when Cordero's structured settlement was written, or when Transamerica stopped writing business.
But "Night and Day" would be a felicitous observation framed by a quote Hindert cited from Winston Churchill less than 5 years ago upon assuming his current role at Independent Life paired with another Churchill quote that I have cited later in this post.
“The farther backward you look, the farther forward you are likely to see.” said late British Prime Minister Winston Churchill. It's a quote from Churchill, chosen by Hindert, who is the co-author of the seminal structured settlement industry text that he used in his final and still published Beyond Structured Settlements blog post on August 13, 2018. That's less than 5 years ago at the time of this posting.
The National Association of Settlement Purchasers (NASP) promotes itself as a leader in "setting standards" and implementing best practices in the Secondary Market for structured settlements. NASP strives to improve awareness and understanding of how this vital market works, as well as to ensure the market remains fair, competitive, and transparent Source: NASP website, retrieved May 5, 2023.
7 Years Back
NASP has bestowed its Alexander Hamilton Award eight times "to distinguished individuals who have supported and defended the right to free alienability of property rights." NASP considers this right to be its own cornerstone and the foundation of the structured settlement factoring business". Patrick Hindert, S2KM Ltd November 22, 2015 Source: S2KMblog.typepad.com, retrieved May 4, 2023. 630pm EDT.
11 Years Back
At the time Hindert published the August 13 2018 Beyond Structured Settlements post from which the above Churchill cite has been excerpted, Hindert was one of those eight recipients who in the eyes of NASP "supported and defended the right to free alienability of property rights"...." the cornerstone and foundation of trhe structured settlement factoring business". Patrick Hindert was bestowed the Alexander Hamilton Award by the National Association of Settlement Purchasers in 2012. In Latin that's known as Res Ipsa Loquitur.
Cordero Transfer Petition Submitted Just Months Before Hindert Honored by Factoring Trade Association
Ironically a Lujerio Cordero transfer petiton with a signed Settlement Agreement incorporated in an Exhibit was submitted in July 2012, just a few months earlier. One of those petitions was submitted by Singer Asset, then a member of NASP.
Reprising Hindert's cited Winston Churchill quote “The farther backward you look, the farther forward you are likely to see.”
12 Years Back
"Many primary market participants will disagree with portions of the above paragraph. They do not view structured settlements transfers either as a product improvement or as a recipient's "right" however that right may be qualified by statute". S2KM Beyond Structured Settlements NASP Annual Meeting commentary November 18, 2011
14 Years Back
Patrick Hindert 2009 Beyond Structured Settlements
"Adam Scales - When Professor Adam Scales first questioned the myth of squandering injury victims in his remarkable 2002 University of Wisconsin Law Review article titled: "Against Settlement Factoring? The Market in Tort Claims has Arrived", he was reviled by leaders of the primary structured settlement market. Seven years following the publication of Professor Scales' article, structured settlement and settlement planning leaders continue to quote false dissipation statistics and mis-characterize existing dissipation studies to promote a negative and false psychological and financial profile of injury victims".
Hindert referred to structured settlement industry myths and considers them "especially pernicious", related and long-standing:
In 2002 Associate Law Professor Adam Scales' is quoted in the Wisconsin Law Journal:
"What is objectionable in the rhetoric of structured settlement enthusiasts is the unsubtle attribution to tort claimants of characteristics, values and habits that are generally held in contempt in American political discourse: a lack of self-control, and the concomitent propensity to wind up on welfare."
Patrick Hindert devoted 5 blog posts to the " J.G.Wentworth Thought Leadership Conference"
Two years before the first of its two bankruptcy filings JG Wentworth said this:
"J.G.Wentworth was founded on a single, yet powerful idea: deferred payment streams can be purchased at a discount to produce superior returns". J.G. Wentworth corporate brochure 2007 .pdf page 3".
Superior returns for who and at what expense to consumers solicited by companies in an industry whose participants were not licensed, or their sales practices regulated? This was a reasonably forseeable problem that was ignored. If you were to examine HIndert's body of work you with fiund little to nothing addressing this issue over more than two decades spanning the enactment of VTTRA 2001 and the present day.
Hindert May 4, 2023, in the Independent Life Blog
"The justices of the New York State Court of Appeals have rendered a decision which gives Transamerica and NSSTA the results they wanted and what they argued existing legislation, case law and structured settlement documentation requires concerning specific rights and duties of annuity providers and structured settlement obligors. The same decision, however, undoubtedly will have an opposite impact and interpretation for Lujerio Cordero and thousands of similar factoring victims".
At Independent Life, Patrick is responsible for New Business Development, including new products, new clients and new markets. Patrick also represents Independent Life within multiple national professional associations, including the National Structured Trade Association (NSSTA) where he currently is a member of the Legal and Certified Structured Settlement Consultant (CSSC) committees as well as NSSTA’s ABLE and MSA Task Forces.
Independent LIfe has a Payee Protection Policy.
Every year, thousands of structured settlement payees participate in (Internal Revenue Code) 5891 transactions, transferring payment rights to factoring companies. These companies use highly persuasive marketing tactics to lead payees, who are often no longer represented by professional advisors, to transfer payments to themselves, often offering inadequate compensation.
Generally, the structured settlement professionals, settlement planners and attorneys, who participated in the settlement, are not even aware of the impending 5891 transfers. So, this team of professionals, who collectively advised the payee on the original payout plan, is unable to assist the payee in finding a reasonable alternative or at least in making an educated decision. The life insurance companies continue making payments (to a different payee assuming a transfer occurs), but the original payee’s payment plan is never really secure when structured settlement payment rights can so easily be transferred to a third-party.
As part of Independent Life’s Payee Protection Policy, Independent Life has committed to publishing an annual report to outline the number of petitions, orders approving, orders denying, and appeals related to §5891 transfer requests. The purpose of this report is to provide full disclosure to the structured settlement market on these transactions as it relates to Independent Life. Independent Life states that " we hope this effort will ultimately encourage the other structured settlement providers to adopt a similar policy for the benefit of structured settlement payees and for the overall security of structured settlements.
Instead its Director of Business Development has essentially used this Payee Protection Policy as a cudgel to support thus far unsuccessful efforts to support extracting money from life insurers to deflect from the proverbial steaming pile of elephant poo in the middle of the room...the unregulated structured settlement factoring companies and their public facing employees, brokers and agents who solicit structured settlement annuitants, fomented by the strategic failure of state legislatures and in certain states, and in some states, grossly inneffectual state court judges entrusted with being the Yea or Nay arbiter.
Why No Updates Since 2021?
Despite the covenant in its Payee Protection Policy brochure, to publish an annual report concerning the Payee Protection Policy, Independent Life has only published one such report, for the time frame February 25, 2020 through February 24, 2021. That contained just two interactions. In both instances the structured settlement transfers were approved. At the time of this posting why has there been no report for the 2021-2022 time frame or 2022-2023 time frame? That would be useful and might be worth celebrating, let alone keep the covenant made to the target audience.
While I'm confident that Independent Life keeps such statistics, it is evident that the Payee Protection Act brochure on its site at time of posting has apparently not been updated since early 2021. Consider that it states therein that "the sale of structured settlement payment rights is governed by Section 5891 of the U.S. Internal Revenue Code and Structured Settlement Protection Acts in 49 states. However on August 11, 2021, New Hampshire SB 134 was signed into law as the 50th US state to adopt a structured settlement protection act. Of note the New Hampshire Act "specifically states that the structured settlement obligor and the annuity issuer bear no liability from failing to comply with the requirements of the statute. Statutory protection of this level is important, as structured settlement obligors and annuity issuers are often faced with needing to address third-party factoring petitions on a rapid-fire basis as they deal with competing transactions and fast-approaching court dates". For more details about the NH SSPA see . The Granite State Solidifies Structured Settlement Protection Act | Publications | Insights | Faegre Drinker Biddle & Reath LLP August 12, 2021.
Instead of using it as a cudgel, perhaps its utility could be improved by Independent Life updating same and disclosing the results during each of the years in the missing two year time frame.
While I am encouraged by Patrick Hinderts interest in promoting structured settlements instead of lauding an award that he received that was given to " distinguished individuals who have supported and defended the right to free alienability of property rights" and, if we go farther back (in a nod to Sir Winston), promoting "factoring is settlement planning",
On January 22, 2022, on the Independent Life blog
"Unless and until the blight of factoring company abuse is brought under control, the full potential of structured settlement products and the structured settlement market as originally envisioned by Congress will never be realized".
Churchill also said "It is always wise to look ahead but difficult to look further than you can see”
- Licensing and enforcement. Require background checks. History has shown little consequences to bad actors. This must change. There must be consequences. Require each entity to be licensed. If you want to have 100 pop-up LLCs in Wisconsin, how about needing to have 100 licenses? Require that entities have a minimum amount of insurance. Having licensing and standards of practice and accountability might make it more attractive for insurers.
- Seller's Guide produced Independent of the factoring company that should be delivered to the seller at the beginning of the sales process, separate and apart from the mandatory disclosures. Seller should understand how the first petition and sale may impact their and thair family's privacy.
- Lobby remaining states to adopt the 2017 Revisions to the Life & Health Guaranty Funds Model Act (#520). Close to 40 states have already adopted.