by John Darer CLU ChFC MSSC RSP CLTC
The website of the National Structured Settlements Trade Association includes a Financial Security document that is available for download by members of the public and members of the trade association who are subject to the insurance laws of the various states in which they hold licenses.
As I wrote in January 2009, NSSTA members must exercise extreme caution in downloading and using in a solicitation or offering of structured settlements, the financial security handout or they may face being in hot water with state insurance departments.
This author sought and received an opinion on this very subject in October 2008 and the State of New York Insurance Department's opinion in response in January 2009 was:
" Insurance Law Sec 7718 broadly prohibits any person from using the existence of the LIGCNY for the purpose of sales, solicitation or inducement to purchase annuity contracts, including structured settlement annuity contracts, However, the statute has no application to 1) the LIGCNY itself; 2) any other entity that does not sell or solicit insurance; or 3) an insurer that responds directly to a policyholder upon written request and on a form prepared by the corporation and approved by the Superintendent.
Life insurance agents and brokers clearly come within the scope of the prohibition contained in Insurance Law 7718. The fact that the statement "state insurance guaranty funds provide additional level of protection for future structured settlement recipients" is general in nature, and does not specifically reference the LIGCNY is irrelevant. When the statement is directed at New York residents, whose only coverage is from the LIGCNY if a life insurer fails its obligations, it is an implied reference to LIGCNY, and thus prohibited by Insurance Law 7718 in the absence of any statute's express exceptions. And based on the facts presented, none of the exceptions is applicable here"
For those who believe that the disclaimer at the bottom of the NSSTA brochure is a source of comfort, please consider the following. The New York State Insurance Department expressed to this author that it was not even comfortable with one structured settlement industry website that contained a list of state insurance guaranty funds and their phone numbers designed to help consumers get to those who can legally answer their questions AND which included a similar disclaimer to NSSTA about not being an offer or solicitation for the purchase of insurance.
I'm sure there are those that do not appreciate my highlighting these points, but I didn't write the law. I am just reporting what I know for those that seem to conduct their business in blissful ignorance of the law the seat of their pants".
I have continued to hear from lawyers that members of the settlement profession are using the existence of guaranty funds in their solicitation of structured settlement annuities (in violation of state insurance law).