Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

Structured Settlements and Grillo Padding by Settlement Planners

by John Darer® CLU ChFC MSSC RSP CLTC

The Grillo case has been widely used as a "scare tactic" to motivate attorneys to structure by plaintiff settlement advisers

After a quarter of a century perhaps it is time to "scour" the internet of creative liberties concerning the case of Grillo v Pettiete, the poster child for attorney malpractice with respect to structured settlements and settlement planning.  Sometimes a story gets told incorrectly and the "urban legend" gets passed from generation to generation. In this case it is happening in the structured settlement industry every day.

The Court transcript from the minor's prove up hearing does not appear to jive with the marketing

I have read a copy of the transcript and it did not appear to go down the way a generation of settlement planners has spinned it, and continues to spin it to sell more annuities or even special needs legal services.

In my June 15, 2011 blog post, I did an extensive analysis about the Grillo v Pettiete case,  a legal case which has spawned white papers, Lawyers' Weekly articles and even waivers that plaintiff lawyers should have their clients sign, that are named after Ms. Grillo. The only thing missing is I _________ in the Grillo case "and all I got was this lousy t-shirt".

Consider these points:

1. Was Christina Grillo offered a structured settlement or not?  Yes, she was, by the hospital.

When asked January 3, 1991, in the minor prove up hearing in the seminal case,  Christina Grillo's Mom, Josephine Grillo was asked " your concern was that with an annuity paying you monthly that you would not have sufficient funds in the event of catastrophic health or --health problem, is that correct" (Josephine Grillo responded "That or a new technology, yes")

2. Evident by her testimony,  the transcript of which I have seen, Ms. Grillo had concerns about annuities because of  a big "what if?", access to funds in the event of a catastrophic medical need. Her testimony also suggested that whoever she relied on for advice suggested an alternative strategy to a structured settlement, on the premise that Christina Juniker (Grillo)'s medical expenses would provide an offset against the taxable income generated in the trust.

3. Don't get me wrong here. I am obviously in favor of structured settlements however,  those participating in the structured settlement industry can surely stop making intentional or unintentional misprepresentations of what happened in the Grillo case to sell products or services. 

It seems to me that it would behoove the structured settlement industry to place the Grillo case in context going forward and furthermore, to dig up another more current legal malpractice case, (if such a case exists) as one of the many factors to highlight the importance of having a settlement advisor.

By the way, if you really want the lousy t shirt you can get it at ErasersTees!

Other References

Henry Stong of JMW Settlements tackled the Grillo subject in a white paper " The Real Lessons of Grillo" in the summer 2004 edition of the Journal of the Virginia Trial Lawyers Association and tied it into a discussion of fiduciary responsibility. Strong, a former President of the NSSTA,  notably observed in his paper that the plaintiff attorneys did discuss structured settlements with Josephine Grillo. His source is an 8/2/2001 Lawyers Weekly article. My source is the court transcript from the Grillo prove up hearing.

Structured Settlement Privacy | Register for National "Do-Not-Call" to Deter Cash Now Hounds

by Structured Settlement Watchdog

Court record sniffing structured settlement buyers can obtain information about any structured settlement that has required court approval and has not been filed under seal. The same companies can target structured settlement annuitants who have previously sold their structured settlements and obtain addresses and phone numbers and other information useful to them prior to hitting you up in  an unsolicited phone call.

The National Do Not Call Registry gives you a choice about whether to receive telemarketing calls at home . Once you register your phone number, telemarketers covered by the National Do Not Call Registry have up to 31 days from the date you register to stop calling you.  When wrapping up a settlement with a client, the settlement planner and/or plaintiff attorney should discuss privacy issues with the plaintiff and perhaps should include information about the Do Not Call list.

The National Do Not Call Registry is managed by the Federal Trade Commission (FTC), the nation’s consumer protection agency. It is enforced by the FTC, the Federal Communications Commission (FCC), and state law enforcement officials.

NOTE: Companies, including settlement purchasers with which you do business may also continue to  call, unless you have asked them to stop calling you.  If you have asked them to stop calling, please keep a record of the date you made the request and include that information in the comment section of any complaint you submit against that company.   

Debt collectors may also continue to call you whether your number is on the Do Not Call  Registry or not. If you have a complaint about a debt collector,  please Click Here to file your complaint. For more information about your rights regarding debt collectors Click Here.

Resources

Register Your Phone Number(s) for the National Do Not Call List

File a Complaint With the Federal Trade Commission if you are on the Do Not Call List and have received an unsolicited call from someone seeking to buy your structured settlement.You may also file a complaint if you received a call that used a recorded message instead of a live person (whether or not your number  was on the Registry). 
   
Read about the Telemarketing Sales Rule 16 C.F.R. Part 310

Questions & Answers about the National Do Not Call List

Image Source for "case records"  ©Webdata/ Dreamstime.com

  


  

A Qualified Assignment With More Than One Payee Presents Privacy issues

by John Darer CLU ChFC MSSC RSP CLTC

Is it a good business practice to use a single qualified assignment for more than one payee in the same family when each is scheduled to receive separate structured settlements?  I submit to you that the answer is no.

• Sacrificing privacy for brevity is not acceptable. 
• Using the example of a single qualified assignment for 3 children and a mother, a single qualified assignment means that if one of the payees decides to sell structured settlement payment rights down the road, all of the other non-selling payees' private information is in play, including the amount and timing of future periodic payments. Why not mitigate unsolicited and unwanted phone calls now? 
• In the event of a later marriage, remarriage, or divorce, a single qualified assignment for all payees puts the privacy of the other payees in play. What business is it of Betty Sue's husband if her sister Annabelle is to receive a $500,000 lump sum in 2 years? Why not mitigate this potential recurring problem now?
  
• Boilerplate document wordings may not reflect what is actually happening. Many documents refer to a claimant in the singular, sometimes Claimant(s), but there is not a consistent distinction throughout the document. The more payees the less merry!
  

 

 

New York General Obligations Law 5-1702(e) Structured Settlement Protections Being Ignored?

by John Darer® CLU ChFC MSSC RSP CLTC

New York State General Obligations Law 5-1702 places a burden on defense lawyers, defendants, in house lawyers for defendants and insurance adjusters based out of New York, having New York adjudicated cases to make certain written disclosures when a structured settlement is negotiated.

New York General Obligations Law Section 5-1702-Structured Settlement Protection Act

In negotiating a structured settlement of claims brought by or on behalf of a claimant who is domiciled in this state, the defendant or defendant’s legal representative shall disclose in writing to the claimant or the claimant’s legal representative all of the following information that is not otherwise specified in the structured settlement agreement...

5-1702 (e) a statement that the claimant is advised to obtain independent professional advice relating to the legal, tax and financial implications of the settlement, including any adverse consequences and
that the defendant or defendant’s legal representative may not refer any advisor, attorney or firm
for such purpose  (emphasis added)

On cases of a highly sensitive nature it is important for Defendants and Defense counsel and mediators not to lose sight of New York General Obligations Law 5-1702 and to avoid the conditioning of money on exclusively using the defense retained structured settlement consultant. While I am not aware of specific cases where a defense lawyer or defendant has been punished for not complying with this New York law, I'm sure that nobody wants to be a volunteer.

Since it is both a recognized and prudent practice today for both parties to have settlement consultants, why put yourself or your client in harm's way?  One suggestion is to have the plaintiff settlement consultant agree to be bound under a confidentiality agreement.

Do Insurance Brokers Have A Duty to Offer The Best Rates?

by John Darer

The question of whether insurance brokers are required to obtain the lowest cost insurance that meets the insured’s needs was recently addressed by the Missouri Supreme Court in the case of Emerson Electric Co. v. Marsh & McLennan Cos., 362 S.W.3d 7 (Mo. 2012).

Emerson alleged that

• Marsh attempted to steer the business to a few insurers that agreed to pay Marsh extra volume based contingent commissions.
• Marsh had breached its duty of loyalty to Emerson by not purchasing the lowest cost insurance that met Emerson’s needs because Marsh steered business to secure the alleged “contingent commissions” from the insurers involved with the ultimate placement

The Missouri Supreme Court found that:

• while Marsh owed Emerson a duty of loyalty, the duty of loyalty DID NOT include a duty to obtain the lowest cost insurance that met the insured’s needs absent a specific agreement to do so.
• the broker's duty of loyalty to the client does not require them to disclose contingent commissions to its insured.
• the broker still has a fiduciary duty to use reasonable care, skill and diligence in procuring insurance. Failure of that fiduciary duty would be legally actionable, not because it represented a breach of the duty of loyalty but because it would constitute a failure to exercise the degree of care required in procuring a policy for the insured generally

Insurance Journal carries the story here

How if anything does this decision impact the conduct of brokers of structured settlements in the primary and secondary structured settlement market?

Primary structured settlement market

Arguably the story of Executive Life Insurance Company of New York is a good example of where the "best price"  [and lack of diversification] ultimately proved to not necessarily be the best thing for the insured (annuitant), regardless of whether the advocate for best price was the structured settlement broker, the plaintiff attorney, the plaintiff themselves, or the insurer.

Secondary structured settlement market

Do the same legal principles law even apply, even though some loosely use the term "annuity" "structured settlement" and "broker" when they are talking about structured settlement payment rights?  A number of individuals or entities operating in the structured settlement factoring space claim to be able to get the best price. The question is the best price for sellers or best price for investors and what. if any duties are created. What is the consumer's or investor's expectation

Consider that New Leaf Structured Settlements, a factoring company that advertises  'Home Of the Best Price & Fast Funding Guarantees" but the fine print states the following:

*Customer must request Guarantees in writing from Company  (New Leaf)  prior to the execution of the contract to sell future structured settlement annuity payments and Company will provide both guarantees in writing as part of the transactional documents selling future structured settlement payments for a lump sum of cash. We make these offers as part of our unwavering commitment to be the best purchaser of structured settlement annuity payments.  (emphasis ours)

This seems to acknowledge the issues raised in the Emerson case.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

When Settlement Consultants Say They "Never Charge You or Your Client for Services"

by John Darer CLU ChFC MSSC RSP CLTC

Why An Attorney Should Be Skeptical of " We Do Not Charge" Advertising

Plaintiffs and plaintiff attorneys need to be mindful of advertised claims that a structured settlement or settlement planning consultant never charges you or your client for their services. (Emphasis ours).

Consider these products and related services commonly offered by structured settlement brokers and settlement planners and methods of compensation:

Structured Settlement Annuities

Your broker or settlement planning consultant is paid by a managing general agent for the annuity issuer. What is common structured settlement industry practice (and similar to what happens with brokers in a real estate transaction), the commission may have been split with one or more other structured settlement brokers or settlement planning consultants representing other parties. The standard commission paid by annuity issuers is 4% of the annuity cost [although one carrier Independent Life Insurance Company employs a duration-based compensation model that ranges from 2% for short durations to 4% for intermediate durations and 6% for long durations], net of the nominal qualified assignment fee (typically $0-$750) or non-qualified assignment fee (typically $500-$1400). Rebating of such commissions is prohibited under the insurance laws in most states.

Treasury Funded Structured Settlements

Your broker or settlement planning consultant is paid by the treasury funded structured settlement provider. Commissions are variable and determined by the settlement consultant. If one broker or settlement consultant agrees to work for 1% and another works for 4%, is the differential a charge?

Settlement Trusts

Be mindful that if your structured settlement broker or settlement planning consultant is incorporating a trust into the settlement planning solution for you or your client such as a Special Needs Trust, Medicare Set Aside Trust, Disability Trust, Settlement Preservation Trust, Settlement Conservation Trust, Recovery Management Trust there ARE fees and your structured settlement broker or settlement planning consultant may be sharing in them.  The fees charged by the trust company are set forth in the trust documents. A structured settlement broker or settlement consultant may charge a flat fee up front and bill the trust or may simply earn a trail fee by sharing in the fees earned by the trust company assessed on assets under management. In other circumstances where a directed trust is used, and the investment function is separated from the fiduciary function settlement and the consultant has or is affiliated with a Registered Investment Adviser they may share in the fees earned by the RIA on the investment management piece.

Qualified Settlement Fund (468B Trust or QSF)

The legal departments of several state insurance departments have come out with opinions that state that payment of expenses of the qualified settlement fund by the structured settlement broker does not comply with the anti-rebating statutes. Prior to these opinions at or more settlement planner made the claim that they did "cost-free" QSFs! 

Moreover, the near zero short term interest rate environment makes it highly unlikely that the interest earned on the pre-distribution QSF corpus will be sufficient to cover the expenses of the QSF and its trustee or administrator.

Factoring/Secondary Market Activity

Upon information and belief, a significant number of structured settlement brokers and settlement planners refer business to factoring companies or factoring brokers and demand and/or accept a referral fee. The referral fee, which could be undisclosed, ultimately affects the calculation of the effective discount rate.  While the fees charged by the factoring company must be disclosed in the documents submitted for Court approval, the specific fee paid to the structured settlement broker or settlement planning consultant or financial planner may not be.

Factoring/Tertiary Market Activity

Upon information and belief, a number of structured settlement brokers and settlement planners. solicit and/or advise clients to invest in structured settlement payment rights and demand and/or accept a referral fee from intermediaries or the or the originator. The referral fee, which could be undisclosed, ultimately affects the calculation of the effective discount rate.  While the fees charged by the factoring company must be disclosed in the documents submitted for Court approval, the specific fee paid to the structured settlement broker or settlement planning consultant or financial planner for the investment advice and placement of the investment may not be.

Note: The purpose of this post is to examine the fairness of an advertising claim, not an indictment of any one broker, settlement planner, firm or strategy.

Conclusion

Whether or not "we do not charge" or "we never charge you or your client for our services" or implying that you are "working for free" is a fair advertising claim SHOULD NOT hinge on whether or not a plaintiff or plaintiff attorney has to write out a check, or whether referral fees are buried in the fees charged by other vendors or service providers, in my opinion. How about you? 

Last updated February 6, 2022

 

 

 

Track Changes Makes Structured Settlement Documentation Exchanges More Efficient

by John Darer CLU ChFC CSSC RSP

Making use of the track changes function in Microsoft Word is a good way to make the process of structured settlement documentation more efficient.  Before sending out a draft settlement agreement and release, the original drafter simply clicks his or her mouse cursor on the Review tab and then “Track Changes”. Each of the commenters to the initial draft is automatically assigned a different color by MS Word so that all parties, their lawyers and their structured settlement consultants can quickly and clearly see edits, who made the edits and can accept or reject them. While MS Word allows users to toggle  between clean and marked versions, often documents are sent for review in a “clean” version as .pdf and “marked” version in Word. When the collaboration is finished one simply needs to click on “accept all changes” and a final document is created that can be saved as an Adobe .pdf file and distributed for signature.

Contrast that with the “nuances” of a decade (or more) old way of doing things. The drafter creates a Settlement Agreement and Release document, saves it in Adobe pdf and then sends it for review to the opposing party.  The reviewing party or parties must scribble in the margins or worse, type or write out in long hand what their edits are. Some may still use Wite Out and an IBM Selectric. They then submit these changes to the original drafter who then compiles yet another .pdf  (if he or she can read the handwriting) and so it continues.

• Isn’t the reason that documents are sent to be reviewed to make sure that the meeting of the minds is accurately reflected?
• While there’s a certain regimentation that a “cookie cutter” provides, kind of like comfort food for the legal soul, if one thinks logically, there IS more than one way to “skin” a Qualified Assignment Release and Pledge Agreement. For example, if the payee is a Supplemental Needs or Special Needs Trust, a Settlement Preservation Trust, or a case involving a minor who will be an adult when the structured settlement payments begin.
• For the plaintiff side of the case, the "old way" may be an inconvenience at best, but for the defendant or insurance company it might mean needlessly added legal expense when a "pressed for time" case juggling defense attorney has to repeatedly peruse a 6-10 page document for changes .
  

Try it! You MIght Like it! If you're clients aren't familiar with it, take the time to teach them.

 

Why Name a Beneficiary on Annuity or Life Insurance? New York/ CT Education Series

Should you name a beneficiary, or just leave guaranteed structured annuity payments, or life insurance proceeds, to your estate? Registered Settlement Planner and Chartered Financial Consultant John Darer from Stamford, Connecticut frames the issue in this video.

             

Words of wisdom...

"When they refer to you as 'The Late...'

You Don't Wanna Be Intestate

AND, Naming Who YOU Want IS great

"Cause your Heirs Bypass Probate" - © John D. Darer, CLU ChFC CSSC RSP 2011

 

Why Fund Structured Settlement in Advance of Court Order or Release?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Why Should an Insurance Company or Defendant Prefund a Structured Settlement?

An insurance company or Defendant that funds a structured settlement in advance of receiving a signed Court Order or signed release is doing themselves a favor in addition to the other parties involved in the case, particularly when interest rates are decreasing and/or when a precise benefit is needed for court submissions.

Preserve a Favorable Rate on a Discounted Cash Flow

After negotiating a hard fought settlement in a wrongful death medical malpractice case, construction accident case or air crash settlement, there may be a need for Court approval.

The process of obtaining court approval could take months. In some cases it could take years due to arcane processes and backlogs in the Court system, Surrogates Courts in and around New York City are notoriously slow.  A Guardian ad litem may need to be appointed. The Guardian Ad Litem's time frame may not be aligned with an action plan afffected by the movement of interest rates. Wrongful Death cases involving a Public Adminstrator add a further layer of complexity.

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SIDE BAR

What is the Public Administrator?

The New York Public Administrator is one of a chosen office of attorneys in each county that the Surrogate’s Court often calls upon to administer to non-standard probates and estate administrations. The Public Administrator generally has the job of handling estates of people who die without a Will and who have no close relatives who are one way or another, unable to administer the estate.

Examples of Where a Public Adminstrator Comes into Play

Unmarried undocumented non US citizen dies in tractor trailer accident on I-95 South in the Bronx, New York USA. Sole survivor is a child. Child's mother undocumented. Child has a claim. Mother of the child cannot file a wrongful death claim on behalf of the decedent's Estate as she is not a US Citizen. 

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One of my clients encountered a Court in Connecticut that wouldn't even commit to a date for a hearing. Sometimes delays are the result for the time it takes for the plaintiff's lawyer to draft documents or for defense counsel to review them.

With cases that involve Court approval and a structure, the Court must consider the structured settlement payments it is being asked to approve.

In order to fix the benefit the structured settlement consultant must "lock-in" the benefits to preserve the negotiated cost for those benefits.

The problem exists when a combination of the above factors comes into play. Some carriers have free lock ins for 12 months, 6 months, others for 90 days, 60 days, or less.  When you are dealing with large settlements that often  includes prudent diversification, this can present a major challenge as some charge hefty lock in fees after the free lock in period expires. Talk about being the proverbial balancer of spinning plates on long sticks!

The Solution "The Prefund Refund Letter"

To encourage insurers and defedants to fund structured settlements in advance of a release or court approval, most life insurance companies that issue structured settlement annuities will issue some sort of refund letter that says to the effect that the life insurer will refund the premium paid, if the court does not approve of the settlement. So there is no risk to the insurer or defendant to fund the structured settlement.

This solution has worked with some of the world's major insurers on cases involving significant sums of money in the millions of dollars.

When you're talking small settlements in the $25,000-$50,000 range, the money is sitting in short term reserves, earning little to no interest on what has to be short term money. So why not just pre-fund the structure having previously obtained a premium refund letter executed by the annuity issuer, through your structured settlement broker?

Last updated October 27, 2023

 

 

 

Structured Settlement Documents: Let's Ditch "Tom, Dick Or Harry" Clauses Please!

by John Darer CLU ChFC MSSC CeFT RSP CLTC

If you are reviewing structured settlement documents you may see one or more of the following:

• This Defendant, or its Insurer or that Defendant or its Insurer may assign
• The Defendant, the Insurer or the Assignee may purchase an annuity
• The Plaintiff may change the beneficiary of his or her periodic payments by notifying the Defendant, Insurer or Assignee, in writing...

I disdainfully refer to these clauses as "Tom, Dick Or Harry "

 If subject to a settlement agreement with such a clause (or clauses) and down the road a plaintiff wants to change their beneficiary, who the heck  
does he/she/it contact, Tom, Dick, or Harry? To add to the uncertainty, if an annuitant has sold some of their payments down the road,  "he/she/it,  or the guardian *(if applicable), etc etc,  may have to contact the "Ben Dover" factoring company, or if "Ben Dover" uses a third party servicing company, does he/she or it Ben's cousin Jerry", or both Ben and Jerry?!  Where does it frickin' end?

Some act as if these clauses are necessary as if "to avoid altering the space time continuum". The purported purpose of these clauses was to create "tension" that puts the direction of the investment of the present value in doubt, or out of the plaintiff's hands, for tax purposes. The reality today is that the planning associated with structured settlements is increasingly specialized and many plaintiffs have structured settlement experts. Moreover, the laws of some states like New York require that potential structured settlement annuitants to be advised by the Defendant (or its legal representative) to seek independent professional advice about the structured settlement, there is arm's length negotiation about the terms and in the end there is little in doubt.  It fact it has been that way for years so why does this continue to be necessary in some circles?

As I explained to one of my industry colleagues earlier today, we are long term industry professionals who ARE familiar with jargon. Not many annuitants are.  Lawyers and adjusters may not completely be either. So let's try to make things just a little more clear shall we, for the betterment of our industry and its core product?

The National Structured Settlements Trade Association (NSSTA) periodically puts out model documentation. This author opines that it's time for an update.