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

Executive LIfe of New York Liquidation: Benefit Reduction Notices Set To Go Out

by John Darer CLU ChFC CSSC RSP

Certain Executive Life Insurance Company of New York  annuitants can expect projected annuity benefit reductions to be disclosed in notices sent to annuity payees by the end of October 2011. Source: National Structured Settlement Trade Association

For a historical perspective on Executive Life Insurance Company of New York (ELNY), watch the following video podcast featuring structured settlement and settlement planning experts John Darer and Mark Wahlstrom.         

ELNY Liquidation: First Down as Guaranty Associations Ratify ELNY Restructuring

Previous Blog Posts on Executive Life of New York

Legal Malpractice v Anapol Weiss Re 1986 ELNY Structured Settlement Settled With a Tax Twist

by John Darer CLU ChFC MSSC CeFT RSP CLTC

The legal malpractice lawsuit against Philadelphia personal injury law firm Anapol Weiss, arising from legal representation concerning a 1986 structured settlement, finally settled in March 2023. The compromise followed a pair of Motions in Limine by Defendants to Bar Plaintiff's tax expert, and to preclude evidence on tax liability, which was granted by  United States District Court Judge Karen M. Willams on Valentine's Day 2023. Had tax testimony been admitted it would have magnified the damages but might not have made the plaintiff any more whole. Instead, in settling, the parties focused on building a case for the damages being tax-free under the "human capital" concept set forth in O'Gilvie v  519 U.S, at 86.

The late Paul Anapol and/or his staff's unfortunate mistake on a "Recapitulation/Distribution Statement" in 1986, could've easily been avoided instead of becoming an example for the ages of what can go wrong when people are not paying attention to critical details.

It was a long and arduous road for Plaintiff Eric Nels Yerkes who, as a teenager on August 18, 1981, sustained "severe and permanent injuries in a plane crash near the Grand Canyon". Yerkes retained Anapol Weiss and its late founder Paul Anapol to bring a personal injury lawsuit.

"April Fools"?

Briefly, on the advice of his lawyers, Eric Yerkes entered into a structured settlement on April Fools Day (April 1, 1986), with Cessna Aircraft and its London market insurers. The settlement called for a cash payment of $125,000.00 and periodic payments of $1,000/month for  life, with increasing lump sum payments every 5 years. Cessna's insurers made a qualified assignment of their obligation to make future periodic payments to ELNY's assignment company, which funded the assigned obligation with an annuity from Executive Life Insurance Company of New York

The structured settlement was funded with an annuity from Executive Life Insurance Company of New York, at a time when contemporary prime time print and TV news media had observed severe financial impairments of two other similar annuity issuers and Executive Life had been dumped from the approved lists of major financial institutions for more than 24-36 months.  See my June 15, 2020 blog Lessons to be Learned from Eric Yerkes v Cessna and Yerkes v Anapol Weiss - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary (typepad.com).

Five years later, in 1991, ELNY was under supervision of New York's insurance regulator. 22 years later, on August 8, 2013 ELNY was liquidated and restuctured into GABC. Thereafter, 1500 annuitants were set to receive up to 66% less than they were owed under their structured settlements. One of those was Eric Yerkes, whose payments were reduced to just 43.54% of their agreed upon amount.

Yerkes v Cessna et al. is the Seminal Case for Insurers' Novation under Qualified Assignments

Yerkes' attempt to recover from Cessna and the London market insurers failed, due to Yerkes having already released them from the perioidc payment claim when the qualified assignment went into effect, in 1986. Yerkes v Cessna and Underwriters at Lloyds, became a seminal case for novation under a qualified assignment. Most insurers will not enter into a structured settlement without a qualified assignment.

Yerkes Then Turns Turrets on Former Law Firm

On April 12, 2017 Yerkes then went after his lawyers Anapol Weiss for legal malpractice based upon, among other things, alleged lawyer representations made in alleged communication with Yerkes about Cessna's and the London underwriters' ongoing (post qualified assignment) responsibilities that were incorrect. In connection with the with the Cessna Settlement Agreement, Despite the fact that there was a qualfied assignment, Yerke's lawyers provided him with a "Recapitulation/Distribution" statement stating that under the Cessna Settlement Agreement " All Periodic Payments Guaranteed to Eric N. Yerkes by The Cessna Aircraft Company" and "The Total Payout, Assuming a 59 Year Life-Expectancy is  $6,668,000.00" of which  all but $468,000.00 is Guaranteed by Cessna"  

The Parties Disagreed Whether Yerkes' Recovery in the Legal Malpractice Case Would Be Taxable

Defendants had submitted Motions in LImine (1) Barring Testimony of Plaintiff's expert on Taxes (ECF No. 159) and (2) To Preclude Evidence of Tax Liability  (ECF No. 160)

Direct Causal Link

"In order for the exception provided by Section 104(a)(2) to apply, a movant must show that there is " a direct causal link between the damages and the personal injuries sustained"   Blum v Commissioner of Internal Revenue, No. 20020-17, 2021 WL 6323- at *7-8 (T.C. Feb. 18, 2021)

Nature of the Claim

" When damages are received pursuant to a settlement agreement, the nature of the claims that was the actual basis for the settlement controls whether the damages are excludable under section 104(a)(2)" See Burke v Schleier  504 U.S. at 237

"The nature of the claim is derived from the terms of the agreement".  See Rivera , 430 F 3d at 1257

"If the agreement is unclear, " the intent of the payor" is pertinent to examine, taling into account consideration for the amount paid, the factual circumstances leading to the settlement, and the allegations

In this case Plaintiff was awarded damages for severe and permanent injuries, and the intent of the parties has been clear throughout the matter, in mulriple filings from both Plaintiff and Defendant, that the Comtemplated Settlement Agreement is not to simply settle a malpractice claim, but to substitute Plaintiff's awarded damages, which were drastically reduced due to ELNY's restructuring, with the contemplated settlement here, The parties have made it crystal clear that they are settling the case for he sole purpose of returning Plabitiff's human capital (in the form of damages) to make him whole  (ECF No. 190 at Exhibit A)

The Yerkes Court found that it is clear from the Contemplated Settlement Agreement, as well as the consistent characterization of Plaintiff's potential recovery as one of recovering for physical injury throughout the litigation, the Court is satisfied that the paramount reason for the settlement is to compensate the Plainiff for the  physical injuries he suffered in the 1981 plane crash.

The Court's further found that the Contemplated Settlement Agreement is "in lieu" of the plaintiff's human capital that was lost in the 1981 plane crash, as the Contemplated Settlement Agreenment is intened to be a one-to-one replacement of the damages awarded to Plaintiff from his original suit alleging physical injury.

The Court further found that this Opinion stays faithful to the principle of "human capital" rationale that emanates from Section 104*a)(2) as instructed by the   Supreme Court in O'Gilvie  519 U.S.  at 86

Eric N. Yerkes, Plaintiff v Anapol Weiss, et al IN THE UNITED STATES DISTRICT COURT FIOR THE DISTRICT OF NEW JERSEY, CAMDEN Civil Action No. 17-2493-KMW-AMD  Opinion and Order dated February 14, 2023  (ECF No. 191)

Last updated December 23, 2023

 

Briefly, on the advice of his lawyers, Eric Yerkes entered into a structured settlement on April Fools Day (April 1, 1986), with Cessna Aircraft and its London market insurers. The settlement called for a cash payment of $125,000.00 and periodic payments of $1,000/month for  life, with increasing lump sum payments every 5 years. Cessna's insurers made a qualified assignment of their obligation to make future periodic payments to ELNY's assignment company, which funded the assigned obligation with an annuity from Executive Life Insurance Company of New York

The structured settlement was funded with an annuity from Executive Life Insurance Company of New York, at a time when contemporary prime time print and TV news media had observed severe financial impairments of two other similar annuity issuers and Executive Life had been dumped from the approved lists of major financial institutions for more than 24-36 months.  See my June 15, 2020 blog Lessons to be Learned from Eric Yerkes v Cessna and Yerkes v Anapol Weiss - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary (typepad.com).

Five years later, in 1991, ELNY was under supervision of New York's insurance regulator. 22 years later, on August 8, 2013 ELNY was liquidated and restuctured into GABC. Thereafter, 1500 annuitants were set to receive up to 66% less than they were owed under their structured settlements. One of those was Eric Yerkes, whose payments were reduced to just 43.54% of their agreed upon amount.

Yerkes v Cessna et al. is the Seminal Case for Insurers' Novation under Qualified Assignments

Yerkes' attempt to recover from Cessna and the London market insurers failed, due to Yerkes having already released them from the perioidc payment claim when the qualified assignment went into effect, in 1986. Yerkes v Cessna and Underwriters at Lloyds, became a seminal case for novation under a qualified assignment. Most insurers will not enter into a structured settlement without a qualified assignment.

Yerkes Then Turns Turrets on Former Law Firm

On April 12, 2017 Yerkes then went after his lawyers Anapol Weiss for legal malpractice based upon, among other things, alleged lawyer representations made in alleged communication with Yerkes about Cessna's and the London underwriters' ongoing (post qualified assignment) responsibilities that were incorrect. In connection with the with the Cessna Settlement Agreement, Despite the fact that there was a qualfied assignment, Yerke's lawyers provided him with a "Recapitulation/Distribution" statement stating that under the Cessna Settlement Agreement " All Periodic Payments Guaranteed to Eric N. Yerkes by The Cessna Aircraft Company" and "The Total Payout, Assuming a 59 Year Life-Expectancy is  $6,668,000.00" of which  all but $468,000.00 is Guaranteed by Cessna"  

The Parties Disagreed Whether Yerkes' Recovery in the Legal Malpractice Case Would Be Taxable

Defendants had submitted Motions in LImine (1) Barring Testimony of Plaintiff's expert on Taxes (ECF No. 159) and (2) To Preclude Evidence of Tax Liability  (ECF No. 160)

Direct Causal Link

"In order for the exception provided by Section 104(a)(2) to apply, a movant must show that there is " a direct causal link between the damages and the personal injuries sustained"   Blum v Commissioner of Internal Revenue, No. 20020-17, 2021 WL 6323- at *7-8 (T.C. Feb. 18, 2021)

Nature of the Claim

" When damages are received pursuant to a settlement agreement, the nature of the claims that was the actual basis for the settlement controls whether the damages are excludable under section 104(a)(2)" See Burke v Schleier  504 U.S. at 237

"The nature of the claim is derived from the terms of the agreement".  See Rivera , 430 F 3d at 1257

"If the agreement is unclear, " the intent of the payor" is pertinent to examine, taling into account consideration for the amount paid, the factual circumstances leading to the settlement, and the allegations

In this case Plaintiff was awarded damages for severe and permanent injuries, and the intent of the parties has been clear throughout the matter, in mulriple filings from both Plaintiff and Defendant, that the Comtemplated Settlement Agreement is not to simply settle a malpractice claim, but to substitute Plaintiff's awarded damages, which were drastically reduced due to ELNY's restructuring, with the contemplated settlement here, The parties have made it crystal clear that they are settling the case for he sole purpose of returning Plabitiff's human capital (in the form of damages) to make him whole  (ECF No. 190 at Exhibit A)

The Yerkes Court found that it is clear from the Contemplated Settlement Agreement, as well as the consistent characterization of Plaintiff's potential recovery as one of recovering for physical injury throughout the litigation, the Court is satisfied that the paramount reason for the settlement is to compensate the Plainiff for the  physical injuries he suffered in the 1981 plane crash.

The Court's further found that the Contemplated Settlement Agreement is "in lieu" of the plaintiff's human capital that was lost in the 1981 plane crash, as the Contemplated Settlement Agreenment is intened to be a one-to-one replacement of the damages awarded to Plaintiff from his original suit alleging physical injury.

The Court further found that this Opinion stays faithful to the principle of "human capital" rationale that emanates from Section 104*a)(2) as instructed by the   Supreme Court in O'Gilvie  519 U.S.  at 86

Eric N. Yerkes, Plaintiff v Anapol Weiss, et al IN THE UNITED STATES DISTRICT COURT FIOR THE DISTRICT OF NEW JERSEY, CAMDEN Civil Action No. 17-2493-KMW-AMD  Opinion and Order dated February 14, 2023  (ECF No. 191)

Last updated December 23, 2023

Briefly, on the advice of his lawyers, Eric Yerkes entered into a structured settlement on April Fools Day (April 1, 1986), with Cessna Aircraft and its London market insurers. The settlement called for a cash payment of $125,000.00 and periodic payments of $1,000/month for  life, with increasing lump sum payments every 5 years. Cessna's insurers made a qualified assignment of their obligation to make future periodic payments to ELNY's assignment company, which funded the assigned obligation with an annuity from Executive Life Insurance Company of New York

The structured settlement was funded with an annuity from Executive Life Insurance Company of New York, at a time when contemporary prime time print and TV news media had observed severe financial impairments of two other similar annuity issuers and Executive Life had been dumped from the approved lists of major financial institutions for more than 24-36 months.  See my June 15, 2020 blog Lessons to be Learned from Eric Yerkes v Cessna and Yerkes v Anapol Weiss - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary (typepad.com).

Five years later, in 1991, ELNY was under supervision of New York's insurance regulator. 22 years later, on August 8, 2013 ELNY was liquidated and restuctured into GABC. Thereafter, 1500 annuitants were set to receive up to 66% less than they were owed under their structured settlements. One of those was Eric Yerkes, whose payments were reduced to just 43.54% of their agreed upon amount.

Yerkes v Cessna et al. is the Seminal Case for Insurers' Novation under Qualified Assignments

Yerkes' attempt to recover from Cessna and the London market insurers failed, due to Yerkes having already released them from the perioidc payment claim when the qualified assignment went into effect, in 1986. Yerkes v Cessna and Underwriters at Lloyds, became a seminal case for novation under a qualified assignment. Most insurers will not enter into a structured settlement without a qualified assignment.

Yerkes Then Turns Turrets on Former Law Firm

On April 12, 2017 Yerkes then went after his lawyers Anapol Weiss for legal malpractice based upon, among other things, alleged lawyer representations made in alleged communication with Yerkes about Cessna's and the London underwriters' ongoing (post qualified assignment) responsibilities that were incorrect. In connection with the with the Cessna Settlement Agreement, Despite the fact that there was a qualfied assignment, Yerke's lawyers provided him with a "Recapitulation/Distribution" statement stating that under the Cessna Settlement Agreement " All Periodic Payments Guaranteed to Eric N. Yerkes by The Cessna Aircraft Company" and "The Total Payout, Assuming a 59 Year Life-Expectancy is  $6,668,000.00" of which  all but $468,000.00 is Guaranteed by Cessna"  

The Parties Disagreed Whether Yerkes' Recovery in the Legal Malpractice Case Would Be Taxable

Defendants had submitted Motions in LImine (1) Barring Testimony of Plaintiff's expert on Taxes (ECF No. 159) and (2) To Preclude Evidence of Tax Liability  (ECF No. 160)

Direct Causal Link

"In order for the exception provided by Section 104(a)(2) to apply, a movant must show that there is " a direct causal link between the damages and the personal injuries sustained"   Blum v Commissioner of Internal Revenue, No. 20020-17, 2021 WL 6323- at *7-8 (T.C. Feb. 18, 2021)

Nature of the Claim

" When damages are received pursuant to a settlement agreement, the nature of the claims that was the actual basis for the settlement controls whether the damages are excludable under section 104(a)(2)" See Burke v Schleier  504 U.S. at 237

"The nature of the claim is derived from the terms of the agreement".  See Rivera , 430 F 3d at 1257

"If the agreement is unclear, " the intent of the payor" is pertinent to examine, taling into account consideration for the amount paid, the factual circumstances leading to the settlement, and the allegations

In this case Plaintiff was awarded damages for severe and permanent injuries, and the intent of the parties has been clear throughout the matter, in mulriple filings from both Plaintiff and Defendant, that the Comtemplated Settlement Agreement is not to simply settle a malpractice claim, but to substitute Plaintiff's awarded damages, which were drastically reduced due to ELNY's restructuring, with the contemplated settlement here, The parties have made it crystal clear that they are settling the case for he sole purpose of returning Plabitiff's human capital (in the form of damages) to make him whole  (ECF No. 190 at Exhibit A)

The Yerkes Court found that it is clear from the Contemplated Settlement Agreement, as well as the consistent characterization of Plaintiff's potential recovery as one of recovering for physical injury throughout the litigation, the Court is satisfied that the paramount reason for the settlement is to compensate the Plainiff for the  physical injuries he suffered in the 1981 plane crash.

The Court's further found that the Contemplated Settlement Agreement is "in lieu" of the plaintiff's human capital that was lost in the 1981 plane crash, as the Contemplated Settlement Agreenment is intened to be a one-to-one replacement of the damages awarded to Plaintiff from his original suit alleging physical injury.

The Court further found that this Opinion stays faithful to the principle of "human capital" rationale that emanates from Section 104*a)(2) as instructed by the   Supreme Court in O'Gilvie  519 U.S.  at 86

Eric N. Yerkes, Plaintiff v Anapol Weiss, et al IN THE UNITED STATES DISTRICT COURT FIOR THE DISTRICT OF NEW JERSEY, CAMDEN Civil Action No. 17-2493-KMW-AMD  Opinion and Order dated February 14, 2023  (ECF No. 191)

Last updated December 23, 2023

Beef Yerkes | ELNY Era Legal Malpractice Case Continues Against Anapol Weiss

by John Darer CLU ChFC MSSC CeFT RSP CLTC

“ERIC YERKES Plaintiff, v. ANAPOL WEISS Defendant” Yerkes v. Weiss, Civil Action 17-2493[1], (D.N.J. Apr. 26, 2022)

Executive Life of New York (ELNY) structured settlement annuitant Eric Yerkes sought recovery of the shortfall he suffered when

Could have been avoided

ELNY went into liquidation in 2013, by first going after the released defendant and its insurers. After that effort failed in 2015 in a seminal case that tested and ultimately underscored the security of a qualified assignment to Defendants and Insurers, Yerkes filed a legal malpractice lawsuit against Anapol Weiss, his Philadelphia personal injury lawyers, in an action that remains pending in New Jersey Federal Court. This is an update from my June 15, 2020 commentary in Lessons Learned from Eric Yerkes v Cessna and Yerkes vs Anapol Weiss

Court Denies Anapol Weiss Summary Judgment and Allows Legal Malpractice Case to Continue

Defendant Anapol Weiss moved for summary judgment on all of Plaintiff’s claims, and Plaintiff Eric Yerkes moved for partial summary judgment on the elements of duty and breach for his legal malpractice claim. After a two-year delay, on April 26, 2022, the Court found Plaintiff Eric Yerkes' legal malpractice claim shall not be precluded and there is a genuine dispute of material fact regarding whether Defendant Anapol Weiss, breached its standard of care. Accordingly, the Court ruled that Defendant’s Motion for Summary Judgment shall be denied, and Plaintiff’s Motion for Partial Summary Judgment shall be granted on the element of duty but denied on the element of breach for his legal malpractice claim. 

In support of its motion, Defendant Anapol Weiss raised several arguments:

(1) Pennsylvania law should apply, and its statute of limitations should preclude Plaintiff’s claim from proceeding;

(2) New Jersey’s collateral estoppel doctrine prevents Plaintiff from arguing that he did not understand the terms of the Cessna Settlement Agreement;

(3) if New Jersey law applies, its Dead Man Statute should require Plaintiff to establish his legal malpractice claim by clear and convincing evidence; and,

(4) (The late) Paul Anapol met the accepted standards of practice when advising Plaintiff on his 1986 structured settlement with Cessna. (Def.’s Motion for Summary Judgment 16, 18, 30, 33.)

The Posture Taken by Anapol Weiss in its Defense Supports the Concept of Novation That A Qualified Assignment Provides

"The Release and Indemnity Agreement was executed and notarized on April 1, 1986. (SOMF ¶ 54; RSOMF ¶ 54; Def.’s Mot. Summ. J. Ex. G.) Said Release and Indemnity Agreement provides in part: It is also understood and agreed that Cessna and Lloyds will assign their obligation for these periodic payments to First Executive Corporation as set forth in the Assignment Agreement. This assignment is accepted by Eric Yerkes, without right of rejection, in full release of Cessna and Lloyds with respect to these periodic payments. He acknowledges that once this assignment is made Cessna and Lloyds are released from the obligation to make such payments. (SOMF ¶ 55; RSOMF ¶ 55; Def.’s Mot. Summ. J. Ex. G.)

The Release and Indemnity Agreement contains an attorney certification signed by Paul Anapol, which states “I, the undersigned, am the attorney for Eric Yerkes and have advised him regarding the release and have counseled him that by signing it and accepting the considerations set forth, he is releasing any and all claim for unknown losses that may develop in the future.” (SOMF ¶ 56; RSOMF ¶ 56."

The Anapol Weiss Recapitulation/Distribution Statement at the Heart of Plaintiff's Claim

Sol Weiss, current president and member of Anapol firm since 1977, testified that it was the practice of the firm at the conclusion of every case to prepare a Recapitulation / Distribution Statement that broke down the money paid in the settlement, the amounts taken out for attorneys’ fees and expenses, and the amount the client would receive. (SOMF ¶¶ 99-100, 109; RSOMF ¶ 99-100, 109.) The Recapitulation/Distribution Statement had to be signed by the client before the client would receive the proceeds of the settlement. (SOMF ¶ 111; RSOMF ¶ 111.)

The Recapitulation/Distribution document for Eric Yerkes’ settlement in 1986 was prepared by Defendant’s assistant, Marci Strick. (SOMF ¶ 117; RSOMF ¶ 117.) The Recapitulation/Distribution form stated, “All Periodic Payments Guaranteed To [Plaintiff] By The Cessna Aircraft Company Pursuant To The Release and Indemnity Agreement.” (SUF ¶ 47; RSUF ¶ 47; Pl’s Resp. Ex. I.) The Statement also noted “The Total Payout, Assuming a 59 Year Life-Expectancy is $6,668,000.00 of Which All but the Sum of $468,000 is Guaranteed by Cessna, its Insurers, and Assignees.” (SUF ¶ 48; RSUF ¶ 48; Pl’s Resp. Ex. I.) Although Plaintiff’s signature is not on the Recapitulation/Distribution sheet, he was required to sign it to receive the lump sum cash portion of the settlement. (SOMF ¶ 112; RSOMF ¶ 112; SUF ¶ 49; RSUF ¶ 49.)

Plaintiff testified he informed Defendant during that meeting he would not sign a settlement agreement spanning multiple decades because he “could not trust that an insurance company would be in business for the rest of [his] life.” (SUF ¶ 24; RSUF ¶ 24.) Plaintiff further testified that Defendant assured him the structured settlement was guaranteed by Cessna and guaranteed and backed by the state of New York. (SUF ¶ 25; RSUF ¶ 25; SOMF ¶ 72; RSOMF ¶ 72.) Plaintiff asserted Defendant also said “those payments would be made no matter what. If the insurance company didn’t pay it, Cessna would pay it . . . [e]ither Cessna would pay it or their re-insurers would pay it.” (SUF )

Joel D.Feldman, a current shareholder at Anapol Weiss, stated that it was Paul Anapol’s practice to rely on the expert, as opposed to independently investigating the proposed insurance company issuing the annuity. (SOMF ¶ 95; RSOMF ¶ 95.) He claimed Paul Anapol taught him that the term “guarantee”—as it is used in the context of structured settlements—referred to a mortality guarantee, which addressed whether payments would continue to be made after the payee’s death. (SOMF ¶ 96; RSOMF ¶ 96.) Joel Feldman also testified that part of the expert’s consultation would be confirming the life insurance carrier from which Paul Anapol was purchasing the annuity was highly rated by national rating agencies. (SOMF ¶ 148; RSOMF ¶ 148.) In and around 1986, Executive Life Insurance Company of New York and its parent, First Executive Corporation, had the highest possible ratings from rating agency, A.M. Best. (SOMF ¶ 149; RSOMF ¶ 149.) In Plaintiff’s case, the Recapitulation / Distribution Statement showed a $460 expense for “Legal Economic Evaluations.” (SOMF ¶ 147; RSOMF ¶ 147.)

_____________________________________________________________________________________________

Side Bar

Under no circumstances would "Paul Anapol be purchasing the annuity" to fund a future periodic payment obligation of a Defendant or Defendant's insurer to any of his or his firm's clients. Joel Feldman's assertion in this regard is without merit. If arguendo, Feldman's statement in support of Defendant's case were true, and such a purchase were even possible (it isn't), there would have been an actual receipt issue. Dead on arrival as to a structured settlement.

See Rev. Rul. 79-220 which declared that if a personal injury victim agreed to accept monthly payments over a lifetime or specific number of years (whichever was more), and if the recipient did not have either actual or constructive receipt of the present value of the damages the settlement represented or its current economic benefit, all the periodic payments would be tax-exempt as received.

However, it should be noted by observers that if Yerkes prevails on his claims and is awarded damages (or the parties settle), Anapol Weiss, as Defendant, or its legal malpractice insurer, can fund a periodic payment solution to pay Eric Yerkes and his attorneys (if Yerkes' attorneys are paid on contingency and choose to structure their fees).

________________________________________________________________________________________________

According to the Memorandum Decision, Sol Weiss is the current president and managing shareholder of the Anapol firm. (SOMF ¶ 99; RSOMF ¶ 99.) He has been a member of the firm since 1977 and a manager of the firm since the mid-1980s. (SOMF ¶ 100; RSOMF ¶ 100.) Weiss testified as a corporate designee that it was the practice of the firm to rely on an economic expert consultant to “validate, verify, and offer some advice” regarding the structured settlements offered by a defendant to their clients. (SOMF ¶ 103; RSOMF ¶ 103.)

Plaintiff's expert cited to the deposition testimony of Mr. Paul Lesti, a former employee of Legal Economic Evaluations (“LEE”)-the company Defendant used to assess Plaintiff's structured settlement. Mr. Lesti testified that LEE would conduct a document review of a case to confirm the proposed settlement included sufficient damages for the injuries sustained. Notably, “LEE did not evaluate the viability of insurers in connection with evaluating structured settlements, nor, in Lesti's recollection, did it compare alternative values offered by different insurers.” (Pl's Resp. Ex. K 13, ECF No. 105-15 at 24.)

Plaintiff's expert, Bennett J. Wasserman, opined that the standard of care in 1986 for structured settlements required attorneys to provide a measure of security for their client because of its horizontal structure and decades-long payments. (Pl's Resp. Ex. K 20,  n.94.) Such protections could be secured through several mechanisms, including other life insurance companies guaranteeing these transaction. (Pl's Resp. Ex. K 21, n.96.) Wasserman stated in his report that the fact Defendant hired an economic consultant was not sufficient to meet the standard of care because it was reasonable to conclude that said consultant limited its review to the value of the annuity and did not review ELNY's financial strength. (Pl's Resp. Ex. K 21.) Plaintiff's expert also relied on Sol Weiss's deposition where he failed to articulate any disadvantages of structured settlements and concluded that clients were generally not counseled on the disadvantages and risks of such settlements based on this testimony. (Pl's Resp. Ex. K 8.) Ultimately, Plaintiff's expert concluded that Defendant had a heightened duty to provide protection for a client's lifetime benefits in a structured settlement because of the client's insistence on another entity guaranteeing these benefits. (Pl's Resp. Ex. K 20.) Thus, Plaintiff's expert concluded that Defendant fell below the appropriate standard of care by failing to provide such protection.

Defense expert Scott Piekarsky noted that Defendant’s conduct complied with ABA standards for handling structured settlement, although these standards were “non-existent when the settlement was signed in 1986.”

Mr. Piekarsky noted how the model standards primarily required attorneys to ensure the annuity accepted by their client was from an insurance company with the highest rating from independent agencies. (Def’s Mot. Summ. J. Ex. L. 10-11.) It is undisputed that around 1986, Executive Life Insurance Company of New York and its parent, First Executive Corporation, had the highest possible ratings from rating agency A.M. Best.9 (SOMF ¶ 149; RSOMF ¶ 149.) Furthermore, there is evidence that Paul Anapol retained an independent economic expert to evaluate the structured settlement based on testimony regarding his pattern of practice and the $460 expense for “legal economic evaluations” in the Recapitulation/Distribution statement. (SOMF ¶¶ 95, 147; RSOMF ¶¶ 95, 147.) 

My Two Cents (Reiterated)

While Anapol Weiss is a very successful plaintiff personal injury firm, it seems to me, after reading the references in the public court record of Feldman's and Scott Piekarsky's testimony (which underscores my opinion from my June 15, 2020 commentary Lessons Learned from Eric Yerkes v Cessna and Yerkes vs Anapol Weiss),  that there appears to have been little substantive due diligence and standard of care beyond looking at the A.M. Best rating for Executive Life of New York in 1986 and ELNY having the best price. Like I said and have written in previous blogs before about ELNY, red flags were out there, in nationally syndicated newspapers, including but not limited to the Philadelphia Inquirer, on prime-time news, way before this (in my opinion) ill-advised transaction for Yerkes took place. There was no way to avoid them.  They were relevant in my opinion and should not be ignored.

• The assignment company, First Executive Corporation, was on the verge of folding in 1974, 12 years before Anapol let his then 24 year old client get into the fateful deal.
• By the end of 1982, 4 years before Anapol let his then 24 year old client get into the fateful deal, more than 15% of First Executive's portfolio was invested in the B- and BB-rated bonds known as junk bonds  (By 1987 it had increased to 40%). Most of these bonds were issued by little-known companies. This investment allowed First Executive to offer higher yields on policies, soon to become a costly controversy. FE was one of Drexel Burnham Lambert’s largest customers. FE exec Fred Carr had close ties to the Drexel Burnham's high-yield-bond department head, Michael Milken, and Drexel subleased office space from FE. Both Drexel and Milken later would be involved in an extensive criminal investigation.
• In 1982 Charter Corporation, 4 years before Anapol let his then 24 year old client get into the fateful deal, the largest seller of SPDAs, abandoned the annuities after a rush by worried policyholders;
• In 1983, 3 years before Anapol let his then 24 year old client Eric Yerkes get into the fateful deal, the second-largest seller, Baldwin-United, also went bankrupt, leaving First Executive the lead in sales. The company was a Wall Street darling, but in 1982 financial analyst Jim Chanos called it a total sham. Baldwin-United collapsed a year later in a stunning $9 billion. It was the biggest bankruptcy of all time at that point.   The day Baldwin-United declared bankruptcy, the biggest one ever in the United States at the time, CBS Evening News in with Dan Rather carried the Baldwin-United bankruptcy as its lead story onto the TV screens of millions. That was September 27, 1983 from 530pm to 5:50pm, according to the Vanderbilt University News Archive. This was mainstream news!  
  
• In 1984, 2 years before Anapol let his then 24-year old client get into the fateful deal, the Wall Street Journal reported that First Executive Corporation entity that two years earlier lost a customer representing 20% of the previous year's sales. In my January 2013 post  ELNY Qualified Assignment Co | Writing Was on the Wall (Street Journal), in 1984!, I asked, "if you were running a business and a customer, which represented 20% of last year's sales, decided to no longer do business with you, do you think there would be any impact?"
• Interest rates were already past their peak in 1986. Follow this link to the 30 Year Treasury Yield Chart. I started working for Northwestern Mutual in 1983. We competed with "New Money" for breakfast. Concerns about using new money projections in long term projections were an important part of my training and in the insurance industry discourse.  In this example I'm using for illustrative purposes, the 30 Year Treasury yield on May 1, 1986 was 7.35% but it was 2.63% on May 2, 2016.  If you're going out 50, 60 or more years for a 24 year old where are you going to make up the yield when you reinvest?  
• We shouldn't forget the sham reinsurance. The New York Insurance Department said that from 1983 through 1985, Executive Life of New York had engaged in reinsurance transactions that did not meet regulatory standards for financial prudence. The insurance department said the company had improperly accounted for those transactions, known as reinsurance treaties.
• Despite all that information and the obviously frothy atmosphere, did basic common sense go out the window? Despite knowing that the payments were supposed to be paid for Yerkes' life, Anapol let his then 24-year-old client have all of his eggs in a one very shaky basket.

…] ’is the part of a wise man to keep himself today for tomorrow, and not venture all his eggs in one basket".  Don Quixote by  Miguel Cervantes 1615,  371 years before Anapol let his then 24 year old client get into the fateful deal.  Most children read Don Quixote between the ages of 10-14.

On the other hand, in 1891, 95 years before Anapol let his then 24 year old client get into the fateful deal. Scottish-American industrialist and philanthropist Andrew Carnegie said "Put all your eggs in one basket and then watch that basket. Do not scatter your shot. The man who is director in half a dozen banks, half a dozen railroads and three or four manufacturing companies rarely amounts to much. He may be director of many, but these should all be of the one kind which he understands. The great successes in life are made by concentration". 1893, Annual Graduating Exercises: 1882-1892, Pierce School of Business and Shorthand, Annual Address (December 17, 1891) by Andrew Carnegie, Start Page 423, Quote Page 437, Published by Thomas May Pierce, Philadelphia, Pennsylvania. (Google Books Full View) 

One naturally wonders if Anapol handled his own investments with the same standard of care.  

What Can Personal Injury Lawyers Learn from Yerkes v Anapol Weiss Applying to Today's World? 

• Diversification is prudent, especially when the duration is long, like the with then 24 year old Eric Yerkes.
• Insurance agent and structured settlement broker's errors and omissions may have an exclusion for insolvencies. in 2022, one often sees minimum carrier ratings or there is no coverage.
• Lawyers should pay attention to settlement planners trying to sell them, their or their firm's pension plans, or their clients, factored structured settlement payments that are presented as secondary market annuities, SMAs or SMIAs. These are not annuities and in 34 states there is no statutory protection in the event of insolvency. 2 additional states are considering 2017 Revisions to the Model State Life and Health Guaranty Act (#520) and the NAIC is encouraging all its members to adopt the revisions. The Model Act does not carve out those with such investments in place prior to their state's adoption of the revisions. 

 

 

 

Lessons to be Learned from Eric Yerkes v Cessna and Yerkes v Anapol Weiss

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Executive Life of New York structured settlement annuitant Eric Yerkes sought recovery of the shortfall he suffered when ELNY went into liquidation in 2013, by first going after the released defendant and its insurers. After that effort failed failed in 2015, Yerkes went after his lawyers. The action against his lawyers is still pending in New Jersey Federal Court. Dual summary judgment motions are pending.

Qualified Assignment Protected Cessna and its London Market Insurers

The case concerns an underlying suit Eric Yerkes brought against Cessna in which he was represented by the late Paul Anapol, a name partner in what was then Anapol Schwartz Weiss & Schwartz PC. Anapol died in 2012. Yerkes, who was 16 at the time of the crash,  sued Cessna over a 1981 plane crash near the Grand Canyon that left him with permanent injuries, and settled in 1986 for a $125,000 payout, monthly payments of $1,000 and five-year lump sum payments escalating from $25,000 in 1991 to $2 million in 2041, according to court records. The payments were provided through an annuity purchased from Executive Life Insurance Co. of New York. ELNY was declared insolvent in 2012 and underwent restructuring. The surviving company is known as Guaranty Association Benefits Company (GABC). As a result, Yerkes' monthly payments were cut by 44% in 2013, according to court papers.
Yerkes claims that Anapol Weiss (as the firm is now known) assured him the monthly payments were guaranteed by Cessna, but he did not discover this was untrue until after he attempted to sue Cessna and its insurers, over the reduced payments on the advice of another Anapol Weiss attorney. The case was filed in 2014 and a Second Amended Complaint was dismissed in  March 2016.   A central point of that dismissal against Cessna and Certain Underwriters at Lloyds of London, is that there was a qualified assignment, a legal novation to which Yerkes consented.

What is a Qualified Assignment?

A qualified assignment is a transfer of a contractual obligation to make future periodic payments under a settlement agreement, which satisfies the requirements of Internal Revenue Code (IRC) §130. In a structured settlement agreement the original obligor (the defendant, insurance carrier for the defendant, or the trustee of a IRC 468B qualified settlement fund, assigns its obligation to make the future periodic payments defined in the settlement agreement to a "qualified assignment company"

Only payments which represent damages for personal injury, physical sickness, wrongful death and payments for workers compensation may be assigned by way of a qualified assignment.

Generally a qualified assignment company is a special purpose company, which does little more than hold an annuity or United States Treasury obligations as a "qualified funding asset" [as defined in IRC §130(d)] to back up the obligations it assumes from Defendants, Insurers or a qualified settlement fund trustee. A qualified assignment company may actually be an insurance company itself, such as New York Life Insurance and Annuity Corporation (the assignee of New York Life funded structured settlements). When an annuity is used as a qualified funding asset, the qualified assignment company is usually related to the life insurance company issuing the structured settlement annuity.  A critical point, as it was the follow up case in Yerkes v Cessna et al., a qualified assignment requires the plaintiff's consent.

Read more about a qualified assignment in the context of How Structured Settlements Work

Yerkes Sued Law Firm That Represented Him for Legal Malpractice and Breach of Contract

Yerkes then filed suit against Philadelphia based plaintiff law firm Anapol Weiss in April 2017, saying the law firm of his former attorney, on the grounds that Defendant committed legal malpractice and breached its contract with him when Plaintiff's lawyer, Paul Anapol, negligently misrepresented that certain annuity payments provided for in a settlement agreement, negotiated by Anapol, would be or were "guaranteed" by Cessna. Yerkes claims that Anapol misled him and that he would not have taken the settlement if he had realized Cessna didn't guarantee the payments.  See Eric Yerkes, Plaintiff v Anapol Weiss, Defendant  in the United States District Court, District of New Jersey  Case 1:17 cv-02493.

In May 2020 Yerkes urged a New Jersey U.S. District Judge Jerome B. Simandle to grant him a partial summary judgment in the suit accusing  Anapol Weiss of giving bad legal advice regarding the $6.7 million plane crash settlement, saying it was undisputed the firm misled him. Yerkes accuses Anapol Weiss of falsely assuring him that monthly payments from a structured settlement he accepted from Cessna Aircraft Co. over the 1981 Grand Canyon plane crash were guaranteed by Cessna. Yerkes said he submitted as evidence documentation from the firm that unequivocally stated that the periodic payments were guaranteed by Cessna, assuming that Yerkes, who was 16 years old at the time of the crash, would live another 59 years.  

As set forth in Yerkes' motion "Despite the unequivocal representation by defendant (Anapol Weiss) to plaintiff that the periodic payments were 'guaranteed' by Cessna, there is no dispute that the payments in fact were not guaranteed," the motion said. In addition, Yerkes said that because Anapol Weiss knew that it was standard practice in structured settlements for defendants to be released from liability ( by way of a qualified assignment), it also knew that the responsibility for payments shifts to the life insurance company that issues an annuity policy to an injured party. "There is no dispute that defendant should have known, and in fact did know, that by executing the Cessna settlement agreement, plaintiff was releasing Cessna from all liability and that neither Cessna nor anyone else 'guaranteed' the periodic payments," he said.

Yerkes asked Judge Simandle to rule that Anapol Weiss breached its duty of care to him, and said the issues of causation and damages should be left up to a jury at trial.

Exhibit B to the Yerkes' complaint is a copy of the Recapitulation and Distribution Statement is notable to me for the following:

1. The Sum of $1,000.00 Paid Per Month for Life; Guaranteed for Twenty (20) Years; To Be Paid Directly to Eric N. Yerkes, His Estate or Designee Should He Predecease the Guaranteed Twenty (20) Year Period.   [Setting aside the odd use of term "predecease", this is what is known as a Certain & Life Annuity. Payments are guaranteed for the certain period, whether or not the Payee survives the payment schedule and life contingent thereafter.]  Despite this Yerkes' produced they had Yerke's sign that says " The Total Payout, Assuming a 59 Year Life Expectancy is $6,668,000.00, of which all but the sum of $468,000.00 is guaranteed by Cessna, its Insurers and Assignees to be paid even in the event that Eric N. Yerkes does not survive to his life expectancy of 59 years".  Comment: The law firm's alleged recitation seemed rubbish to me given that just before that it discusses a 20 year guarantee period. 
2. No payment dates are specified on the lump sums. 
3. The Cost of the Periodic Payments is noted  "computed to be $275,000". Comment:  $275,000 to produce $6,668,000 from a company for which, other than A.M. Best, there was red flag after red flag about Executive Life and First Executive? Junk upon junk?   

"No, we would not allow a client to enter into an annuity contract with any life insurance company that wasn't -- didn't receive the highest rating at the time of the contract"   -excerpt of Sol Weiss' deposition found in the Court documents.  

Anapol Weiss claims the typical defenses that one would expect such as time barred, disputes New Jersey law applies,  The Dead Man Rule  (Paul Anapol is dead), that the defense controlled the structures then... Whether or not such defenses are successful belies a few facts that Anapol Weiss simply cannot get around, in my opinion. It's important to set the record straight, even if only for historical purposes.

What Anapol Weiss Cannot Get Around, In My Opinion

It is clear from Sol Weiss' testimony that is in the record that Anapol advised Yerkes to enter into an agreement with a company solely based on "the highest rating at the time of the contract". In 1986, A. M. Best's highest rating was A+.

1. Like most qualified assignment companies, First Executive Corporation was not a life insurance company and so Anapol's client Yerkes was NOT entering into a contract with a life insurance company. They represented their client and counseled them about entering to a contract with the Defendant and the Defendant's insurer that included a promise to make future periodic payments.
2. In that contract there was a provision that permitted with the consent of Plaintiff, to make an assignment that obligation to First Executive Corporation, an entity that two years earlier lost a customer representing 20% of the previous year's sales. In my January 2013 post  ELNY Qualified Assignment Co | Writing Was on the Wall (Street Journal), 1984! , I asked, "if you were running a business and a customer, who represented 20% of last year's sales, decided to no longer do business with you, do you think there would be any impact?
3. Some would have you believe (through the lens of the past decade) that in the 1980s the only means of financial news and education was by a figurative Mullet-headed or Rooster-Mohawked "Paul Revere" or  "Ye Olde Towne Crier", but we had "something that was black and white and read all over"  (newspapers in tabloid and broad page form) and news on TV, cable TV  (CNN started in 1980)  (Financial News Network 1981). There were cell phones, car phones

In August 1984, two years before Anapol advised Eric Yerkes to enter into an assignment agreement with First Executive Corporation. E.F. Hutton & Co., then a major brokerage firm based in New York, decided to stop selling a tax advantaged insurance annuity marketed by a unit of First Executive Corp., which was based in Beverly Hills, California. E.F.Hutton also dropped certain other insurance concerns' annuities. E.F.Hutton's sales of the insurance product, known as a single-premium deferred annuity, accounted for about 20% of First Executive's total annuity sales in 1983. When E.F. Hutton's decision was announced, one Wall Street analyst estimated that First Executive would lose $100 million a year in new sales. News of Hutton's decision was first reported in the Wall Street Journal's Heard on the Street column.

Here's what happened in the run up to Anapol's decision to advise his client to agree to a contract with First Executive Corporation, an entity that was already in trouble:

....1982 Baldwin United  (one of the top 20 business failures of the 20th Century), 1983 Charter Security 1984 Storm Warnings on First Executive... How many plaintiff lawyers advised their clients to enter into qualified assignments with the First Executive assignee/ ELNY annuity issuer combination after 1984?"

Anapol Weiss is a very successful plaintiff personal injury firm. But it seems to me that there was no further due diligence than looking at the A.M. Best rating for Executive Life of New York in 1986 and ELNY having the best price. Like I said and have written many times before about ELNY, red flags were out there, in the newspapers, on prime time news, way before this (in my opinion) ill-advised transaction took place. 

The Red Flags That Should Have Given Anapol Pause

1. September 27, 1983 New York Times "The Baldwin-United Corporation, the Cincinnati piano company that borrowed heavily to move into the insurance business, filed for protection under the bankruptcy laws yesterday in one of the largest financial collapses in American history. The company was a casualty of over expansion, built on complex financial maneuvers. Its failure followed four months of intensive efforts to keep the company out of bankruptcy, and further complicated efforts to salvage the savings of thousands of Americans who bought policies from Baldwin-United subsidiaries.  Baldwin was the #1 seller of annuities at the time.

2. BALDWIN-UNITED ANNUITY HOLDERS WILL MEET

Author:    Brian P. Sullivan, Inquirer Staff Writer  Date: September 29, 1983  Publication: Philadelphia Inquirer,

"Philadelphia investors who purchased annuities from Baldwin-United Corp. are banding together to protect their interests in the fight to carve up the collapsing company's assets.

Leaders of a newly formed Baldwin-United Corp. Annuity Holders Protective Committee will meet here tomorrow afternoon to prepare for a general meeting of interested annuity holders to be held within the next three weeks, said Richard D. Greenfield, counsel for the committee and senior partner of Greenfield &..."

3. January 27, 1984 New York Times ANNUITIES: A NEW LIFE AFTER BALDWIN-UNITED'S FALL

"Investors have turned away not only from Baldwin, but from other big sellers of single-premium policies, including the Charter Company and the First Executive Corporation. Instead, the new growth in the annuity business has benefited the old- line conservative companies, such as the Aetna Life and Casualty Company, the Equitable Life Assurance Society of the United States, the Travelers Corporation and the Prudential Insurance Company of America".

4. CHARTER FILES UNDER CHAPTER 11 - CONGLOMERATE SHUT BULLETIN

Author:    Associated Press  Date: April 21, 1984  Publication: Philadelphia Inquirer, The (PA)   Page: D08

The Charter Co. - a teetering conglomerate of insurance, oil and publishing holdings that once included the Bulletin of Philadelphia - filed for protection from creditors yesterday under Chapter 11 of the Federal Bankruptcy Act.The Jacksonville-based company, which owned the Bulletin for 21 months before closing the once-mighty newspaper in 1982, filed 44 petitions under Chapter 11, said Marlie Sailes, a court clerk.Charter's closing of the Bulletin on Jan. 29, 1982, marked the...

5. May 6, 1984  New York Times CHARTER'S MARCH INTO BANKRUPTCY

6. ANNUITY BUYERS ASSURED

Author:    Associated Press  Date: November 4, 1983  Publication: Philadelphia Inquirer, The (PA)   Page: D19

Five insurance companies whose annuity policies will no longer be sold by the nation's leading investment company scrambled yesterday to assure customers that the companies were not in financial difficulty.Among those insurers is Charter Security Life Insurance Co., with 196,000 policyholders and nearly $5 billion in sales, the leading provider of the popular retirement investment."Charter Security is in a stronger financial position than ever before," the subsidiary of Charter...

 

7.  "'There is no question that the brokers who sell annuities are taking a much harder look at the insurance companies, and at what they are doing with the premiums from the policies they sell,'' Perrin H. Long, an analyst with Lipper Analytical Services, said last night".  New York Times November 3, 1983.

In the same article came the following report:

"In a memorandum sent to its account executives, Merrill Lynch Life Agency, a Merrill Lynch subsidiary that sells annuities and receives commissions from the issuing companies, said that after Dec. 1, it would no longer handle annuities issued by Charter Security Life, a subsidiary of the Charter Company, the Capital Life Insurance Company, Old Republic Life of New York, the John Alden Life Insurance Company and Executive Life".  (Ibid para. 8)

 

 

 

 

 

 

 

 

 

 

 

US Court of Appeals Affirms Summary Judgment | USA Does Not Have To Fund ELNY Insolvency Shortfall

by John Darer CLU ChFC MSSC CeFT RSP CLTC

The United States Court of Appeals has decided that The United States DOES NOT have to make up an insurer shortfall to an annuitant 33 years after personal injury litigation was settled against the United States Department of the Army.

The original personal injury litigation involved a birthing injury sustained at a US Army Hospital in 1979. A compromise settlement included the purchase of 4 annuities all of which were placed with Executive Life Insurance Company of New York  (ELNY), which went into rehabilitation in 1992 and was eventually liquidated in 2013.

The Shaws filed suit against the government in the United States Court of Federal Claims (“Claims Court”) alleging a breach of their settlement agreement and seeking damages measured by the difference between the original payments and the reduced payments.

It's a hard "Nutt" to crack

The Claims Court found no breach and granted summary judgment in the government’s favor. Because the agreement did not make the government a guarantor of the annuity payments.

In its August 20, 2018 decision in KAREN L. SHAW, INDIVIDUALLY, AND KAREN L. SHAW, AS GUARDIAN OF THE PERSON OF RICHARD SCOTT SHAW, AN INCOMPETENT, RAYMOND A. SHAW, INDIVIDUALLY, Plaintiffs-Appellants v. UNITED STATES, Defendant-Appellee  2017-2136  Appeal from the United States Court of Federal Claims in No. 1:14-cv-00783-MMS, Judge Margaret M.Sweeney, the United States Court of Appeals concluded:

"Thus, the Shaws’ agreement, even more than the one at issue in Nutt, unambiguously cabined the government’s obligations to the initial lump-sum payments and the purchase of the annuity and did not obligate it to guarantee the future payments by the annuities. We reach this conclusion even in the absence of language, present in future payments will be paid. This minimum payout provides payments to the heirs of the now-dead payee Nutt, concerning the insurer’s rating and the government’s role in the event of the insurer’s default, which supported but was not necessary to the result in Nutt. See Nutt, 837 F.3d at 1298. Because the agreement is unambiguous in this respect, we need not consider the extrinsic evidence offered by the Shaws". Download Shaw - 49 - Affirmed (precedential) USCA 8-20-2018 #ELNY

Also citing to Nutt, in its decision in Trevor Langkamp v The United States  No. 15-764C  filed March 20, 2017,  which also cited to Nutt, the Court of Federal Claims concluded "that the plain language of the Settlement Agreement at issue in this dispute demonstrates that the government contracted to purchase annuities to make the future, periodic monthly and lump-sum payments required under that agreement.  The plain language of this agreement also demonstrates that the government did not unequivocally guarantee that it would make these payments in the event of a default by the annuity company.  And so, the undisputed material facts in this matter show that the government is not liable to plaintiff for the remaining annuity payments required under the agreement".Download 59 - Langkamp - Decision  #ELNY

 

 

Federal Court of Claims Rules In Favor of United States on ELNY Shortfalls | But That's Not All!

by John Darer CLU ChFC MSSC RSP CLTC

The United States Court of Federal Claims has decided in yet another case that The United States DOES NOT have to make up a shortfall to an annuitant of Executive Life Insurance Company of New York more than 32 years after personal injury litigation was settled against the United States Department of the Army. In this case the short fall with two of annuities in the case was 62.4%.

Like its decision in Trevor Langkamp v The United States   No. 15-764C  filed March 20, 2017, the Court of Federal Claims, in its March 31, 2017 decision in Karen L. Shaw et al v The United States  (no. 14-783C),  the Court concluded, that the plain language of the Settlement Agreement demonstrates that the government did not unequivocally guarantee that it would make annuity payments in the event of a default by the annuity company.

The underlying Shaw case commenced in 1982 arose out of a child birthing injury July 4, 1979 at the Madison Army Medical Center in Tacoma Washington for which there was alleged medical malpractice. Plaintiffs obtained an $11.7M judgment that was reversed on appeal, subsequent to which the parties settled January 24, 1985. The settlement included several annuities and a reversionary medical trust funded by one of the annuities. 

No specific annuity carrier was selected. The Settlement Agreement said that "The United States represents to [Plaintiffs] that the insurance company it selects for the purchase of the annuities will be one which is generally regarded as very sound in the insurance industry and to be among the class or group of insurance companies which are rated Excellent or better by Best’s Guide to Life Insurance Companies, 1982 Edition, published by A.M. Best Company, Oldwick, New Jersey 07830".  

Download Shaw et al. v United States - Opinion Granting Govt's Motion for Summary Judgment & Dismissal

OBSERVATIONS

The Irony of "The Thundering Herd"

It's notable that the annuity agent on the Shaw case was Merrill Lynch Settlement Services, Inc. which appears to have utilized the cheapest annuity, ignoring some unavoidable facts, apparently including Merrill Lynch internal guidelines. To wit... as reported in the New York Times November 3, 1983: 

"In a memorandum sent to its account executives, Merrill Lynch Life Agency, a Merrill Lynch subsidiary that sells annuities and receives commissions from the issuing companies, said that after Dec. 1  (1983), it would no longer handle annuities issued by Charter Security Life, a subsidiary of the Charter Company, the Capital Life Insurance Company, Old Republic Life of New York, the John Alden Life Insurance Company and Executive Life."

An A.M. Best rating of A is an excellent rating, not the top tier rating at A.M. Best, which at the time was an A+ (Superior). At the time the Shaw case was concluded ELNY had an A+ rating from A.M. Best, despite the two well publicized recent failures of Baldwin United and Charter (which it is indisputable Merrill Lynch sold a lot of**), a raft of negative information that appeared about Executive Life in the New York Times, Wall Street Journal and other publications for several years preceding the placement.  Executive Life Insurance Company of New York was a subsidiary of First Executive, which the Journal reported in early 1984 had 40% of its assets in junk bonds.

**In January 1984 (one year before the Shaw annuity purchases), for the first time ever, Merrill Lynch & Company reported a quarterly deficit, the result of an $88 million write-off in the fourth quarter to cover losses to investors who bought Baldwin annuities through Merrill.

Important Lesson for Plaintiff Lawyers

Given that several of the annuities did not begin for 25 years, it certainly is appropriate to question why the plaintiff's lawyer left the table without nailing down an agreed annuity provider or providers. Does agreeing to an A.M. Best rating constitute adequate due diligence in a time frame when there were two well publicized failures? 

A January 29, 1984 New York Times article ANNUITIES: A NEW LIFE AFTER BALDWIN-UNITED'S FALL, published one year prior to the conclusion of the Shaw case, provides this very important and significant contemporaneous account:

"The reputation of annuities, it seems, should have been ruined forever after the downfall last year of the Baldwin-United Corporation left thousands of annuity holders unable to redeem their policies, or to collect on them, at least temporarily"..."Investors have turned away not only from Baldwin, but from other big sellers of single-premium policies, including the Charter Company and the First Executive Corporation. Instead, the new growth in the annuity business has benefited the old- line conservative companies, such as the Aetna Life and Casualty Company, the Equitable Life Assurance Society of the United States, the Travelers Corporation and the Prudential Insurance Company of America"

Settlements Are the Result of Negotiations

And the devil is in the details.

United States Does't Have to Make Up Short Fall From ELNY Insolvency | Court Grants Summary Judgment

by John Darer CLU ChFC MSSC RSP CLTC

The United States Court of Federal Claims has decided that The United States DOES NOT have to make up a shortfall to an annuitant more than 30 years after personal injury litigation was settled against the United States Department of the Army.

In its decision in Trevor Langkamp v The United States   No. 15-764C  filed March 20, 2017, the Court of Federal Claims concluded "that the plain language of the Settlement Agreement at issue in this dispute demonstrates that the government contracted to purchase annuities to make the future, periodic monthly and lump-sum payments required under that agreement.  The plain language of this agreement also demonstrates that the government did not unequivocally guarantee that it would make these payments in the event of a default by the annuity company.  And so, the undisputed material facts in this matter show that the government is not liable to plaintiff for the remaining annuity payments required under the agreement".Download 59 - Langkamp - Decision

In September 12, 2016 decision, cited by the Langkamp Court,  The United States Court of Appeals for the Federal Circuit recognized the principle of sovereign immunity compels a finding that the agreement at issue here does not obligate the government to guarantee future payments if the government has not unequivocally promised to do so. [Cynthia G. NUTT, individually as surviving spouse and as the Executrix of the Estate of James N. Nutt, Sr., Deceased, James N. Nutt, Jr., Individually, Plaintiffs-Appellants v. UNITED STATES, Defendant-Appellee  837 F.3d at 1298].

ELNY Lesson redux

In the November 15, 1984 settlement, the Settlement Agreement provided that "the aforesaid amount shall be paid as follows: $350.00 per month beginning by the beginning of January, 1985 through October 15, 1996, then $3,100.00 per month, 3 percent compounded annually for life, guaranteed for 15 years, beginning November 15, 1996, and Lump Sum Payments as follows:

$ 15,000.00 on December 15, 1996

$ 50,000.00 on December 15, 2000

$ 100,000.00 on December 15, 2008

$ 250,000.00 on December 15, 2018

$1,000,000.00 on December 15, 2028"

On November 30, 1984, an annuity was purchased for $160,574.55 (yes that's correct!) from Executive Life Insurance Company of New York to fund the payments.  That was:

1. 14 months following the bankruptcy of Baldwin United, according to the New York Times, "one of the largest financial collapses in American history"

2. One year after the November 5, 1983 story appeared in the New York Times detailing how several major wire houses yanked Executive Life, Charter Life from their product offerings and

3. 11 months after the Wall Street Journal published that EF Hutton was going to suspend sales of First Executive products representing about 1/4 of First Executive's sales.

4. Despite all the red flags, A.M. Best maintained an A+ rating on the company almost until it was taken into rehabilitation in 1991.

ELNY became insolvent and was eventually liquidated in 2013, after which the short fall s began.  In Langkamp's case, his monthly annuity was reduced by 42.39%, from $4,974.59 to $2,108.73;  the $250,000 lump sum reduced to $105,975.00 and the $1,000,000 lump sum reduced to $423,900.00.

One of the key structured settlement lessons learned from ELNY was coined by " The Grail Knight" in Indiana Jones and The Last Crusade.

When it comes to structured settlements, if you're "going long"  you should diversify

 

Image source: funny-pictures.picphotos.net-

Executive Life Insurance Company of New York Misnomer

by Structured Settlement Watchdog®

A highly respected settlement consulting firm, which was neither in business, nor were its associates in business, when Executive Life Insurance Company of New York was operating, appears to be "at sixes and sevens" with structured settlement history as it applies to ELNY.

Using an ELNY shortfall victim as a prop, here's what they say:

First This 

"The defense broker is responsible for protecting the best interests of the defense, not the plaintiff. That often means proposing a structured settlement offered by an insurance company tied to the defense, regardless of whether or not that structure is the best deal for the plaintiff".

Juxtaposed Against This,  as a  Component of Their Value Proposition

"When the plaintiff’s attorney brings in a structured settlement broker for the plaintiff, the plaintiff then has an advocate. That broker will work with the defense to select an option that is agreeable to both sides, and any reputable plaintiff broker will only present options from the most highly-rated insurance companies".

Now Consider These Facts

FACT: At the time each and every Executive Life Insurance Company of New York structured settlement annuity was placed Executive Life Insurance Company of New York had the very highest rating from A.M. Best Company.  The highest rating at the time was an A+(Superior). 

FACT: Executive Life Insurance Company of New York structured settlements were also placed by plaintiff structured settlement advisors, including one, who at one time was one of the the largest contributors to AAJ, then known as the Association of Trial Lawyers of America. At least one of the contracts placed by that big ATLA contributor is in a shortfall status.

Upon information and belief several plaintiff consultants still practicing in 2016 wrote ELNY business. in the 1980s.

It is unfortunate when industry colleagues choose to promote their business without due regard to then current events and then recent past events that should have given them pause, and failing to assign any possible fault to those who placed or approved the placement of such annuities,  including but not limited to those the colleague blames, judges , plaintiff lawyers and financial advisors,  I have written and podcasted extensively on the volume of information available at the time that should have given anyone pause. 

The implication that a rating review is sufficient structured settlement due diligence has now been proven wrong in over 1,000 instances. 

Former stock broker EF Hutton's long running tag line was "When EF Hutton Talks People Listen".  The following ad  was often seen on prime time TV from at least 1982-1986, a time period covering the majority of the Executive Life Insurance Company of New York structured settlement annuities

If only people listened to EF Hutton,  when EF Hutton yanked First Executive products from their shelves in early 1984, which the Wall Street Journal revealed represented a significant percentage of First Executive's overall sales.  Only months earlier on November 5, 1983, the New York Times reported that Merrill Lynch and other wire houses, yanked Executive Life products and others from their shelves in the aftermath of the Baldwin United and Charter failures. ALL of the ELNY structured settlement annuities were placed by structured settlement brokers AFTER these mainstream news items were published and syndicated throughout the country. When one examines history, one can draw an obvious conclusion that parties were drawn to the rates and, if there was any concern, justified them by AM Best ratings as the original Periodic Payment of Judgments Act of 1980 set forth.

Structured Settlement Pulp From Disgruntled Richard B. Risk Esq. in LifeHealthPro

 by Structured Settlement Watchdog®

In the context of his March 12, 2015 article "In wake of lawsuits, storm clouds over structured settlements", dredging up Sylvester Stallone's epic portrayal of Rocky, or  the structured settlement industry as Rocky "getting pummeled", in his opening paragraph,  to conjure up the image that Richard B. Risk Jr. wants to convey, merely demonstrates that Dick Risk may have been hoisted on his own petard, bobbed and weaved by a "rope a dope" of his own creation. Richard B. Risk, Jr. prefers to be addressed as Dick.

Cantaloupe "Flip Fantasia"

Disgruntled Dick's Misplaced Metaphor

If indeed Dick Risk believes his own press clipping, Rocky was supposed to be a patsy for Apollo Creed. Instead the underdog took Apollo Creed all the way and Creed was surprised by the tenacity of the southpaw. Then of course there were multiple sequels, Rocky II where he defeated Apollo Creed, Rocky III where he defeated Clubber Lang and Rocky IV where he beat Drago, in revenge for the "ultimate knockout" of his then buddy, Apollo Creed. Risk looks foolish for his hemispheric portrayal of  the structured settlement industry as Rocky "getting pummeled", It merely demonstrates that Dick Risk may have been boomeranged in a "rope a dope" of his own creation. As a fighter,Rocky kept getting up after gettng down. In real life Sly Stallone wedded and divorced glamazon Brigitte Nielsen, who played Drago's wife in Rocky IV.  If the structured settlement industry can get up after getting knocked down as much as Rocky they will have succeeded.  Thanks Dick!

Dick Risk's Questionable Math

In"barely" the same breath as Risk's "Rocky raccoon" , Dick Risk refers to structured settlement industry production in stating that the industry’s production last year was "barely two-thirds what it was ten years ago", in real terms. The link is to an excerpt of a report compiled by Melissa Evola Price of SFA Inc. and is used completely without attribution by Richard Risk or LifeHealthPro to Ms. Evola. I confirmed with Ms. Evola that Risk is not on her distribution list. So someone on her distribution list supplied the Evola work product to Risk and Risk and/or LifeHealthPro used it without attribution.   This is where Dick Rick comes up short.  Most people in the structured settlement industry know that the spreadsheet is produced by Evola (and therefore would likely attest to the plagiarism) because she has diligently done so for many years (until Matt Ross assumed the reins),  but the wider readership of LifeHealthPro does not.

Setting that aside the questionable ethics of Risk using someone else's work without attribution, Dick Risk's math is way off.

Evola's most recent numbers 2014  are         $5,250,262.691.00            

One decade ago would be 2004, right?          $6,135,000,000.00  

A simple calculation  $5,250,262,691 divided by $6,135,000,000.00 equals 0.8558 or 86% (rounded)

Two thirds =0.6666

What was the Point of Dick Risk's article?

So if we eliminate the first paragraph of Dick Risk's article for the miserable subterfuge that it is and discount the plagiarism of Evola's work product at the time of publication,  what is Risk really trying to say?

" As a longtime believer in structures’ value", he nevertheless thinks  the issues raised in two lawsuit filings show that the industry desperately needs to improve controls on the $5-plus billion in settlements it handles each year.

Risk reports month old news about a class action lawsuit against Ringler Associates in Oregon where the judge denied Ringler and Paul Hoffman's motion to dismiss. [ See Ringler Associates et al. Motion to Dismiss ELNY class Action Denied February 14, 2015]

Risk feels that "this is where things could get problematic for Ringler and, importantly, risky for claims insurers* that  Ringler worked with on the settlements in question.  A key issue: Did
the claims professionals or Ringler’s consultants know prior to securing  ELNY annuities that ELNY was unlikely to be able to meet its future obligations?

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*Claims Insurer is a non-sequitur which appears to be made up by Risk.

There is neither such term in a Google search today, nor does it make sense. An insurer provides cover for its insured against the risks of perils. Generally an insurance contract will  provide for the defense and indemnification of valid claims in accordance with the terms of the contract. A  claim is "to make a demand for money, for property, or for enforcement of a right provided by law".     

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"Shakedown" Street?

So there's the "Shakedown" Street" rub,  speculation about an inevitable visit to "shakedown street" for Travelers and AIG, cited in Risk's article who are among the insurers that insured the Defendants ( that were clients of Ringler Associates),  IF discovery uncovers a smoking gun and Plaintiffs are able to prove their case.  I repeat the Plaintiffs must prove their case.

"Dead Giveaway"

Then there's the Shalamar rub, featuring the gratuitous cite of Rick Woolams, AIG's top claims executive, cited as "according to someone who heard the speech". Most in the industry know who that was since the "informant" repeated those words so much as to remove all doubt. The tell tale cite gives away the source as easy as "Peter Piper Picking a  Peck of Pickled Peppers", so poorly disguised because the "anonymous" source repeatedly cited that 2012 Woolams speech in San Francisco to anyone whose ear could be bent. Anyone in the structured settlement industry at the time could identify the anonymous source based on that Rick Woolams' cite.  If the anonymous source wanted to remain anonymous they should've stopped using that cite!

The Woodyard Situation

In my blog of February 9, 2015, Ringler Sued | Structure Broker Mike Woodyard in Alleged $4MM Ponzi Scheme,  the issues in that case are clearly laid out, in particular that the way the premiums were submitted to Woodyward and/or his entity were highly irregular and not at all characteristic of  how members of the structured settlement industry generally do business. At time of posting there have been no criminal charges against W. Michael Woodyard filed in any Federal Court (source; Pacer.gov) and I have no idea if has been arrested.  Sources claim "they  (FBI) know where he is"

This lawsuit IS NOT weighing on structured settlements.  If anything at all, it is weighing on Ringler Associates.  If Ringler Associates goes out of business because the alleged actions that have associated with its former rogue broker  have been proven and a monetary award or settlement together with everything else exceeds its resources, rendering it unable to continue as a going concern, its producers will land elsewhere.  For Risk to say it weighs on the industry is pure baloney.

Richard Risk admits that "the complaint suggests that the annuities in question were not structured annuities"  If so then why would that weigh on the structured settlement industry?

Risk Never Addressed ELNY Before Now

Before the disgruntled ex-structured settlement consultant Dick Risk became a lawyer he was a structured settlement consultant affiliated with Summit Settlement Services. He wrote an informative newsletter that I personally subscribed to. He posted articles from those newsletters on the Risk Law Firm website. I looked today and was not able to locate one newsletter article or commentary about the ELNY situation.

So for the first time "weatherman" Risk  says in the LifeHealthPro article: 

"A key issue: Did the claims professionals or Ringler’s consultants know prior to securing ELNY annuities that ELNY was unlikely to be able to meet its future obligations?

This is no idle conjecture. I was a structured settlement consultant during the 1980s, when ELNY was issuing structured annuities.  At the time, there were clear warnings about ELNY’s future given its excessive reliance on the unstable junk bond market. [ is Risk going to appear as a witness in the case?]

Moreover, Baldwin United's failure in 1983 had already shown how a run on assets at an under-capitalized insurer could cripple its ability to meet future obligations.

Despite the warning signs, many claims professionals were known for pushing the use of ELNY annuities to save money, even as ELNY’s under-capitalization became too obvious to ignore". 

If such was the case, why has Disgruntled Dick Risk not written about ELNY in 30 years. 

Where is Risks' criticism of his SSP colleagues who wrote Executive Life or  ELNY annuities?

ELNY Lawsuit Challenges

1. Again, Plaintiffs' lawyers must prove their case.
2. A number of plaintiffs in a 2012 class action claimed the failure of ELNY was due to mismanagement by the New York Liquidation Bureau.
3. Proving the all eggs in one basket was a unilateral decision in a lawsuit settlement, that by definition is a compromise.

 

 

 

Income Stream XC Misleading Investors About Historical Default Risk

by Structured Settlement Watchdog™

Income Stream XC,  has published a website and issued a do-it-yourself press release soliciting investors in structured settlements payment streams on the basis of a reckless gross misrepresentation of the facts.

The domain , Incomestreamxc.com is registered to T. Allen Dyer of Indian Wells, California according to whois records and says in the process of soliciting investors:

"To date, no Insurance Company or State Lottery Commission has failed to pay their scheduled payment obligations so Income Stream products are historically very, very safe. Income Stream Exchange gives owners of Structured Settlements, Income Annuities and Lottery Settlements and other Income Stream products exposure to a larger audience of would be buyers".

Before investing your money with Income Stream XC or anyone else in the space,  consider that Executive Life Insurance Company of New York was taken over by the New York State Insurance Department in April 1991 and placed into rehabilitation. ELNY was liquidated in 2013. Hundreds of annuitants as well as investors who acquired ELNY funded incomes streams at a discount,  suffered shortfalls, some in excess of 50%! 

This was not obscure news, if you operate in this space, you couldn't help getting hit by the ELNY news in the face, the tushy or  booty, or in any other promontory point in your anatomy.   

Buyer Beware

To the possible detriment of investors, the structured settlement secondary market has no regulations that govern how structured settlement payment rights can be sold to investors and there is no licensing requirement at the present.  In addition to default risk in cases such as ELNY,  investors must be sure that the underlying structured settlement factoring transaction was completed in compliance with perhaps multiple states' structured settlement protection acts. 

IncomeStreamXC is a new website yet claims it is the #1 marketplace, a claim also made by other so called exchanges. The proof is in the pudding. New websites spring up in the structured settlement secondary market all the time

Caveat emptor applies.

Income StreamXC also misrepresents income streams a structured settlement annuities elswhere on its website, stating falsely:

"Structured Settlements Annuities (the "secondary Annuities" or "SAs")

...Structured Settlement payment rights are transferred by the structured settlement recipient, funded by an annuity and issued by an insurance company. 

Fact: When a structured settlement transfer occurs, the annuity is not transferred. It remains as a "qualified funding asset", which is defined in IRC 130(d),  owned by the qualified assignment company. There is no new annuity issued. 

If the Income Stream XC  doesn't get it, it's not hard to see how an investor, or  a lay person could be misled and confused.

T. Allen Dyer (Todd Dyer) is cooling his jets in jail after a 2017 Conviction. See Brazen 'bring it on' felon gets 15 years for $2 million fraud (jsonline.com)

 

via GIPHY

ELNY Law Suit | Model Periodic Payment of Judgments Act 1980 Standards

by John Darer® CLU ChFC MSSC RSP CLTC

What was the industry standard for evaluating issuers of structured settlements in 1985 and 1986 when the structured settlements were placed for Marie Westrope and Reggie Kelly, lead plaintiffs in a pending class action law suit aginst Ringler Associates, Paul Hoffman and and Does 1-100??

There is clearly evidence that the structured settlement industry was not only aware of the long term nature of structured settlement obligations but on the critical need for standards of reliability and financial quality to protect the structured settlement payees with obligations funding long term needs decades into the future.

Hopping back "in the Delorean" for a visit back to 1980...

The 1980 Model Periodic Payment of Judgments Act required the state insurance commissioner to keep a list of qualified insurers. "These are insurers that meet standards of reliability and financial quality as expressed in common industry rating systems". A qualified funding plan cannot be effected without reliance upon a qualified insurer in some fashion either to provide the plan or guarantee the obligation. The list maintained by the insurance commissioner assures that there will be a reliable pool of qualified insurers from which plans can be obtained to fund periodic payment judgments.

Who is gonna make it?
We'll find out in the long run (in the long run) 
  -from The Long Run by The Eagles  1980  Top 100

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This was 3 years prior to what was at the time the biggest bankruptcy ever. Just 4 years later America would have seen the collapse of 2 out of the 3  top sellers of single premium deferred annuities and the third fined the largest fine ever by the New York State insurance department.

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Regardless of what happened later, we now have 1980 as a clear benchmark where proponents of the theory could argue that A.M. Best "standard" is established because the Model Act  (which is   MODEL act) ties reliability and financial quality to the rating agencies and this is something that I'm sure some agents felt that they could hang their hat on. (and still do feel they can hang their hat on)  The Uniform Periodic Payment of Judgments Act was amended in 1990, well after ELNY's and FIrst Executive's problems were publicized by Joseph M. Belth and others. My industry colleague Patrick Hindert is listed as a contributor to that amended Act in its text. It would be useful if Patrick Hindert could provide some historical perpective given that involvement.

We also have a clear benchmark as to New York,  that the answer to the question  "what is a qualified insurer?" was and still is the reponsibility was the Superintendent of Insurance  (now Department of Financial Services). 

To wit, New York CPLR 5039 and CPLR 5049 state "The superintendent of insurance shall establish rules and procedures for determining which insurers, self-insurers, plans or arrangements are financially qualified to provide the security required under this article and to be designated as qualified insurers.

 On July 1, 1985 Article 50-A of the New York Civil Practice Law Rules became effective. Article 50-A sets forth the requirements for periodic payment of judgments in medical, dental and podiatric malpractice cases  ( it was amended in 2003).

On August 1, 1986 Article 50-B of the New York CPLR became effective.  Article 50-B deals with other types of liability cases such as personal injury, property damage and wrongful death.

Shortly after the enactment of N.Y. C.P.L.R. § 5049, the Superintendent of Insurance, in a letter to the Chief Administrative Judge, designated as "qualified insurers" all insurers authorized to issue annuities in New York. The term "authorized insurer" is defined in N.Y. Ins. Law § 107(a)(10) (McKinney Supp. 2003) as:

an insurer authorized as such to do an insurance business in this state in compliance with this chapter, by reason of a license so to do issued and in force pursuant to the laws of this state or of a corporate charter granted and in force pursuant to the laws of this state, but not including any insurer herein exempted from compliance with the requirement that it obtain a license to do business. 

The issue of whether" All Eggs in One Basket"/Lack of Diversification Is Still Up In The Air

While we now have a prop to a possible explanation behind one or more of the structured settlement broker, property and casualty insurer, plaintiff attorney, judge AND plaintiff reliance on the rating agencies, it does not explain away why in spite of an unquivocal recognition of the long term critical needs all eggs went into a single company. 

In my opinion here is where more of the burden perhaps shifts to plaintiffs, their attorneys and judges all of wom have the right and power to say no to ANY offer, particularly on minors or wrongful death cases.

Even if you were relying on the A.M. Best rating, being ignorant of, or having knowledge and being willing to ignore the on ongoing frothy business environment for annuity issuers and material actions of  that was in local papers, on mainstream prime times for  "all your eggs in one basket" and a bigger payout, if that's what happened, is not the defendants' fault.

My research uncovered a reason that the Merrill Lynch Memorandum reported in a the New York Times article on November 5, 1983 possible has more significance. The memorandum indicated even at that early stage, Merrill Lynch and others were yanking Executive LIfe products from their offerings.

According to state filings Merrill Lynch Settlement Services, Inc. was a Domestic for Profit Corporation in the State of Florida and while it is no longer active, this corporate entity was filed thirty-four years ago on Friday, December 5, 1980 as recorded in documents filed with Florida Department of State.   Merrill Lynch had its mitts on the company. formerly known as I-Bar and known as Merrill Lynch I-Bar and finally Merrill Lynch Settlement Services Inc. in the years leading up to the Westrope, Kelly and other ELNY placements.  Upon information and belief, Stan Schultz, who is listed as a settlement consultant for Delta Settlements in California was involved or his predecessors were involved with IBar back in the day. It sure would be interesting to get his perspective. His email address posted on the Delta Settlements website is at the URL ibarinc.com