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

Structured Settlement Receivables Have Insolvency Risks Investors May Not Understand

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Investors who buy structured settlement receivables are exposed to potentially devastating financial risk to their investments in the event of insolvency of the life insurance company that issued the annuity, that funded the structured settlement payment rights purchased by the investor.

Investors, financial advisers and insurers of financial advisors should be mindful of a crucial provision of the 2017 Life & Health Guaranty Associations Model Act (#520) which has been adopted by the majority of the United States when evaluating the suitability of structured settlement receivables as investments.

What is a Structured Settlement Receivables Investment?

A structured settlement receivables investment is an opportunity to invest money to acquire an assignment of someone else's structured settlement payment rights (or portions of those rights) in the structured settlement secondary market or tertiary market. 

Are Structured Settlement Receivables Annuities?

No. An investment in a structured settlement receivable is NOT the same as buying an annuity, or the purchase of a structured setlement annuity. Unlike buying an an annuity, no premium is paid to an insurance company.

 

Certain actors, including some settlement planners and financial advisors, have falsely used the term annuity in marketing structured settlement receivables to investors, obfuscating the potential risks to investors and even judges tasked with approving in a minor's settlement. 

• An investment in structured settlement receivables is not the same as someone who is a structured settlement payee. 
• The latter becomes a structured settlement payee by virtue of the negotiated settlement consideration in their personal injury or wrongful death lawsuit wherein there is an obligation to make future perioidic payments as part of the consideration.
• The obligation of the Defendant/Respondent or its/their insurer  to make the periodic payments in the settlement agreement may be assigned [subject to the terms of IRC 130(c)] to a qualified assignment company.
• The assignment company then buys an annuity (or annuities) to fund its periodic payment obligation.

Section 3A(5)(c)  of the Life & Health Guaranty Associations Model Act (#520)

(5) This Act shall not provide coverage to: (a) A person who is a payee (or beneficiary) of a contract owner resident of this State, if the payee (or beneficiary) is afforded any coverage by the association of another State; or (b) A person covered under Paragraph (3) of this subsection, if any coverage is provided by the association of another State to the person; or (c) A person who acquires rights to receive payments through a structured settlement factoring transaction as defined in 26 U.S.C. 5891(c)(3)(A), regardless of whether the transaction occurred before or after such section became effective".

Drafting Notes to Section 3A(5)(c) of the Life & Health Guaranty Associations Model Act (#520) Crystal Clear

"Drafting Note: The exclusion from coverage in Section 3A(5)(c) of any person who has purchased from an original structured settlement annuity payee his or her rights to receive structured settlement annuity benefits and the exclusion of such benefits from covered benefits under Section 3B(2)(n) recognize that the protections afforded by guaranty associations are intended for insurance consumers, such as the original payees of structured settlement annuities. Guaranty association protection does not extend to sophisticated investors who acquire rights to receive structured settlement annuity benefits in the secondary market. These exclusions, however, do not apply to structured settlement annuity benefits that are transferred to children, present or former spouses or other dependents as part of domestic relations settlements or orders, or to other transferees (including donees) who acquire rights to receive structured settlement annuity benefits without providing any monetary consideration. Thus, Section 3A(5)(c) and Section 3B(2)(n) clarify that guaranty association coverage protects structured settlement annuity benefits to which the original payee and his or her family members retain the rights"

What if You Invested in Structured Settlement Receivables while Residing in a State That Hasn't Adopted?

• Just remember that in Dec 2018,  the National Association of Insurance Commissioners (NAIC) published Statutory Issue Paper No. 160 (finalized April 6, 2019) which expressly stated that acquired structured settlement payment rights are not captured as an annuity or insurance product in statutory accounting.   Then go back and read the Drafting notes above!
• Investment in structured settlement receivables were never an investment in an annuity, regardless of how they were labeled and marketed by secondary market companies, tertiary market companies, financial advisers to seniors, or certain settlement planners to trial lawyers for the trial lawyers or their clients.
• There's a certain inevitability to adoption of the 2017 Revisions to the L&HGA in all states, just like the Structured Settlement Protection Acts

What If You Invested in Structured Settlement Receivables While Residing in a State that Hasn't Adopted and Move to a State that Has Adopted the Model Act?

An attorney source opined that the law of the original residence state would apply. The big ole "but" is the "before and after the effective date" clause in the Life & Health Guaranty Associations Model Act takes no prisoners. Figuratively speaking, that's like standing over the gallows for an agonizingly long time for the trap door open to swiftly snap your financial neck.

Why States Exclude SMA Investors From Annuity Insurance Insolvency Schemes? - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews (typepad.com)

 

Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews: L&H Guaranty Assoc. Model Act (typepad.com)

 

Maryland EXCLUDES Acquired Structured Settlement Payment Rights From Guaranty Fund Cover - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews (typepad.com)

 

The 2017 L & H Guaranty Association Model Act was published in 1^st QTR of 2018.

 

 

 

 

 

John Darer Reviews North Carolina HB 845 | NC Structured Settlement Protection Act

by Structured Settlement Watchdog

North Carolina HB 845, submitted April 24, 2023 by NC House Representative Chris Humphreys of Raleigh, is an act to update the North Carolina Structured Settlement Protection Act to align with the most recent version of the Model State Structured Settlement Protection Act approved by the National Counsel of Insurance Legislators (NCOIL).

Registration Required, with Department of Insurance

"§ 1-543.11A. Registration required.
(a) A person shall not act as a transferee, attempt to acquire structured settlement payment rights through a transfer from a payee who resides in this State, or file a structured settlement transfer proceeding in this State unless the person has registered with the Department of Insurance as a structured settlement purchase company. A registered structured settlement purchase company shall renew its registration annually, on or before the renewal date required by the Department 1iment of Insurance, and provide the certifications set forth in this section. The Department of Insurance may adopt rules as necessary to implement this section and may set and charge to each registrant a fee to offset the costs of processing and maintaining the registration required by this section.

Commentary

• The few states that require registration put the Secretary of State in charge. The Department of Insurance is the most logical regulator to put in charge of oversight. In other states, such as Connecticut, the Department of Insurance regulates life settlements. Why not structured settlement factoring, given that financial advice is being given regarding the replacement of payments funded with an insurance product with cash? Replacement disclosures are required when life insurance policies are replaced as well. Licensed insurance agents and brokers Individuals and companies) are the ONLY route to the placement of structured settlement annuities. Time for symmetry in regulation of life settlements and structured settlement factoring.
• HB 895 introduces the defined term "Structured Settlement Purchase Company"as "a person that acts as a transferee in this North Carolina and who is registered with the North Carolina Department of Insurance pursuant to G.S. 1-543.11A. Technically the buyer is buying the structured settlement paymemt rights. not the structured settlement itself, or the structured settlement annuity that funds it. One hopes that some consideration will be given to the use of terms consistent with "structured settlement factoring transaction" (i.e. structured settlement factoring company)

Surety Bond Requirement

(b) To protect payees who do business with a structured settlement purchase company, a structured settlement purchase company's initial registration shall be submitted on a form prescribed by the Department of Insurance and shall include a sworn certification by an owner, officer, director, or manager of the registrant, if the registrant is an entity or by the registrant if the registrant is an individual, certifying that the registrant has secured a surety bond, been issued a letter of credit, or posted a cash bond in the amount of fifty thousand dollars ($50,000) relative to its business as a structured settlement purchase company in this State. The following provisions apply:

(1) The bond shall be payable to the State of North Carolina.

(2)The surety bond, letter of credit, or cash bond shall be effective concurrently with the structured settlement purchase company's registration with the Department oflnsurance and shall remain in effect for not less than three years after the expiration or termination of the registration. The surety bond, letter of credit, or cash bond shall be renewed annually with the registration.

(3) The registrant shall submit to the Department of lnsurance a copy of the surety recovery for the payee should a payee recover a judgment against a structured settlement purchase company for a violation of this Article. 

(4)The surety bond, letter of credit, or cash bond may provide a source forrecovery for the payee should a payee recover a judgment against a structured settlement purchase company for a violation of this Article.

(d) Within 10 days after a judgment is secured against a structured settlement purchase company by a payee, the structured settlement purchase company shall file a notice with the Department of Insurance and the surety. The notice shall include a copy of the judgment, the name and address of the judgment creditor, and the status of the matter, including whether the judgment will be appealed or has been satisfied.

(e) Neither the bonded structured settlement purchase company nor the surety shall cancel or modify the bond during the term for which it is issued, except with written notice to the Department of Insurance at least 20 days prior to the effective date of a cancellation or modification.

(f) In the event of a cancellation of the bond, the registration of the structured settlement purchase company shall automatically expire unless a new surety bond, letter of credit, or cash bond that complies with this section is filed with the Department of Insurance. The cancellation or modification of a bond does not affect any liability that the bonded surety company incurred before the cancellation or modification of the bond.

Investors Not Required to Register

(g) An assignee is not required to register as a structured settlement purchase company in order to acquire structured settlement payment rights or take a security interest in structured settlement payment rights that were transferred by the payee to a structured settlement purchase company.

(h)  An employee of a structured settlement purchase company acting on behalf of the structured settlement purchase company in connection with a transfer is not required to register.   NOT GOOD!

Commentary

North Carolina legislators should pay attention. Anyone who speaks with a structured settlement annuitant should be properly schooled about more than a sales pitch with a "pennies on he dollar: value proposition, There needs to be a standardized way of testing that knowledge as well as guardrails that spell out what is not permissible.Examples of what should not be [permissible in my opinion are (1) impersonating representattives of insurance companies  (2) offering non guaranteed investment projections as am inducement for annuitants to sell their payments. One Florida entity spawned a legion of practitioners who have been working with a financial adviser using unreasonble projections to induce transfers. It is now a forseeable danger for a decade. One that I saw and blogged more recently about had an inducement of a 12% projected rate of return that upon closer examination. failed to take into account income taxes or volatility in a New York petition that failed to impress a Niagara County New York judge. Monte Carlo analysis anyone? Not familiar with Monte Carlo anlaysis?  Consider reading this Monte Carlo Simulation/Analysis in Structured Settlements and Settlement Planning Process (4structures.com)

(i) A transfer order signed by a court of competent jurisdiction pursuant to this Article constitutes a qualified order under 26 U.S.C. § 5891 unless the transferee to which the transfer order applies is not registered as a structured settlement purchase company pursuant to this section at the time the transfer order is signed, in which case, the transfer order does not constitute a qualified order under 26 U.S.C. § 5891.

"§ 1-543.11B. Prohibited practices; private right of action; penalties.

(a)A transferee, structured settlement purchase company, or an employee or other representative of a transferee or structured settlement purchase company shall not do any of the following: 

(1)Pursue or complete a transfer with a payee without complying with this Article.
(2) Refuse or fail to fund a transfer after court approval of the transfer.
(3) Acquire structured settlement payment rights from a payee without complying with this Article and obtaining court approval of the transfer in accordance with this Article.
(4)Intentionally file a structured settlement transfer proceeding in any court or with any administrative authority other than the court or administrative authority specified in G.S. 1-543.14, unless the transferee is required to file in a different court by other law. (Anti Forum Shopping)
(5)Except as otherwise provided in this subdivision, pay a commission or finder's fee to any person for facilitating or arranging a structured settlement transfer with a payee. This subdivision does not prevent a structured settlement purchase company from paying any of the following:

(a) A commission or finder's fee to a person who is a structured settlement purchase company or an employee of a structured settlement purchase company.

(b) Routine transfer expenses to third parties, including court filing fees, escrow fees, lien recordation fees, judgment and lien search fees, attorneys' fees, and other similar types of fees relating to a transfer.

(c)A reasonable referral fee to an attorney, certified public accountant, actuary, licensed insurance agent, or other licensed professional advisor in connection with a transfer.

Commentary: Licensed, licensed, licensed, sounds like a nice improvement!

(6) Intentionally advertise materially false or misleading information regarding its products or services.
(7) Attempt to coerce, bribe, or intimidate a payee seeking to transfer structured settlement payment rights.

Commentary: Efforts to compromise structured settlement annuitants by some structured settlement factoring industry partcipants may not have been limited to payees. 

(8) Attempt to defraud a payee, any party to a structured settlement transfer, or any interested party in a structured settlement transfer proceeding by means of forgery or false identification.
(9) Except as otherwise provided in this subdivision, intervene in a pending structured settlement transfer proceeding if the transferee or structured settlement purchase company is not a party to the proceeding or an interested party relative to the proposed transfer that is the subject of the proceeding.This subdivision does not prevent a structured settlement purchase company from intervening in a pending structured settlement transfer proceeding if the payee has signed a transfer agreement with the structured settlement purchase company within 60 days before the filing of the proceeding and the structured settlement purchase company that filed the proceeding violated any provision of this Article in connection with the proposed transfer that is the subject of the proceeding. (Anti-Poaching)

(10) Except as otherwise provided in this subdivision, knowingly contact a payee who has signed a transfer agreement and is pursuing a proposed transfer with another structured settlement purchase company for the purpose of inducing the payee into cancelling the proposed transfer or transfer agreement with the other structured settlement purchase company if a structured settlement transfer proceeding has been filed by the other structured settlement purchase company and is pending. This subdivision does not apply if no hearing was held in the pending structured settlement transfer proceeding within 90 days of the filing of a proceeding.

Payee to Have Standing To Bring Private Action for violations of and Recover Limited Damages, Attorney Fees and Structured Settlement Paymnet Rights Reconveyed to Payee

(b)  A payee has standing to bring a private action for violation of this Article and may recover all damages and pursue all rights and remedies to which the payee may be entitled pursuant to this Article or any other law. Any payee who brings an action against the transferee may recover actual monetary loss or damages up to five thousand dollars ($5,000), or both. The payee is entitled to attorneys' fees and costs incurred to enforce this Article. In addition, all unpaid structured settlement payment rights transferred in violation of this Article by any transferee shall be reconveyed to the payee.

Read the full draft of North Carolina HOUSE BILL DRH30312-MVf-20 (ncleg.gov)

 

AnnuitySold Pimps Themselves as a Financial Planner | But Where Are Their Credentials?

by Structured Settlement Watchdog

Annuity Sold is an Owings Mills based company led by Ryan Blank and Richart Ruddie

Annuity Sold is held out as a Washington DC financial planner on its Facebook page. Under the leadership of Ruddie and Blank, their various entities have embraced fraudulent advertising as a business practice as I have well documented on this blog and at Structured Settlement Watchdog.

• Download Richart Ruddie is not a CFP 12-5-2017
• Download Ryan Blank is not a CFP CFB Standards Board 12-5-2017
• Neither Richart Ruddie nor Ryan Blank are listed as Financial advisors registered on the IAPD website.
• Neither Richart Ruddie nor Ryan Blank have any recognized or accredited financial planning credential   CFP, ChFC, CFA
• Neither Richart Ruddie nor Ryan Blank have any recognized structured settlement or settlement planning credential  CSSC MSSC RSP

 

 

 

How can Annuity Sold LLC be a financial planner without credentials?

 

 

Forged Structured Settlement Transfer Orders | Which Structured Settlement Buyers Used Camacho?

by Structured Settlement Watchdog®

Which Structured Settlement Factoring Cos. Used Lawyer Who Forged Judge's Signatures?

According to the public filings in State of Florida vs Jose Manuel Camacho Jr. (Broward  15-3747CF10A), the following companies used Miami based former lawyer Jose Manuel Camacho, Jr of Camacho Law Group to handle  structured settlement transfers during the relevant time period that Camacho allegedly forged 104 transfer orders and filed them with the Broward County Court clerk.  They relied on Camacho's legal work and alleged expertise.

• Liberty Settlement Funding [ LSS LLC,  Liberty Settlement Solutions]
• Novation Funding
• CBC Settlement Funding
• Annuity Transfers Ltd.

Most of the companies that used Jose Manuel Camacho Jr., during the time frame relevant to Camacho's arrest affidavit, are members of the National Association of Settlement Purchasers(NASP).  Several other NASP members have used Camacho according to Broward County records but not in the time frames set forth in Camacho's arrest affidavit.

Last week CBC Settlement Funding moved to re-open cases affecting its clients with new counsel and aim have a number of structured settlement transfers (that contained alleged Jose Camacho forgeries) ratified.  Others are apparently seeking a judge to hear the cases in the most efficient way.

Affidavits from Broward County Circuit Court judges whose orders were allegedly forged by Jose Manuel Camacho Jr.

Download Affidavit of Broward County Judge John Luzzo re Jose Camacho Jr.

Download Affidavit of Broward County Judge Thomas Lynch IV re Jose Camacho Jr

Download Affidavit of Broward County Judge Eileen O Connor re Jose Camacho Jr. cases

[ Source:  CBC Settlement Funding Motion exhibits retrieved from Broward County public records January 17, 2016]

In addition to the above named judges, the signatures of the following Broward County Judges were allegedly forged on structured settlement transfer orders submitted by former attorney Jose Manuel Camacho, Jr. to the Broward County Court Clerk:

• Judge Marina Garcia-Wood
• Judge John Bowman
• Judge Mily Rodriguez Powell
• Judge Carlos Rodriguez

Jose Manuel Camacho Jr was arrested in October 2015 but bail was posted, according to public records.  Until being charged with multiple 3rd degree  felonies related to the alleged forgeries Camacho appears to have had an unremarkable record,  according to the Florida State Bar and in Broward County he  just had a few speeding tickets and an auto negligence case .                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Camacho's motivation for career suicide is as puzzling as the silence in the South Florida press. 

His October 4, 2013 divorce filing may offer a partial clue.  The above linked affidavits of the Judges O'Cononr, Luzzo and Lynch substantiate that a large number the alleged acts of forgery by Camacho occurred in the months leading up to and around the filing of of his divorce from Nabilah  "Naby" Baig and the final order in that case in 2014. Adding to the intrigue is that Jose Camacho's ex-wife  works in the Broward County sheriff's office.

On November 16, 2015, the Circuit Court for  Broward County recused itself from the case and sought to have the case against Camacho assigned to a Circuit Judge outside of Broward County.

Despite allegedly admitting to the forgeries in a video taped interview and sworn statement [according to the affidavit submitted at the time of Camacho's arrest], Jose Camacho Jr entered a "not guilty" plea at his arraignment.