by John Darer CLU ChFC CSSC RSP CLTC
On behalf of the structured settlement industry I would first like to thank the Geneseo New York law firm of Cannon and Van Allen, LLP for their support of structured settlements. While we'd certainly encourage the Livingston County lawyers for making an effort with the June 6, 2013 blog post on structured settlements, we wish it were more accurate.
On the plus side:
"Structured settlements offer many benefits to the client over a lump sum payment, including a guaranteed rate of interest on the money (a big deal nowadays), the payments received are tax free, and the client has guaranteed income in the future"
What's wrong with the Cannon and Van Allen, LLP blog on AIG?
A. The title "Oh No! My Structured Settlement is With AIG!"
Comments from "Sluggo": This is neither a 1970's Saturday Night "Disasterpiece Theater" featuring a paranoid character molded from "Mr. Hands", nor is it 2008. AIG repaid its bailout money in 4 years. Things have been looking better for some time. Some industry "clairvoyants" are even predicting that it may have its A+ A.M. Best rating back by the end of the year.
B. Factual inaccuracies
(1) "One of the largest structured settlement companies is American International Group. Yes that's AIG"
Comment: American International Group, Inc. is a multi-national insurance corporation. It is not a structured settlement company. Over the years various subsidiaries have underwritten structured settlement annuities. Neither of these companies missed any payments between September 2008 and now. Nor were they in danger of doing so despite the cash now pushing "vultures" that hovered in the days and months following the bailout of the parent company. Those who sold their payment rights out of "induced" fear needlessly took a bath.
Current AIG subsidiaries underwriting or guaranteeing structured settlements
- American General Life Insurance Company
- United States Life Insurance Company in the City of New York
- AGC Life Insurance Company
AIG subsidiaries that formerly undewrite structured settlements
- Variable Annuity Life Insurance comapny (VALIC)
- AIG Life Insurance Company
- Western National Life Insurance Company
Current AIG subsidiaries that own structured settlements
- American General Assignment Company
- American Home Assurance Company
- National Union Fire Insurance Company of Pittsburgh, PA
(2) "Structured settlements are also a good deal for the defendant's insurance company, as they pay less money to the structuring company than they would pay up front to the client".
Comments: The New York Structured Settlement Protection Act, which is set forth in New York General Obligations Law Section 5-1702, renders the lawyers' comments moot. A structured settlement that is established in New York State requires up front transparency by the Defendant or the Defendant's legal representative. If the insurance company were to pay less it would be because the plaintiff accepted less money. That Cannon and Van Allen use a maybe in their estimate of the cost of the structured settlement in their example suggests to me that perhaps they need to be paying more attention to the mandatory NYGOL Sec. 5-1702 disclosures [also see next post with respect to that topic].My suggestion is that the lawyers who wrote the article should always consult with their own settlement planner.
That being said structured settlements are good for insurance companies because they can focus on, and quantify, the plaintiff's needs in a liability case.
(3) "There is a law in New York that basically says if the insurance company with whom you have contracted for a structured settlement goes bankrupt, you may be eligible to receive payment..."
Comments: With few exceptions, insurance Companies may not file Chapter 7 or 11 as it is against the law and against public policy. I've addressed this in a July 23,2010 blog post. Licensed insurance agents and brokers are prohibited from discussing statutory protections referred to by Cannon and Van Allen. Further questions can be addressed at the websites of nolhga.org or your state insurance department. For a list of state insurance department phone numbers 4structures.com LLC has compiled a list. Please click here