by John Darer CLU ChFC MSSC RSP CLTC
Are there any ethical considerations for a structured settlement co-broker placing a structured settlement for the defense using the information about the plaintiff's structure to solicit them in the future for other insurance, advisory or investment products and services by them or third parties?
Cross Selling is Not Unusual Concept But Where Does It Cross the Line?
Cross selling is not an unusual concept. If you go into a bank to open a savings account you might be interested in a checking account or a time deposit account or a mortgage. On a future visit to the bank the in house insurance person may try to solicit you for life insurance. But all of those sales are to customers of the bank.
Does the plaintiff, or plaintiff lawyer become a client of the defense broker simply by virtue of a private agreement between two brokers to split commissions that the plaintiff or plaintiff attorney is not a party to? Does the buyer of a property become a client of the listing broker by virtue of the entitlement to a percentage of the real estate commission earned where the buyer was introduced by the buyer's broker?
So What is Going On?
- I've learned that an entity involved on the primary side of the structured settlement industry is sending letters to annuitants entitled "IMPORTANT NOTIFICATION FOR YOUR LUMP SUM PAYMENT".
- The letter is sent on the letterhead of a different but related entity to the defense broker, a name that would be not likely be known to the annuitant, but possibly recognizable to participants in the primary structured settlement market.
- The letter is sent by regular mail
- The letter, contains specifics about the former plaintiff's structured settlement, including the date the annuity was placed, the name of the life insurance company issuing the underlying structured annuity, and the amount and date of a particular lump sum payment along with a financial inducement (see below).
- The letter is clearly a solicitation for insurance (i.e. lifetime annuity). advisory and investment products and services to "show you options to finalize your lump-sum payment" and to "identify retirement strategies that can provide guaranteed lifetime income..." and offers a complimentary service with a purported value of $1,500.
What Do Downstream Business Agreements With Insurers Say?
I am aware of at least one casualty insurer where this might present a problem with a vendor agreement. There may be a problem with the vendors of the defense broker and how the data is used.
Is this Simply Opportunism or Is There An Ethical Question to Be Answered?
One Way to Flesh Things Out
The brokers associated with the entity often submit split agreements that attempt to do a commission grab for any type of product sold to the plaintiff, not just the structured settlement annuity, whether the posturing broker had any involvement in bringing about that business or not. Those that have signed such agreements may wish to review such agreements to see if there is a time limit and if not, explore whether or not any fees are owed to them for other products sold as a result of the type of solicitation described. That a different entity is used for such solicitations muddies up the waters a bit.
Plaintiff brokers entering into co-broker agreements with defense brokers who have concerns about this issue may wish to insert language into such co-broker agreements to address the issue of using information gleaned from the case in solicitation of their clients.
Do You Need to Finalize a Lump Sum Payment From a Structured Settlement?
If you have a lump sum coming due from your structured settlement and you have not changed your address or bank account then the check or deposit should arrive on time. It may be helpful to contact the structured settlement annuity issuer or to contact your broker or settlement adviser or financial planner to help verify that they have your current address and contact information. Most settlement agreements place the burden on the annuitant to notify the annuity issuer of address or bank account changes. It is also a good opportunity to make sure your beneficiary designation is up to date if you have more payments arriving in the future If you are just turning 18 you will be able to name a beneficiary for the first time. Naming a beneficiary means that your heirs avoid potentially significant probate delays. If you want to contact the annuity issuer directly here is a helpful list of customer service phone numbers for life insurance companies that currently issue structured settlement annuities, as well as companies that formerly issued structured settlement annuities.
If you want to explore other options for the lump sum consider working with a Sudden Money advisor, who has experience dealing with financial transitions.