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Plaintiff Lawyers Warned Of Legal Malpractice From Settlement Planners Who Can't Read Cited Cases

by Structured Settlement Watchdog®

A Society of Settlement Planners Board member needs to get their facts straight. Based on what appears on the Settlement Professionals Inc. website today, former SSP President Jack Meligan, gifted settlement planner from Oregon and yellow highlighter "black belt", could never be confused for someone who actual read the two legal cases that he cites,and uses, in an attempt scare plaintiff attorneys into doing business.

On the subject of Limiting Plaintiff Liability, Meligan writes (highlights included):

In Macomber v. Travelers Property & Casualty Corp. and Lyons v. Medical Malpractice Insurance Assoc., plaintiff attorneys have been sued for the harm sustained by their clients at the hands of the defense-provided structured settlement brokers.

Reality

• No plaintiff attorneys were named Defendants in the lawsuit captioned Macomber v Travelers Property & Casualty Corp.

Download MacomberTravelersII040406[1]

• Meligan's "analysis" of Lyons v MMIA is a bit simplistic, just like his affiliate Bill Tilley's chestnut from September 2009 (see below)
  

Download LyonsvMMIA286AD2d711

Bill Tilley Dishes Out "Old Rag" on Settlement Planning Blog

The settlement profession has evolved over the years. It is important for plaintiff attorneys and their clients to have someone who is qualified, and that they feel comfortable with, to advise them on settlement planning and transitional financial planning issues. That being said there's no excuse for the likes of Settlement Professionals Inc. or anyone else to promote themselves using unreasonable scare tactics, such as citing facts that don't exist.

 

 

Settlement Planner Discovered Old "Hand in Cookie Jar"

by John Darer CLU ChFC CSSC RSP

On September 29, 2009  Bill Tilley law firm financier with Amicus Capital Services, LLC  turned settlement planner, reported that "the New York Supreme Court recently caught a defense retained structured settlement broker with his hand in the cookie jar". 

 

Recent of course means "of, belonging to, or occurring at a time immediately before the present" (i.e. new or, fresh).

"Recent" (as in 8 Years Ago)

Tilley's "cautionary tale" references the matter of Lyons v. Medical Malpractice Insurance Association, 730 NYS 2nd, (A.D. 2 Dept. 2001) Download LyonsvMMIA286AD2d711 which, to those in the know, has been widely cited for 8 years by structured settlement industry professionals and settlement planners as one of the reasons for plaintiffs to retain their own settlement consultant.

Lyons v Medical Malpractice Insurance Association (MMIA)

The gist of the New York Appellate Division's decision in 2001 was that contractual privity exists in a settlement, and intentional or negligent misrepresentation of a structured settlement annuity’s cost by the defense constitutes fraud".

What happened with the plaintiffs in 1987 that gave rise to the issues decided in Lyons v MMIA, is highly unlikely to happen today in New York because of New York State General Obligations Law 5-1702, labeled Initial Disclosure of Structured Settlement Terms**. 5-1702(b) of the statute places the burden on the defendant or the defendant's legal representative attorney to disclose in writing, among other things, the amount of premium payable to the annuity issuer.  In addition there may be local jurisdictional requirements. For example New York Supreme Court for Bronx County requires a sworn structure broker's affidavit.

Also see Structured Settlement Ethics | Why Structured Settlement Affidavit Matters (4structures.com)

Recently Caught With Hand in Cookie Jar, But the Trail Goes Cold After 1992 :-)

Tilley's representation that the defense retained broker was "recently caught" with "his hand in the cookie jar" is false. Somebody please inform Bill Tilley that the Rhode Island based structured settlement firm, Broker's Services Corporation, the implied subject of the "hand in the cookie jar", has been defunct for MANY years! The trail on Timothy P. Daugherty, the "villified" BSC representative goes cold after 1992. Try Googling it/him!  The Lyon's  plaintiff attorney Lonn E. Berney is also off the radar. 

The Appellate Division (2nd) Made No Mention of Defense Retained Structrued Settlement Broker

Furthermore, the New York Appellate Division (2d) decision Tilley cites, Lyopns v MMIA, makes no mention of a "defense retained structured settlement broker"and solely directs its punishment to former medical malpractice insurer MMIA.

Lyons v MMIA Signalled that Plaintiff Lawyers Must pay Attention

More importantly the case signalled to plaintiff attorneys that they must pay attention. Tilley states that MMIA contended that the plaintiffs could have and should have independently determined the value for themselves (as if that's a negative thing)! And I couldn't agree more. This author understands that the plaintiff recovered damages from their own attorneys for THEIR FAILURE in this regard.

The Muddling Up of "Present Value" and "Cost"

Back in the day there were some in the settlement community and legal community who muddled up the financial terms "present value" and "cost".  Back in the day you'd hear lawyers muttering non existent financial terms like present day cash value, present day value and others. Indeed MMIA, through its claims examiner, Joseph T. Sullivan, represented in a letter to plaintiff lawyer Lonn E.  Berney, dated March 26, 1987, “[t]he Present Day Value of the above package, including the cash payment, is $940,180.”. Back in the day much misinformation was spread (through ignorance or otherwise) that knowledge of the cost of a structured settlement was "constructive receipt". It isn't now, and wasn't then (according to a 1983 IRS Private Letter Ruling).

What is Present Value?

"Present value" is a financial term that describes the result of a financial calculation which reduces a future sum or series of future cash flows to its worth today using a discount rate. If you truly understand what present value is it can be a useful tool for wide variety of financial decisions.

What is a Discount Rate in Connection with Present Value?

The discount rate used to determine present value is supposed to represent the fair cost of capital when comparing two or more series of alternative cash flows.  That being said, one will observe that the higher the discount rate the lower the present value. Conversely the lower the discount rate the higher the present value. A modern day example of cause and effect with this is what one observe with offers from factoring companies for structured settlement payment rights. Another example is the results of present value calculations required under New York CPLR Articles 50A and 50B (although post July 2003 Article 50A matters peg the discount rate to a specific Treasury Bond).

Tilley has come on the blog scene at  a thousand miles an hour and according to one of our sources he is "finding his way". My advice to Tilley, if "his way" is to "empower" and not to "the egress", is to do just a little bit more research and avoid scare tactics using latter day information.

Other Structured Settlement Blog posts concerning New York Structured Settlement Protection that may be of interest

Structured Settlement "Standard of Care" in New York   February 16, 2009

** Several other states have similar disclosure obligations to New York at or before the time of the creaton of the structured settlement.

 

 

 

Settlement Industry Marketing to Trial Lawyers Over the Top- Exhibit 1

Marketing Claim

"How many structured settlements have you been involved with in the past 10 years in which the annuity was funded through the life insurance company affiliate of the casualty insurer? Is it likely that the affiliate life market of the casualty insurer provided your clients the highest benefits for the claim dollars being spent? The answer is an unfortunate -NO! An even harder answer to swallow is Probably not by a long shot".

Comments

To boil this rhetoric down , it is necessary to independently shop the market, but it is possible that the affiliate life company IS giving the best deal. Like anything else shopping around improves your bargaining position.

Marketing claim

"A number of attorneys have been successfully sued by their clients when the claimant realized  a sizeable (sic) benefit stream could have been acquired if another, more competitive life insurance company had been utilized".

Comments

The creator of the sales piece doesn't cite any specific cases, but the statement is simply not in line with the facts of two widely cited cases by settlement professionals. Successfully sued suggests that these cases were tried to a verdict, which in the case of Grillo v Pettiete et al Cause 96-145090-92 and Grillo v Henry Cause 96-167943-96 96th Dist, Ct Tarrant County, TX, simply wasn't true. The cases were settled. The Grillo cases against the attorneys and the guardian ad litem centered upon not doing a structured settlement and not preserving the public benefits that the plaintiff was entitled to.

The matter of Lyons v MMIA 730 N.Y.S. 2d 345 centered on the issue of privity and New York's Appelate Division for the second department overturned a lower court ruling that said defendants do not owe a duty of privity to the plaintiffs In a matter that involved numerical manipulations of present value). It is this author's understanding that the attorneys were sued, for among other things failing to realize that the numbers proferred to them were future value, not present value, resulting in excessive attorney fees. This author also understands that the matter was settled. Furthermore such practice is virtually impossible in 2009 because of the disclosure requirements set forth in New York General Obligations Law Section 5-1702.

Neither of these cases support the claim of the marketing memo creator that the lawyers "were successfully sued "when the claimant realized  a sizeable(sic) benefit stream could have been acquired if another, more competitive life insurance company had been utilized".  This author challenges the creator of the aforementioned claim to come up with a case that supports the claim being made. 

Marketing claim
Cites a March 2003  Internal Memo (from AIG)  that stated " unless compelled by the plaintiff or plaintiff's broker to illustrate competitiveness, the broker need not canvas the Approved list of life companies for the best quote. If compelled , the broker must canvas the Approved List for the best available rates. The broker, however, must give (our life market) the last right of refusal"

Comments
The following questions underscore the pernicious manner in which the Marketing claim has been made.

1. Is the same person CEO of AIG as was in March 2003? No
2. Is the person running the structured settlement department the same as in March 2003?  No
3. How many CEO's has AIG had since March 2003?  4  (Greenberg, Sullivan, Liddy, Benmosche)
4. Is AIG the same company as it was in March 2003?  No
5. Is the name of AIG's property and casualty company the same it was in March 2003? No, the name was changed to Chartis in July 2009.

The continued use of the March 2003 internal memo by any structured settlement professional or settlement planner is disingenuous in the context that the creator of the marketing claim is likely aware of the majority of the above facts and is aware of the events that took place in September 2008 and the sequelae. A call to Ismael Acevedo who runs the Chartis structured settlement operation would dispel the marketing claim being made with relation to the March 2003 memo. This author is aware that a the time of writing the author of that marketing piece had not contacted Mr. Acevedo.

Marketing Claim
"(Name of Firm) exclusively represents plaintiffs and their attorneys".

Comments
This author has knowledge that among the firm's "42 offices nationwide" there IS defense source business being written. Even one piece of business written torches the absolute marketing statement. I keep warning people about making unsupportable absolute statements in marketing. There is nothing wrong with writing business via such source.  In that regard however, given that the firm in question has apparently distributed copies of the marketing piece to more than one trial lawyer, it stands, without further qualification of the marketing claim (for example that a specific office or specific individuals are exclusive) that the firm is engaging in advertising that is grossly false and misleading. How shocking!

Marketing Claim
"If (Name of Firm) is involved you will be covered under our $10,000,000 Errors and Omissions Policy"

Comments

1. This author has reason to believe that the policy in question is a single limit policy insuring 42 offices and the claims they may have.
2. If the creator of the marketing piece really had the conviction that AIG was so bad, why on principle did the company insure (for the 2003-2004 and 2004-2005 policy years) the cited E&O policy for with an AIG subsidiary? It's certainly worth noting that the frequently cited March 2003 memo would have been fresh in mind in when the insurance was placed in in 2003.
3. An insurance policy covers its named insureds and coverage is subject to the policy terms and the interpretation thereof.
4. The statement about coverage is outrageous because it makes the intentional or unintentional misrepresentation that an entirely new class of insureds (plaintiffs and plaintiffs attorneys) is covered by the policy by virtue of simply doing business with this firm. 
5. Questions
   • Can the insured unilaterally enlarge a class of insureds under its policy? 
   • What acts of the plaintiff attorney would the plaintiff attorney be covered as an insured under this structured settlement firm's policy. Again we are dealing with a snappy sounding marketing throwaway that could have severe consequences! 
   • What possible exposure does a firm have if it makes such a misrepresentation to induce a plaintiff or law firm to do business ?
   • Wouldn't that bring a whole new pricing structure for the E&O policy if it were true? I mean we're talking 42 offices and all the clients of those 42 offices implied by the marketing statement.

I have no doubt that a dog loving old friend will be upset with me for writing this post, but the fact that your marketing piece is all over the frickin' country now leaves me no alternative but to inflict a "bite".

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