by John Darer® CLU ChFC MSSC RSP CLTC
If a successful New York mediation involves a structured settlement, care must be taken by all parties when documenting the settlement, to properly reflect the consideration and the intentions of the parties to the structured settlement, to not to run afoul of New York State General Obligations Law and Federal tax law.
Initial Disclosure of Structured Settlement Terms
In negotiating a structured settlement of claims brought by or on behalf of a claimant who is domiciled in this state, the defendant or defendant’s legal representative shall disclose in writing to the claimant or the claimant’s legal representative all of the following information that is not otherwise specified in the structured settlement agreement:
(a) the amounts and due dates of the periodic payments to be made under the structured settlement agreement. In the case of payments that will be subject to periodic percentage increases, the amounts of future payments may be disclosed by identifying the base payment amount, the amount and timing of scheduled increases, and the manner in which increases will be compounded;
(b) the amount of the premium payable to the annuity issuer;
(c) the nature and amount of any cost that may be deducted from any of the periodic payments;
(d) where applicable, that any transfer of the periodic payments is prohibited by the terms of the structured settlement and may otherwise be prohibited or restricted under applicable law; and
(e) a statement that the claimant is advised to obtain independent professional advice relating to the legal, tax and financial implications of the settlement, including any adverse consequences and that the defendant or defendant’s legal representative may not refer any advisor, attorney or firm for such purpose.
The above is a section of the New York General Obligations Law. A number of settlement consultants are attempting to protect their turf at mediation by attempting to get their names placed into mediation agreements as "structured settlement broker of record". But does having the defense representative named in the "settlement agreement" signed at mediation comply with the NY G.O.L. 5-1702(e)?
This author recently came across a mediation document labeled "settlement agreement" in which the Defendant's representative was named as "structured settlement broker of record". A written 5-1702 disclosure was not provided to the plaintiffs at the time of the mediation. As it was the plaintiff lawyer contacted his own settlement consultant and there are consultants representing both sides of the case.
In an era when separate brokers or settlement consultants representing the adverse parties is customary and commonplace, why is it necessary for a defense or plaintiff representative to put their moniker on the mediation settlement agreement?
The agreement in question called for the consideration of "defendant paying and the plaintiff accepting the sum of ($XXX,XXX) for cash or periodic payments using XYZ Company as structured settlement broker of record at the above cost to the defendant's insurers at plaintiffs' option".
Don't know about you, but in my opinion, settlement consultants could be providing better assistance to their clients by paying more attention to how the consideration is articulated in a mediation agreement than making sure their name is inserted as part of it.
Furthermore, mediators should consider having a structured settlement friendly mediation agreement on hand.
Fortunately for the plaintiffs in the case described above. minors were involved and therefore the settlement was subject to approval of the trial court.
Constructive Receipt Doctrine and Structured Settlements December 3, 2009