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NY Structured Settlement Transfer Petitions Raise Questions for Judges to Address

by Structured Settlement Watchdog

New York judges are some of the best in the country at snuffing out the subtle blend of baloney and brined BS on rye served in structured settlement factoring deli.

The New York Structured Settlement Protection Act requires that "not less than ten days prior to the date on which the payee signs a transfer agreement, the transferee shall provide to the payee by first class mail and certified mail, return receipt requested or United States postal service priority mail, a separate disclosure statement, in bold type no smaller than fourteen points, setting forth:

(a) the amounts and due dates of the structured settlement payments to be transferred;

(b) the aggregate amount of such payments;

(c) the discounted present value of the payments to be transferred, which shall be identified as the "calculation of current value of the transferred structured settlement payments under federal standards for valuing annuities", and the amount of the applicable federal rate used in calculating such discounted present value;

(d) the price quote from the original annuity issuer or, if such price quote is not readily available from the original annuity issuer, then a price quote from two other annuity issuers that reflects the current cost of purchasing a comparable annuity for the aggregate amount of payments to be transferred;

(e) the gross advance amount and the annual discount rate, compounded monthly, used to determine such figure;

(f) an itemized listing of all commissions, fees, costs, expenses and charges payable by the payee or deductible from the gross amount otherwise payable to the payee and the total amount of such fees;

(g) the net advance amount including the statement: "The net cash payment you receive in this transaction from the buyer was determined by applying the specified discount rate to the amount of future payments received by the buyer, less the total amount of commissions, fees, costs, expenses and charges payable by you";

(h) the amount of any penalties or liquidated damages payable by the payee in the event of any breach of the transfer agreement by the payee; and

(i) a statement that the payee has the right to cancel the transfer agreement, without penalty or further obligation, not later than the third business day after the date the agreement is signed by the payee.

Let's look at couple of cases where the factoring company was represented by the same New York City law firm. The first two were pending at the time of posting.

Peachtree Settlement Funding, LLC v Nelson, Derrick et al. NY Supreme Ct. County Orange index EF002393-2020.   Hon. Catherine > Bartlett AJSC .  Disclosure refers to a 24.99% specified discount rate for the sale of 156 life contingent Prudential monthly payments of $500 each from July 9, 2020  ending on June 9, 2033 Offer of $24,027 for $78,000 in payments.  According to the Payee's affidavit he is 56 years old, unemployed, divorced with no dependents and receives monthly disability checks of $900 per month. Plans to use the sale proceeds for a down payment on a home. Nelson was due $1,500/month for life from 12/9/1988  (period certain ended in 1998). As the result of the proposed sale, if approved by AJSC Bartlett, Nelson will get a net of $500 per month from his annuity through May 9, 2030, if still living, and then $1,000 per month thereafter, if living. Adding in the $900 he receives from disability he will have to live on $1,400/month through May 9, 2030. Assuming he can find a suitable residence and obtain a mortgage he will have to make mortgage payments, pay for telephone, cable, electric, transportation, food, clothing and taxes. Does the math add up? Court submission notably does not redact Derrick Nelson's Prudential annuity contract number. UGH! An Order to Cause has an Appearance date of July 28, 2020 at 10am. Jones and the attorney for Petitioner (i.e. not Jones' attorney, the attorney for Peachtree) are required to attend via Skype.

Peachtree Settlement Funding, LLC v  Christopher Freeman  NY Supreme Ct.  Cayuga County  Index E2020-0273. Disclosure refers to an equivalent discount rate of 15.23% per year, for the sale of A) 12 monthly payments of $820.00 each, beginning on January 1, 2035 and ending on
December 1, 2035 B) 240 monthly Life Contingent payments of $820.00 each, beginning on January 1, 2036 and ending on December 1, 2055. $8,000 was offered for $206,640 in future payments.  number Dealing directly with Berkshire Hathaway and its Hardship Exchange program would likely result in a much lower discount rate. Berkshire Hathaway's Hardship Exchange program has been well publicized.

See my two posts

Berkshire Hathaway Structured Settlements Expands Hardship Exchange Program  February 13, 2018

Berkshire Hathaway Hardship Exchange Program | Secondary Market Urban Legend Debunked  August 18, 2018

The Peachtree Petition in Freeman is disingenuous in that the Peachtree disclosure uses New York Life and MetLife Investors for comparable quotes.  Judge Mark H. Fandrich AND Christopher Freeman should be fully informed of Berkshire Hathaway's program and if Peachtree wants to keep the business it should come in under the Berkshire Hathaway number, in my opinion. Download 2020_0273_Peachtree_Settlement_F_v_Peachtree_Settlement_F_EXHIBIT_S__4.  With the Court hearing being adjourned to September 1, 2020 at 1145am there is plenty of time to get a more competitive offer on the table. How about it Peachtree?

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ProTip

In another recent decision that may be of interest to judges reviewing structured settlement transfer petitions, as well as CBC Settlement Funding and its Queens lawyers with an apparent penchant for citing cases from 12-17 years ago in transfer petitions  [ see July 16, 2020 prior post]

In the Matter of the Application of J.G. Wentworth Originations, LLC, Petitioner, v.  Pamela McDonald, UTICA MUTUAL INSURANCE COMPANY and UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK, as Interested Persons pursuant to General Obligations Law § 5-1701 (f)., Respondent. Supreme Court, New York,  Warren County. Index EF2020-67893 decided July 8, 2020

The fourth application — also filed in Warren County — sought to transfer Ms. McDonald’s right to 180 monthly payments of $1,500.00 beginning on December 22, 2020 and ending on November 22, 2035 — for an aggregate sum of $144,000.00 — to petitioner for a lump sum of $52,800.00. Ms. McDonald — who was then 44 years old, married and had no minor dependents — indicated that she planned to use the money to purchase the 2002 double-wide trailer that she and her husband had been renting. The Court approved this application by Order dated December 10, 2019.

The Court then reviewed a fifth application — filed on May 26, 2020 — which sought to transfer $850.00 of each $1,500.00 monthly payment to which Ms. McDonald is entitled from December 22, 2035 to November 22, 2050 — for an aggregate sum of $153,000.00 — to petitioner for a lump sum of $2,500.00. Ms. McDonald now describes herself as “45 years old, widowed and with no minor children.” She intends to use the funds to purchase a new kitchen stove.

The Court in McDonald observes that petitioner technically complies with NY State General Obligations Law 5-1705 by including a copy of the transfer agreement, a copy of the disclosure statement and proof of service upon all interested parties, including the party currently receiving the structured settlement payments and the obligor responsible for making the payments

That being said, in enacting the SSPA the Legislature “ did not intend for the courts to be mere rubber stamps’ for the proposed sale”  Matter of 321 Henderson Receivables L.P. v Martinez 11 Misc 3d at 895, quoting Matter of Settlement Capital Corp [Ballos} 1 Misc 3d 446, 461 ( Sup Ct Queens County 2003); accord (the 2018 decision) in the Matter of JG Wentworth Originations , LLC [Allstate Life insurance Company of NY-Kwant case 61 Misc 3d 1224[A] Rather, “the courts are intended to examine the various statutory criteria and determine whether the proposed sale will truly serve the ‘best interest’ of the payee”

Application of this best interest standard “ ‘requires a case-by-case analysis to determine whether the proposed transfer of structured settlement payments, . . . designed to preserve the injured person’s long-term financial security, will provide needed financial rescue without jeopardizing or irreparably impairing the financial security afforded to the payee

Considering the history of these several applications and Ms. McDonald’s expressed desire to relinquish the aggregate amount of $153,000.00 in exchange for a $2,500.00 kitchen appliance, the Court specifically finds that the proposed transfer is not in her best interest.

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A) 2 quarterly Life Contingent payments of $1,197.66 each, beginning on January 2, 2038 and ending on April 2, 2038 B) 2 quarterly Life Contingent payments of $1,203.77 each, beginning on July 2, 2038 and ending on October 2, 2038 C) 20 quarterly Life Contingent payments of $1,198.88 each, increasing at 3% annually, beginning on January 2, 2039 and ending on October 2, 2043 D) 42 quarterly Life Contingent payments of $4,155.29 each, increasing at 3% annually, beginning on January 2, 2044 and ending on April 2, 2054

 

 

 

 

 

 

Novation Funding Sues Westbury New York Structured Settlement Annuitant for Advances

by Structured Settlement Watchdog®

Novation Funding advanced money to a quadriplegic 4 times in the space of 2 years,  then filed suit against the 50 year old Westbury, NY resident to get their money back after Mr. Shaw decided he was getting scammed by Novation and refused to move forward with selling his payments.  [Novation Funding, LLC d/b/a WLTI, D/B/A Rainy Day Processing D/B/A Sunshine State v Frederick Shaw Nassau County Supreme Court 603713/2017] Download Frederick Shaw re Novation suit,  alleges Novation Funding scam.

According to Mr. Shaw's affirmative defenses filed Pro Se

"(Mr Shaw) Never refused to pay money. Plaintiff tried to scam closs (sic) to $900K for $338K. When dependant (sic) refused to deal Plaintiff held the defendant's annuity hostage for 90 days. When the defendant told them to take their money several times but the Plaintiff would not Release the Defendant account unless the deal was done".

Note that Mr. Shaw is a quadriplegic and signs his documents  with an "X". His handwritten answer was dictated by him to a friend who assisted with the filing.

In my opinion, after speaking to Mr. Shaw, who is yet another African American New Yorker in vulnerable circumstances apparently targeted by Novation Funding,  an investigation needs to be conducted about the proposed deal that Novation was suggesting Mr. Shaw enter into and providing advice.  Purportedly an address in another state was set up in contemplation for the transfer. That would be bad. 

New York structured settlement annuitants should never agree to use an address in another state where they don't reside.  If a company offering to buy structured settlement payments suggests that you do something shady like use an address to Florida, CT, Virginia or a state that you don't reside, run!  If you can't run, wheel, hobble or hop away fast! Report the company to your state's attorney general.  Report it to the Structured Settlement Watchdog®

 

 

 

 

 

Index-Linked Structured Settlements for Minors Catch The Eye of New York Judges

by John Darer® CLU ChFC MSSC RSP CLTC

New York judges are approving index-linked structured settlements for minors in an Infant Compromise, as part of a proposed settlement planning allocation to complement fixed rate structured settlements in the current interest rate environment.  What's the attraction? Priced at approximately the rate of a structured settlement with a 2.3% COLA, index-linked structured settlement payment riders on structured settlement annuities, issued by Pacific Life and Annuity in New York and Pacific Life Insurance Company elsewhere, are ideally suited for a plaintiffs with a long time horizon.

Indexed Linked Annuity Payment Adjustment riders are not a cost effective solution for short term structured settlements.

The initial adjustment cap since the product was introduced has been 5%.  That's 5% increase in payments on completion of the first year of payments , but the cost of a 2.3% COLA.  If there was a down market the following year the minor's payments stay the same, averaging out to a 2.5% increase annually over the two years with the exemplar.   If you are concerned about low interest rates and have the time to spread out your payments then an allocation to the index-linked structured settlement is a good alternative, as some New York judges have discovered.

Download Index Linked Structured Annuity Pacific Life brochure

The product can be used for plaintiffs or structured attorney fees.

United States Life in The City of New York: NY Structured Settlements Improvement

by John Darer® CLU ChFC CSSC RSP  CLTC

Under a new corporate guarantee for New York structured settlements announced January 17, 2012, AGC Life Insurance Company will guarantee the obligations owed to structured settlement claimants under Qualified Assignments in the State of New York entered into with American General Annuity Services Corporation (AGASC). AGC Life Insurance Company is a Missouri-domiciled life insurance company and an intermediate holding corporation and owner of certain major affiliated life insurance companies of AIG.

A copy of the structured settlement guarantee can be found at the following link  Download Corporate Guarantee-AGC Life Insurance Company Guarantee of AGASC-specimen

The improvement is a welcome return of American General's New York structured settlement program to a transactional structure similar to what existed prior to the AIG purchase, when VALIC was its New York underwriting company. It also aligns its New York program with its structured settlement program outside of New York. Since the AIG acquisition of American General in 2004 and prior to this latest development, the New York program offered no guarantee of the assignment company.

Summary

Annuity Issuer: The United States Life Insurance Company in the City of New York (USLife).
Assignment Company: American General Annuity Service Corporation (AGASC)
Corporate Guarantor: AGC Life Insurance Company (AGC Life)

Caveat For Certain Existing Structured Settlement Annuitants

It is unclear whether or not structured settlement annuitants who took structured settlements with American International Life Assurance Company of New York (AILife) AFTER the post bailout restructuring of certain AIG insurance subsidiaries (effective July 1, 2009 as to the structured settlement annuity program), or with United States Life Insurance Company in the City of New York after the merger between it and  AILife made it the New York underwriting company, but prior to the January 17, 2012 announcement, will have the benefit of the AGC Life Insurance company guarantee. This author contacted an American General company executive for comment and the executive indicated that he would check into it. We are also interested in how funded cases that have not yet been issued (e.g.awaiting Court approval) will be treated.

With AILife structured settlements written between 2004 and 2008, the qualified assignee was either American Home Assurance Company, or National Union Fire Insurance Company of Pittsburgh, PA (if an AIG case where American Home Assurance Company was the Defendant's insurer). Both of these entities are insurance companies, which generally cannot file for bankruptcy protection. 

In the restructuring following the AIG bailout in 2008, National Union Fire and American Home were segregated under the Chartis umbrella. While structured annuities issued by AILife/USLife and American General are eligible in the Chartis structured settlement program, neither of the companies is a Chartis subsidiary.The American General structured settlements retained the AGC Life insurance Company guarantee that existed prior to the AIG acquisition in 2004, but after restructuring, from July 1, 2009, the qualfied assignment company for prospective cases using the New York licensed annuity issuer was the special purpose shell company AGASC  (not an insurance company), with no guarantee for New York. To be clear, during the same time period the assignee DID have a guarantee where the AGASC funded its obligations using the non-New York licensed American General Life. This affected July 1, 2009 to January 16, 2012 issued cases with AILife and later USLife structured settlement annuitants. This was seen as a negative by some, which has now been addressed, at least for new USLife structured settlement annuitants. 

We understand that the AGC life guarantees only apply on AIG subsidiary issued New York structured settlements from January 17, 2012.

NY Judge Denies Structured Settlment Sale: Says NO to "Hanks-y Panksy" With Cash Now Pusher

by Structured Settlement Watchdog®

In The Matter Of The Petition Of Philip Hanks, Jr., No. 10575/11, 2011 N.Y. Slip Op. 32512(U) (N.Y. Sup. Ct. Sept. 14, 2011) , Justice Thomas Feinman was not impressed with the 19.99% discount rate rate that Settlement Funding of New York, LLC a/k/a Peachtree Settlement Funding (recently acquired by J.G. Wentworth) was offering for Phil Hanks structured settlement payment rights, opining they were not “fair and reasonable” as well as “excessive.”

If an annuitant wants to sell structured settlement payments in Nassau County, New York they've got to visit Judge Thomas Feinman's "house".

The Long Island judge also stated that the structured settlement factoring transaction was not in Hanks' best interest because he planned to use the money to make repairs to his mother’s home. Hanks', 22, claimed his mother would give him the house at a future date but did not provide any proof to his claim. Therefore, the judge thought Hanks did not fully understand the consequences of the transaction.

While Phil could have muttered "Hanks alot!" for being saved from becoming low hanging fruit, it is important to note that 47 states as well as our national government enacted legislation to protect those receiving structured settlements. While there is some state by state law variation, court approval is necessary in order for an annuitant to be able to transfer structured settlement payment rights. The Hanks case is yet another example of a New York judge doing what is necessary to protect the annuitant. New York plaintiff personal injury lawyers concerned about the factorability of structured settlements should take comfort that it "just"ain't that easy" for someone to cash out in the State of New York.

 

Qualifed Assignment Company for AIG Structured Settlements in New York Changed

by John Darer CLU ChFC CSSC RSP

The qualified assignment company for structured settlements funded with annuities issued by AIG's New York life insurance subsidiary will change to American General Annuity Service Corporation (AGASC) effective July 1, 2009.

The change is primarily relevant to New York structured settlements.

Structured settlements funded with annuities issued by American International Assurance Company of New York (AI Life) that are in force or are pending but locked in or funded prior to July 1, 2009, will not change and will remain with National Union Fire Insurance Company of Pittsburgh, PA (for old AIG or AIU Holdings claims where the insurer was American Home Assurance Company) or American Home Assurance Company (AHAC) for others.

AGASC is a stand alone special purpose assignment company whereas the soon to be previous assignees are property and casualty insurers. AGASC is already the qualified assignment company for stuctured settlements funded with annuities issued by American General Life Insurance Company.

Postscript

What is a Qualified Assignment