A bill introduced June 4, 2010 in the New York State Senate purports to provide plaintiffs with continued availability and use of structured settlement agreements in lieu of a lump sum payments in tort and workers' compensation cases by guaranteeing their right to a
claimant's structured settlement broker.
The bill was introduced by New York State Senator Eric Schneiderman (above)
Highlights1. Section 5-1701 of the General Obligations Law (GOL) would have added, the defined term a "claimant's structured settlement broker" as a person
secured by the claimant to represent the claimant's interests in the
acquisition of a funding mechanism for a structured settlement,
including an annuity policy from a life insurer.
2. That a claimant receive written notice of the
claimant's right to secure a claimant's structured settlement broker to
represent the claimant during the acquisition of the defendant's
settlement funding mechanism, including an annuity.
3. A new section
5-1702A of the GOL is added to provide in Subsection (1) that a claimant
has the absolute right to use a claimant's structured settlement
broker, and must be advised of this right by their attorney or the
court. Subsection (2) provides that the broker represents the claimant
in determining the funding mechanism used to support the structured
settlement, including use of an annuity policy.
3. No funding mechanism can
be agreed upon and no annuity approved unless the claimant's structured
settlement broker has been notified of an the details of the agreement,
and been provided with a copy of the contract and the annuity policy
(if applicable)
4. 5-1702A Subsection (3) provides that the fee or
commission paid to a claimant's structured settlement broker not be a
separate fee paid by the claimant from the settlement. Rather, under
this subsection. the fee or commission will be paid by the insurer
funding the funding mechanism or annuity policy.
5. A claimant's structured
settlement broker will be entitled to a share of the commission paid in
connection with the acquisition of the funding mechanism or annuity in
an amount agreed to by the claimant's structured settlement broker and
the defendant's broker.
6. Absent such an agreement, the claimant's
designated structured settlement broker will receive one-half of the
total statutory commission paid in connection with the acquisition of
the funding mechanism or issuance of the annuity policy. 5-1702A
subsection (4) provides that nothing in this new section 5-1702A of the
GOL can be deemed or interpreted as transferring an ownership right in
the annuity policy to a claimant, and this section does not alter or
effect any advantages or considerations with respect to the taxability
of periodic payments pursuant to state or federal law. Any existing tax
benefits in place on the effective date will remain in effect.
Section
4 provides that the act becomes effective in 30 days and applies to
structured settlements agreements entered into on and after such date.
The bill states the following as justification:
Structured settlements are current public policy
both in New York State and Federally, providing for significant tax
exemptions to children and disabled citizens of our state as an
incentive to enter into periodic payment obligations. Although we are
protecting our citizens that are attempting to sell their current
existing structured settlements, we have done nothing to protect their
rights in establishing a structured settlement in the first instance.
The marketplace of structured annuities is complex and diverse, this
bill established transparency for plaintiffs entering into structured
settlements as pall of the resolution of their lawsuits, and makes the
brokers/agents accountable to them as part of the sale of insurance. Due
to the natural opposition encountered between parties in litigation,
the plaintiff, the real consumer of insurance, and beneficiary of the
structured settlement needs representation from an expert in the field
of structured settlements. This bill gives the plaintiff a right to
representation, fairly compensates that expert, and eliminates the self
dealing occasionally encountered when insurance companies settle cases
with plaintiffs state wide. This policy will foster a greater
confidence in structured settlements, and will further encourage their
use by all parties to litigation. At a time when every financial
transaction and insurance product is in question, we should not expect
the citizens of our state to entrust their financial future to the agent
of their opponent in litigation. To continue do so, controverts the
public policy and undermines the entire existence of structured
settlements.
LEGISLATIVE HISTORY: New bill. FISCAL IMPLICATIONS
FOR STATE AND LOCAL GOVERNMENTS: Structured Settlement, assuming more
are put in force each year, will prevent many citizens from spending the
proceeds from their lawsuits, and therefore will not need public
assistance and/or Medicaid. potentially positive effect.
EFFECTIVE
DATE: This act shall take effect thirty days after the date it becomes
law and shall be applicable to structured settlements agreements entered
into on and after such date.
Comments:
1. Here! Here! But why not make it symmetrical? Shouldn't all parties to a structured settlement agreement be entitled to representation in such transactions and their representative be entitled to a share of the fees-just like a real estate deal?
2. Are those scribing the new law suggesting that state law trumps federal law when it comes to the federal tax treatment?
3. Does the proposed amendment to law say commissions are negotiable but if the claimant's broker doesn't like the terms it's a 50/50 anyway?
4. Are insurance commissions statutory as the proposed law change states or are they contractual between the insurer and its agents and/or brokers? Someone needs to think this one through. Is there a statutory commission for "the acquisition of a funding mechanism for a structured settlement, if such funding mechanism is a United States Treasury Bond Trust?
5. No mention in the proposed amendment to the law about funding of structured judgments.
6. While the proposed amendment appears to expressly create an absolute right to a claimant's structured settlement broker/planner/consultant it DOES NOT appear to create an absolute right to a structured settlement.
7. However noble the cause, it's a shame that taxpayers' time and expense needs to be taken up to tie off a situation fomented collectively by an alleged longstanding business decision by a single office of one insurance company, one or two claims adjusters at another who occasionally get angry at a plaintiff attorney and "throw their toys out of the pram" and the bleeding minority of insurance brokers who "can't play nice in the sandbox".
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