Certain things are facts of life. For one, the factoring of structured settlement payment rights seems here to stay. As a frame of reference, the "JG Wentworth guy" has apparently made enough money to buy a new suit and to slow down the cadence of his speech to show he might not be as desperate to buy your structured settlement (payment rights).
It is common knowledge that a number of so-called "settlement planners" actively participate in the structured settlement factoring market via referrals or apparently, in some circumstances, directly (see "Wow, No No I Mean Wow!" and "Structured Annuity Buyer Among Us").
In a prior post I highlighted Privacy Issues Concerning Structured Settlement Factoring Referrals when I became aware of a form that a MAJOR settlement planner was getting former plaintiffs to sign as consent to release confidential information detailing terms, amounts and conditions of settlement (copies of the settlement agreement, qualified assignment and copy of annuity contract) that may contain a confidentiality clause. Clearly the indicia that this settlement planner thought to obtain consent of one party demonstrates at least a partial understanding of protecting confidential information.
If a settlement agreement contains a confidentiality clause then an interesting discussion ensues that is ripe for an ethics opinion by esteemed legal scholars. The discussion concerns the responsibility that the following parties have in relation to those documents.
Consider these Assumptions:
- Structured settlement recipient sees an ad from JG Wentworth and calls them in addition to calling the original settlement planner who participated in setting up the structured settlement for the structured settlement recipient.
- The settlement planner has a friend who does structured settlement factoring and thinks he or she can give structured settlement recipient a better deal than JG Wentworth.
- The original settlement agreement to the underlying lawsuit contains a confidentiality clause which prohibits the disclosure of any of the settlement terms or amounts without the written consent of the other party.
- Although there may be numerous parties to a settlement agreement, let's just assume that the settlement agreement is signed by the plaintiff, the plaintiff's attorney(s) and the Defendant or the Defendant's Insurer who, by their signatures, agree to be bound by the terms of the settlement agreement INCLUDING the terms of the confidentiality covenant.
- Settlement Planner tells plaintiff he or she needs to sign the consent form for settlement planner to release the confidential settlement documents to the factoring company (JG Wentworth or other).
- Structured settlement payment recipient (plaintiff) signs the consent form and sends from back to settlement planner.
- Settlement planner (who participated in the original structured settlement) discloses the confidential settlement documents to a representative of the factoring company. Settlement planner does not notify or obtain consent from any other party to the settlement agreement (containing the confidentiality covenant) other than the structured settlement payment recipient.
- Factoring company representative sees settlement documents and determines they are gossip worthy. Spills beans to reporter for local paper which writes damning article about the defendant discloses the terms and conditions of the settlement and attributes, ironically, to "confidential source"
Who has exposure here, esteemed legal scholars?
The settlement planner, who because of his or her participation knew of the confidentiality covenant and its terms? Does you opinion change if the settlement planner is compensated?
The plaintiff, who agreed to the confidentiality covenant?
The plaintiff attorney, perhaps the unwitting man in the middle?
Positions Taken By Settlement Trade Associations
The National Structured Settlement Trade Association amended ts bylaws last Fall, in recognition of this concern, and a number of life companies including AIG took the responsible step of admonishing its appointed agents and brokers of its concerns in this area and the consequences to agents brokers (and settlement planners)of non compliance. Bravo!
The Society of Settlement Planners (SSP) has yet to come up with a firm public stance on factoring and ethics of its members. WHY? Coincidentally the above referenced in paragraphs 2 and 3 ARE currently listed SSP members.
It's no secret that the Society of Settlement Planners took in a large amount of money from factoring companies in 2005 and that the 2005 Society of Settlement Planners annual meeting was dominated by factoring company attendees. We do know that until recently the Society of Settlement Planners had a number of representatives of factoring companies listed as members or patrons. Despite the fact that I was told in Kansas City in July 2005 by current President Charles Derenne, that he considered factoring part of the settlement planning process, the association itself has not taken a stand. Is that a reflection of the current leadership?
The Society of Settlement Planners has opened its March 2007 annual meeting to everyone. It will be interesting to see how many factoring company representatives have registered and show up. For a professional association (of 19 or so) already skating on thin ice, it's a "risk" proposition.
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