by John Darer CLU ChFC CSSC
Richard B. Risk, Jr., J.D. of Tulsa, OK has posted a piece called "Doing What's Right and Avoiding What's Wrong" on the website of The Risk Law Firm. in which he states that if a structured settlement transaction "calls for involvement of producers on both sides, the trial attorney should communicate to the client that such arrangements often come with restrictions on the choice of annuity companies, which denies the client of free market competition."
" Draconian" Description is Overkill Exaggeration
In my professional experience, today most defendants and insurers DO NOT have restrictive lists of annuity issuers. While there are some carriers that have some restrictions, few rise to the level of draconian. Thus there is no reason that a structured settlement consultant cannot shop the entire market and get the approved markets to match. Who would have thought the trial attorney's structured settlement broker or settlement planner actually has to do some work? If your structured settlement broker won't do it, or continues to whinge, then simply call my office...we'll take care of you! The toll-free number is listed on the top left of this page. What's even more silly is when a trial lawyer's structured settlement consultant is hypercritical of and suggests that an annuity market is not adequate and THEN places another plaintiff with that same annuity issuer on another case. The fact is that in 2007 there are not a vast number of insurance companies who write structured settlements. Rosemarie Mirabella of A.M Best estimates that 70% of the market is controlled by 5 annuity issuers, according to a report by Patrick Hindert of S2KM.
As I understand it, here Risk opines that the annuity commission paid by the annuity issuer to the structured settlement producer is part of the plaintiff's recovery. Risk suggests that the trial attorney deduct the amount of this commission from the contingent fee calculation on the basis that it is "the amount of the client's recovery being given back to the defense to pay defense costs". If an attorney is to follow Risk's advice then perhaps he should be deducting the entire commission as (although unrecognized) by Risk's logic the plaintiff structured settlement producer fee is ALSO a cost. Does trial attorney collect a fee on the amount paid to the plaintiff's economic expert, plaintiff's medical expert etc.? In most states aren't those costs deducted up front and then the contingent fee percentage applied?
Update: In 2017, Risk tried to take on AIG with this every same. His case was dismissed without prejudice, disimissed with prejudice, lost on appeal and then rhee appeal was Affirmed by the 1st Circuit in June 2019 in favor of Defendants.
How many of your plaintiff attorneys or trial lawyers out there have "overcharged" or are "overcharging" your clients? RELAX! In the same document at point number 8, Risk states (Defendant or Insurer) "may tell the victim that periodic payment consideration must be expressed as times and amounts of payments, NOT as part of a single lump sum. (This is true; the cost of the annuity is NOT the consideration to the claimant" (emphasis added). If the consideration is NOT the cost of the structured settlement (annuity) then what is the consideration? The consideration, is the PROMISE TO PAY the future periodic payments.
Structured settlement brokers are paid by the annuity issuer NOT the claimant. The commission is paid by the annuity issuer as a marketing expense incurred in distribution of its annuity product. Risk admits that the annuity issuer pays the commission (#11) but mischaracterizes it as an offense that readers unfamiliar with legal terms would perceive as criminal ("if civil conspiracy is a service"). Once again, it is a marketing expense of the annuity issuer. If only one broker is involved the same commission is paid in total as if there were two, or more, brokers involved. State insurance laws regulate how much is paid for commission on insurance products and such rates are filed with state insurance commissioners. Since rebating (kickback of commissions) is illegal in almost every state there is no difference financially, to the plaintiff, whether 1, 2 or even 10 brokers are involved.
One of Risk's proposed solutions is that the Plaintiff lawyer petition the court to establish a qualified settlement fund (QSF) to receive the entire proceeds The QSF presumably would be administered by Risk, but my point regarding Risk's flawed logic still survives. Furthermore if your case involves a single claimant most qualified assignees will not accept assignment. This severely limits annuity market selection for your client to John Hancock Life and Aviva Life Insurance Company (or its NY subsidiary) and may put your client in an even worse situation than he or she was prior to the single claimant QSF being established. With no disprespect intended to these fine companies, are these markets competitive on your case? Are you seeking diversification on a large case? Is your broker or settlement planner recommending a single claimant qualfied settlement fund, or espousing this theory of "free market access", just so they can make double the commission? If there were no anti-rebating laws don't you think the plaintiff would want to bargain to pay half the commission? Before you act on such a recommendation be sure that the issues have been analyzed before it's too late.
Richard B. Risk, Jr, is a former structured settlement broker who, according to a Declaration that he made, under penalty for perjury, to the UnIted States Department of Justice in 2004**, had substantial experience providing structured settlement brokerage services to or behalf of defendants or their counsel in the 3 years preceding the date he signed such declaration in 2004. He is also a Founding Member and ex-officio of the 20 professional member Society of Settlement Planners. I respect his knowledge but not his tactics. And he's got it wrong here. Together with two other Founding Members and Former Presidents of that organization (Jack Meligan of Settlement Professionals, Inc. and Charles J. "Chuck" Derenne of Premier Settlement Services) and the Forge Consulting contingent, Risk seems to employ overly aggressive, and outdated, scare tactics and broad generalizations*** when soliciting plaintiff lawyers or plaintiffs for business (ironically the behavior is, to one observer attendee of the recent Society of Settlement Planners annual meeting in DC , remarkably parallel to that which Democrats accuse Republican politicians).
In the states that don't have mandatory disclosure requirements, many of the concerns expressed by Risk and others can be addressed using a structured settlement affidavit to provide assurance.
Buy in to the scare tactics if you wish. However, the fact is that the current paradigm shift, in the settlement industry, is centrist.
** such statement is part of the Declaration required to get on this list pursuant to 28CFR 50.24 Download doj_list_2004_august_update.pdf
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