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.
1. 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.
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".