Anti-Assignment Language

Almost all structured settlements are completed on a basis that qualifies future payments for tax-free treatment under I.R.C. § 104(a) and 130. One of the requirements for a “qualified assignment” under IRC 130 is that “periodic payments cannot be accelerated, deferred, increased, or decreased by the recipient of such payments.

In addition to this statutory language, many structured settlement documents also have added additional restrictive language such as stipulating that the payment recipients may not assign, transfer, pledge or otherwise encumber the rights acquired by settlement.

The effectiveness of these contractual anti-assignment provisions was extensively litigated between factoring companies and insurers in the context of factoring transactions that predated the enactment of IRC 5891 and the state structured settlement protection acts (SSPAs).

The National Structured Settlement Trade Association (NSSTA) recently announced that with New Hampshire’s SSPA enactment, all 50 states and the District of Columbia now have this statutory legal protection for structured settlements.

Although IRC 5891 and the state protection statutes have not eliminated factoring abuses, they have certainly reduced the abuses – and perhaps saved the primary structured settlement market in the process. Nor have IRC 5891 and the state statutes eliminated the importance of anti-assignment provisions in structured settlement documents.

Model QA&R

Following the enactment of IRC 5891, NSSTA published a Model Qualified Assignment and Release Agreement (Model QA&R), including an Annotated version, with a Paragraph 7 which reads as follows:

Acceleration, Transfer of Payment Rights. None of the Periodic Payments and no rights to or interest in any of the Periodic Payments (all of the foregoing being hereinafter collectively referred to as “Payment Rights”) can be

  1. Accelerated, deferred, increased or decreased by any recipient of any of the Periodic Payments; or
  2. Sold, assigned, pledged, hypothecated or otherwise transferred or encumbered, either directly or indirectly, unless such sale, assignment, pledge, hypothecation or other transfer or encumbrance (any such transaction being hereinafter referred to as a “Transfer”) has been approved in advance in a “Qualified Order” as defined in Section 5891(b)(2) of the Code (a “Qualified Order”) and otherwise complies with applicable state law, including without limitation any applicable state structured settlement protection statute.

No Claimant or Successor Payee shall have the power to effect any Transfer of Payment Rights except as provided in sub-paragraph (ii) above, and any other purported Transfer of Payment Rights shall be wholly void. If Payment Rights under this Agreement become the subject of a Transfer approved in accordance with sub-paragraph (ii) above the rights of any direct or indirect transferee of such Transfer shall be subject to the terms of this Agreement and any defense or claim in recoupment arising hereunder.”

Although IRC 5891, the SSPAs and NSSTA’s Model QA&R have changed the “anti-assignment” language used in many, if not most, structured settlement documents, as well as the business practices of settling parties involved in subsequent transfers petitions, those statutory provisions have not impacted assignment or anti-assignment laws in general.

The more general laws impacting assignments and anti-assignment provisions can still become relevant in specific structured settlement cases and are therefore worthy of review. Note also: NSSTA’s Model QA&R Annotated footnotes to Paragraph 7 specifically address some of the topics discussed below and represent valuable educational resources as well as supplemental drafting guides.

Validity of Assignments

Where a clear anti-assignment provision appears in a bilateral agreement, the general (majority) rule is that it will be enforced, unless some other provision of state law overrides the parties’ express agreement not to permit assignment of future payments – or if the party or parties having the right to enforce the anti-assignment provision (in structured settlements, generally the assignment company and annuity provider) give their approval and support.

There is a minority view, followed in Connecticut, that an anti-assignment provision is not clear unless it expressly makes void any attempt at assignment. Under this minority view, the words “this agreement may not be assigned” are not sufficient. Connecticut distinguishes between the right to assign and the power to assign and requires both the power and the right be negated to prevent an assignment. To enforce an anti-assignment provision in Connecticut, therefore, an agreement must expressly say that any attempt to make an assignment is void and of no effect.

UCC Article 9

When UCC Article 9 was revised in 1999, a major purpose was to expand the range of financial obligations covered by Article 9, and thus eligible for assignment despite contractual anti-assignment language. “Payment intangibles” were added to the list of subjects within the scope of Article 9, and thus eligible for assignment notwithstanding a contractual prohibition.

A right to periodic payment falls within the definition of a payment intangible. If, however, structured settlement rights are funded by annuity contracts, they remain excluded from Revised Article 9 under its insurance exception, and anti-assignment provisions should be enforced.

Confusion on this issue was introduced by Official Comment 15 to Article 9: “Note that once a claim arising in tort has been settled and reduced to a contractual obligation to pay (as in, but not limited to, a structured settlement), the right to payment becomes a payment intangible and ceases to be a claim arising in tort.

This confusion resulted in a number of lawsuits seeking clarification. Most states have now adopted specific legislation to make Article 9’s revision inapplicable to structured settlement obligations.

Restatement (Second) of Contracts

Most states follow the Restatement (Second) of Contracts which recognizes that assignments of payment rights are valid – with three important exceptions. Courts have ruled (at least in some cases) that structured settlements satisfy each of the following three exceptions and can therefore restrict and/or prevent assignments:

  • the substitution of a right of the assignee for the right of the assignor would materially change the duty of the obligor, or materially increase the burden or risk imposed on him by his contract, or materially impair his chance of obtaining return performance, or materially reduce its value to him, or
  • the assignment is forbidden by statute or is otherwise inoperative on grounds of public policy; or
  • assignment is validly precluded by contract.

Workers Compensation

A potential statutory conflict exists related to the assignment of payments in workers compensation cases. Most workers’ compensation laws prohibit or sharply restrict assignment of benefits, including benefits payable through structured settlements. However, both IRC Sections 5891 and 130 reference and incorporate workers compensation cases.

Some state legislatures have addressed this potential conflict by making their SSPAs inapplicable to transfers of payment rights under workers’ compensation settlements. Factoring companies have attempted to argue (generally unsuccessfully) that an SSPA overrides prohibitions of assignments in workers’ compensation cases.

When state workers’ compensation systems forbid assignment of future rights, courts have maintained that policy and have refused to find that an SSPA implicitly overruled it or permitted an exception to the anti-assignment rule. The same public policy has been applied to workers compensation structured settlement rights that arise from the federal Longshore and Harbor Workers’ Compensation Act.

Recent Litigation Involving Anti-Assignment Provisions

Two recent cases demonstrate that anti-assignment provisions continue to represent important structured settlement issues.

Cordero v. Transamerica

In Cordero v. Transamerica Annuity Service Corp., n/k/a Wilton Re Annuity Service Annuity Corp., a structured settlement payee who transferred his payment rights subsequently sued both the annuity issuer and owner alleging, among other things, that the annuity contract’s anti-assignment provision imposed a duty on the issuer and owner to determine whether or not a transfer was in the best interest of the payee.

The United States District Court for the Southern District of Florida granted the motion of the annuity issuer and owner to dismiss plaintiff’s first amended complaint, finding that no such duty obtains, but provided leave for the plaintiff to file a second amended complaint. Plaintiff filed a second amended complaint on April 20, 2020 and that case is now on appeal.

In ruling on the first Complaint, the District Court reasoned: 1) the anti-assignment provision exists to protect the annuity issuer and owner; 2) that provision did not require the issuer or owner to exercise discretion for the settlement payee’s benefit; and 3) requiring the annuity issuer and owner to analyze each proposed transfer would create new duties not required under the applicable Settlement Agreement.

White v. Symetra

In a proposed class action, White, Nadeau v. Symetra Assigned Benefits Service Company and Symetra Life Insurance Company, filed in the Western District of Washington at Seattle and involving an anti-assignment provision, Plaintiffs refer to the provision as “power language” and argue it “is a bargained-for safeguard to protect the settlements of vulnerable tort victims.”

Plaintiffs further allege Defendants were “predatory” when they solicited their rights to future payments for several reasons including they “intentionally evaded anti-assignment language in the settlements that prohibited the very transfers at issue here.

Defendants responded with jurisdictional, procedural and claim specific objections all of which were denied by the Court which on August 5, 2021 denied Defendants’ Motion to dismiss and strike the class allegations. The class action remains pending.


Anti-assignment provisions represent a critical component of every structured settlement. IRC 5891, the SSPAs and NSSTA’s Model QA&R provide tax certainty and suggested language for settlement documentation. They do not, however, eliminate all factoring abuses, anti-assignment litigation or structured settlement business issues.

A general understanding of the law of assignments and anti-assignment is important for structured settlement and settlement professionals. Of course, the actual documentation language used in each settlement is also critical. What else can the structured settlement industry do to further enhance anti-assignment provisions and help to protect structured settlement recipients?

Independent Life offers one example. We are the first structured settlement annuity company to provide a Payee Protection Policy. This Policy adds an additional commitment for each of our structured settlement payees to further enhance the anti-assignment protection in their settlement documentation.

Our Payee Protection Policy helps to insure that, when transfer petitions involving our payees are filed with state courts, the professionals who established the original payment plans will be re-engaged and the payees themselves will be better protected against unfair transfers.

Please note: portions of this article are reprinted with the permission of the Publisher of and copyright holder from “Structured Settlements and Periodic Payment Judgments,” co-authored by Daniel Hindert, Joesph Dehner and Patrick Hindert and published by Law Journal Press.