Periodic Payment Judgments Release 69

Because settlements represent voluntary agreements, neither plaintiffs nor defendants can be forced to participate in a structured settlement. Structured settlements initially were promoted exclusively by defendants and their insurers as a claim management tool. For many years, plaintiff and their attorneys lacked equivalent resources.

Today, however, many plaintiffs and their attorneys insist they should be: 1) represented by their own structured settlement advisors; and 2) able to select whichever annuity providers will be funding their structured settlements.

The logic of this argument has resulted in both the development of plaintiff structured settlement consultants who share commissions with defense consultants and an increasing shifting of control on structured settlement issues from the defense side to the plaintiff side in personal injury negotiations.

As one result of this historic shift in negotiation control, the role and responsibility of plaintiff attorneys in structured settlements has gained increasing importance and even more complexity as structured settlements has transitioned into the more complex profession of personal injury settlement planning.

Chapter 5 Update

Release 69 of “Structured Settlements and Periodic Payment Judgments” offers plaintiff attorneys a substantial update of current Chapter 5, titled “Role and Responsibility of Plaintiff Counsel in Structured Settlements.”

Written by attorney and guest author Ronald Walters, Jr., updated Chapter 5 provides valuable advice about the application of the ABA Model Rules of Professional Conduct to structured settlement issues as well as extensive discussion of the Grillo case, Professor Stephen Saltzburg’s 2006 Opinion letter and expanded analysis of deferred attorney fee compensation including both tax considerations and new products.

Among the conclusions:

  • Failing to retain a structured settlement or settlement planning professional to review defense proposals, independently check rated ages, review the financial security of the companies or plans being proposed by defendants could rise to the level of legal malpractice.
  • Failure to properly retain such a consultant to review the defense’s proposals could even be viewed as falling outside of an attorney’s malpractice insurance as it pertains to the sale of an insurance product.
  • Plaintiff attorneys are well-advised (if not ethically bound) to retain the expertise of an attorney whose expertise includes special needs trusts and Medicaid eligibility.

Additional Release 69 Highlights

  1. Agent Compensation – The standard structured settlement compensation for consultants in the U.S. market historically has been a four (4% ) per cent commission based upon the amount of premium for a specific life insurance annuity. A new subsection in Chapter 1 under “Industry Standards,” discusses “duration-based compensation” which one of NSSTA’s nine annuity providers introduced to the market in 2020 thereby challenging and potentially transforming the prevailing industry standard.
  2. Economic Benefit and Constructive Receipt – Chapter 2 (“Taxation of Damages”) includes expanded discussion of “economic benefit” and “constructive receipt”. The economic benefit doctrine has evolved subsequent to the publishing of Sproull v. Commissioner in 1951. Currently, the Federal courts more frequently apply Reed v. Commissioner, a 1983 First Circuit Case, which Release 69 summarizes in detail. The book’s analysis of constructive receipt now also includes more detailed summaries of multiple relevant revenue rulings and private letter rulings.
  3. Low Interest Rates – The settlement planning market has become increasingly competitive and traditional structured settlement annuities must now compete with a variety of financial products in a low interest rate economy plus additional structured settlement products which appear to meet the IRC 130 “fixed and determinable” requirement. A new subsection considers how low interest rates have impacted the structured settlement market as well as the marketing of the product itself.
  4. Capital Maintenance Agreements – Among several suggested alternatives for securing a structured settlement transaction, Release 69 adds “Capital Maintenance Agreements.” A Capital Maintenance Agreement (CMA) is a method by which one company (e.g. a parent holding company) enhances the financial strength of another company (generally a corporate affiliate) by agreeing to maintain a minimum level of capital within the second company. A CMA was the focus of a 2018 structured settlement class action settlement involving Aviva and Athene for which the book also provides a detailed discussion.

Industry Resource

Since it was first published in 1986, “Structured Settlements and Periodic Payment Judgments” , has provided structured settlement stakeholders with an authoritative reference guide, consisting of 16 chapters with extensive footnotes and Appendix documents, to help them understand historical development as well as current issues and fashion settlements and judgments utilizing periodic payments.

Both the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP) have utilized S2P2J as an educational resource for their certification programs.

Co-authored and updated semi-annually by Daniel W. HindertJoseph J. Dehner and Patrick J. Hindert, S2P2J features an online version as well as the traditional hard copy. Online S2P2J includes a search feature and download capability as well as link features to access individual book sections, appendices, footnotes, cases and statutes.

Next month, publisher Law Journal Press will distribute hard copy supplements of Release 69 with online subscribers receiving their update simultaneously with no additional subscription charge.