Responsibilities of Plaintiff Counsel in Structured Settlements
As the Mraz case demonstrates, even the most successful and sophisticated trial attorneys aren’t always familiar enough with structured settlement and settlement planning to identify and achieve a “best interest” result for their client. Similarly, the Grillo case points out the potential legal liability for plaintiff attorneys who do not advise their clients about structured settlements.
And yet, despite the growing importance and complexity of structured settlements in the context of personal injury settlement planning, AAJ CLE programs focus almost entirely on litigation-related topics with no support or resources for settlement planning or structured settlements.
Lump Sum vs. Periodic Payment
The expertise of most personal injury attorneys focuses on obtaining the largest possible amount of compensation for their client(s). Personal injury settlement planning and negotiation require different subject matter expertise than personal injury litigation.
The format of a lump sum settlement or judgment is generally uncomplicated – even if it may require special expertise to address the issues of subrogation rights, liens, taxes, allocations among multiple plaintiffs and other factors that exist regardless of the form of settlement. Personal injury attorneys therefore generally know how to draft a release that conforms to state law and obtains a one-time amount agreed to be owed to their clients.
Periodic Payments are different. Although structured settlements offer benefits not available from lump sums, they can also complicate the client’s decision making and expand a plaintiff attorney’s potential responsibilities. With structured settlements, a plaintiff attorney must address a variety of “post-settlement” issues in giving proper advice to a settling claimant, either directly or by involving or referring the claimant to other professionals.
ABA Model Rules
Although some trial attorneys may argue otherwise, the ABA Model Rules of Professional Conduct (ABA Model Rules) make it difficult for to avoid his or her obligation to advise plaintiffs about structured settlements.
- Rule 1.2: Attorneys are to “abide by the client’s decisions concerning the objectives of the representation” and to “consult with the client as to the means by which they are to be pursued.”
- Rule 1.4(a)(2): Attorneys must “reasonably consult with the client about the means by which the client’s objectives are to be accomplished.”
- Rule 1.4(b): Attorneys must “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.”
- Rule 1.3: Attorneys must be diligent regarding matters that can be adversely affected by the passage of time, a subject inevitably present in any structured settlement.
- Comment to Rule 1.16: Ordinarily, a representation in a matter is completed when the agreed-upon assistance has been concluded.
Historically, many plaintiffs’ attorneys have relied exclusively on defendants and their advisors to make structured settlement proposals and to provide expertise regarding structured settlements. This practice is in dire need of modernization – by engaging their own structured settlement consultants early in the process, plaintiff attorneys equip themselves and their client(s) with knowledge and negotiation power.
Requests for Proposals
In a paper delivered at the Society of Settlement Planners (SSP) 2008 Annual Meeting, Frank Johns, a leading special needs attorney, recommended that plaintiff attorneys, special needs attorneys and 468B Fund administrators develop their own Request for Proposal (RFP) for structured settlement consultants designed to protect structured settlement recipients.
Johns recommended that proposals from prospective consultants should offer specific services (which he identifies) and that the RFP include specific declarations affirming:
- duties of loyalty, competence and confidentiality to the plaintiff;
- the consultant’s independence from any defendants/insurers related to the case;
- that he/she is not an “in-house” broker;
- will fully disclose, in advance, all costs, commissions, expenses and any commission-sharing;
- has access to, and will only offer, highly-rated, cost-competitive products.
Personal injury settlement planning, within which structured settlements play an important role, has become an increasingly complex and specialized field. A broad range of professionals provides settlement planning related services to plaintiffs and their attorneys. These professionals include structured settlements consultants, life care planners, economists, tax attorneys, special needs attorneys, Medicare set-aside professionals, IRC Section 468B counsel, financial planners, registered investment advisors and other financial professionals.
Regardless of case complexity, however, plaintiff attorneys generally retain the following essential settlement planning roles:
- Recognizing settlement planning issues which impact their clients;
- Recommending appropriate settlement planning professional resources to their clients; and
- Retaining ultimate responsibility for effectuating settlements.
For more detailed analysis of the role and responsibilities of plaintiff counsel in structured settlements , see “Structured Settlements and Periodic Payment Judgments” published by Law Journal Press.