Beyond Structured Settlements

Unauthorized Practice of Law - 1

Mark Wahlstrom has written a blog post titled "Structured settlement brokers drafting settlement documents. Are you guys nuts?" that highlights an important and controversial industry issue.

Mark's question: does a routine structured settlement business practice (life insurance agents drafting personal injury settlement documents) represent the unauthorized practice of law?

Mark, a life insurance agent and structured settlement commentator, answers yes: 

• Current structured settlement business practices promote the unauthorized practice of law including non-lawyers drafting structured settlement legal documents. 

• Some structured settlement intermediaries (aka "brokers" or "agents") regularly provide such legal services without appropriate licenses or qualifications for:
  • Plaintiff attorneys;
  • Liability insurers;
  • Defense attorneys.

Mark's blog post:

• Describes how some liability insurer claim managers pressure structured settlement brokers to provide unauthorized legal services;
• Does not address this corollary question: do these same structured settlement legal practices also represent malpractice by plaintiff and defense attorneys?

For additional information about structured settlements and the unauthorized practice of law, see:

• Related S2KM blog posts:
  • NSSTA - NSSTA's 2007 Fall Meeting featured an educational program for NSSTA members about structured settlement documentation (subtitled: "an analysis of the legal and practical issues and problems") without any discussion concerning the unauthorized practice of law by life insurance agents and their employees.
  • AAJ - This author believes the American Association for Justice (plaintiff attorneys) has been negligent for not providing its members with updated education about:
    • Structured settlement laws and legal issues;
    • Related professional responsibilities and potential liabilities.
• ASNP - This author also believes structured settlement recipients will benefit if and when special needs attorneys expand their professional knowledge to address structured settlement legal issues including the proper drafting of personal injury settlement documents.
• Related S2KM wikis:
  • Structured Settlement Law - part of S2KM's coverage of the Academy of Special Needs Planners (ASNP) 2007 Annual Meeting;
  • Structured Settlement Resources - part of S2KM's 2007 presentation to the National Association of Settlement Purchasers (NASP).
• Related hardcopy resources - "Structured Settlements and Periodic Payment Judgments" including separate chapters for plaintiff and defense attorneys as well as updated information about structured settlements and:
  • The secondary annuity market - including IRC section 5891 and the state structured settlement protection statutes;
  • Government benefits and structured settlements - including the Medicare Secondary Payor statute; special needs trusts; and the Deficit Reduction Act of 2005.
• John Darer's defense and explanation of traditional structured settlement business practices related to the unauthorized practice of law titled: "Nuts, Protein, Cholesterol, Fiber and your Settlement Documents." 

Postscript - October 30, 2007

This post was originally published Sunday evening October 28, 2007.  Additional edits were added Monday morning October 29, 2007. The original post appeared unedited for approximately eight hours Sunday night. S2KM's edits included changing S2KM’s interpretation of John Darer’s October 27, 2007 blog post titled “Nuts..Protein, Cholesterol, Fiber and Your Settlement Documents”.  S2KM’s original post characterized John’s post as promoting and condoning current structured settlement business practices.   S2KM’s edited post (above) substitutes the words “defense and explanation”.  Both the original and final versions include links to John Darer’s blog post and recommend that readers of S2KM's blog review Mark Wahlstrom's original post as well as John Darer's post.  

AAJ 2007 Annual Convention - 3

Today is the final day of the American Association for Justice (AAJ) 2007 Annual Conference. This blog post supplements two prior S2KM blog posts about the AAJ conference:

• AAJ-1: which highlights the need to improve structured settlement education for AAJ members;
• AAJ-2: which identifies structured settlement companies and associations that participated at the AAJ conference as exhibitors, advertisers or sponsors.

The purpose of this third and final S2KM post about the 2007 Annual AAJ conference is to summarize without personal attribution:

• Private comments by individual structured settlement stakeholders who exhibited at the AAJ conference about selected industry issues; and
• Handout materials from exhibiting stakeholders related to these same structured settlement industry issues.

AAJ's Structured Settlement Role

• Several AAJ exhibitors identified "plaintiff attorneys' lack of structured settlement knowledge" as a strategic industry issue and AAJ priority.  As one exhibitor stated: "we must retrain plaintiff attorneys to correct the misinformation defense brokers have been communicating for the past 25 years."   
• Other exhibitors urged AAJ to proactively support and advance a pro-plaintiff structured settlement public policy including: 
  
  • A plaintiff "Bill of Rights" for structured settlements beginning with the right of every plaintiff to his own structured settlement advisor; as well as   
    
  • AAJ political support for single claimant 468B funds.

Structured Settlement Business Practices

• The most common complaints from consultants who exhibited at the AAJ conference about structured settlement business practices included:
  • Commission rebating;   
    
  • Defendants' "approved lists" of annuity providers;
  • Settlement documentation providing a full release for defense consultants who receive annuity commissions.   
    
• Although many of the exhibiting structured settlement consultants favored compensation disclosure, only one consultant interviewed by this author at the AAJ conference recommended written informed consent by plaintiffs of structured settlement compensation arrangements.
• Several consultants criticized structured settlement annuity providers who refuse to accept premiums from single claimant 468B funds - a business practice they characterized as a "conflict of interest" as well as a "fabricated political issue".  According to one consultant, "the threat of single claimant 468B funds is the primary reason defense brokers have organized the Broker Relationship Initiative."
  
• Another consultant highlighted the need for an "unbiased product perspective." He characterized as a "conflict of interest" those "settlement planners" who sell structured settlement annuities but are not licensed or trained to sell other financial products.  According to this consultant, "the greatest threat to structured settlements is the industry's failure to adapt to change."
  

The Structured Settlement Secondary Market

• Despite frequent references to IRC sections 104(a)(2), 130 and 468B, not a single handout from any structured settlement consultant or annuity provider at the AAJ conference mentioned IRC section 5891 - which includes the federal income tax definition for "structured settlement"

• This omission is consistent with the educational programs of the National Structured Settlement Trade Association (NSSTA)and the Society of Settlement Planners (SSP)- neither of which has provided its general membership with any educational programs about the statutory language of IRC 5891(enacted in 2002) or the 46 state structured settlement protection statutes.
• Several of the exhibiting consultants said they never voluntarily or proactively discuss structured settlement factoring laws, issues or options with plaintiffs or plaintiff attorneys.
• Addendum (added July 22, 2007): Follow-up factoring questions this author should have asked AAJ structured settlement exhibitors:
  
  • What about existing structured settlement recipients?
  • How many structured settlement stakeholders, besides factoring companies, have informed these recipients (clients, customers) about the enactment of IRC section 5891 and their options under relevant state structured settlement protection statutes?
  • How have IRC section 5891 and state structured settlement protection statutes changed structured settlement public policy?
  • Does a "conspiracy of silence" exist within the primary structured settlement market - relating specifically to current and prospective structured settlement recipients, IRC section 5891 and the state structured settlement protection statutes?
  • If yes:
    • Does the conspiracy (failure to communicate with clients and customers about factoring legislation) represent a good business practice and structured settlement industry strategy?
  • How does this business practice and industry strategy positively impact the future of structured settlements?

The AAJ 2008 Winter Convention will take place January 26-28 at the El Conquistador Resort in San Juan, Puerto Rico.

AAJ 2007 Annual Convention - 2

A prior S2KM blog post (AAJ 2007 Annual Convention - 1) criticizes the American Association for Justice (AAJ) for failing to provide any structured settlement educational programs during 2007 despite:

• The importance of structured settlements for personal injury victims;
• The general lack of knowledge and professional competence of AAJ members concerning structured settlement laws and legal issues;
• The significant legal changes impacting structured settlements that have occurred since 2001;
• The prominent role of structured settlement companies as AAJ exhibitors, advertisers and sponsors.

Here are the companies and associations AAJ identifies as exhibitors, advertisers or sponsors in the AAJ 2007 Annual Convention Program Book that participate (directly or through an affiliate) in the primary or secondary structured settlement markets:

Structured Settlement Consultants

• Creative Capital
• EnterpriZ Economic Consulting
• EPS Settlements Group
• Ferlisi Jolley Associates
• Forge Consulting
• High Impact Structures
• Lesti Structured Settlements
• Millenium Settlements
• Pressman Settlements Corporation
• Ringler Associates
• Robert W. Johnson & Associates
• Society of Settlement Planners
• The Center for Special Needs Trust Administration
• The Garretson Firm Resolution Center
• The Halpern Group
• The James Street Group
  

Structured Settlement Annuity Providers

• Aviva
• MetLife
• The Hartford
  

Structured Settlement Factoring Companies

• Bentzen Funding Solutions
• J.G. Wentworth
• LawCash
• Oasis Legal Finance
  
• Peachtree Settlement Funding
• Strategic Capital

Addendum (added July 18, 2007) - Who is missing from the above list of structured settlement advisors and stakeholders?  Which additional settlement planning product and service providers (or provider associations) should be exhibiting at AAJ meetings? 

• Trust companies
• Special needs attorneys
• Medicare set-aside professionals
• Life care planners - Beacon, a regular AAJ exhibitor, is a notable exception within this category.

AAJ 2007 Winter Meeting

The American Association for Justice (AAJ) hosted its 2007 Winter Conference in Miami Beach February 10-13. Here are the highlights from a structured settlement perspective:

Affinity Programs

• Affinity programs represent controversial developments within the structured settlement industry. See, for example, this analysis on the Society of Settlement Planners (SSP) website titled: "Issues Trial Lawyer Associations May Consider When Contemplating a Structured Settlement Affinity Program".  The SSP analysis challenges affinity programs organized by trial lawyer associations based upon consumer protection and public policy concerns.

• What is an "affinity program"? For the structured settlement industry, affinity programs constitute exclusive business relationships where product and service providers pay money or share commissions with organizations in exchange for case referrals and/or other marketing advantages.

• On the defense side, affinity programs include:

• Exclusive (and exclusionary) relationships among structured settlement brokers, defendants, liability insurers; and/or reinsurers whose affiliates may include: annuity providers; assignment companies; factoring companies; and trust companies.

• Lawsuits such as Macomber v. Travelers and Spencer v. Hartford attack these types of defendant affinity programs.

• On the plaintiff side, affinity programs include exclusive (and exclusionary) relationships among product and service providers, AAJ, the National Association of Trial Lawyer Executives (NATLE) and state trial attorney associations. These product providers may include: structured settlement brokers and settlement transfer (factoring) companies.

• At the AAJ Conference in Miami Beach, the following affinity program developments were reported:

• Primary market: representatives of Forge Consulting and the Halpren Group , two leading AAJ sponsors, confirmed:

• No "affinity programs" exist between individual structured settlement companies and AAJ; and

• Such "affinity programs", according to these spokespersons, are unlikely to develop.

• This does not prevent structured settlement companies from exhibiting at AAJ meetings or sponsoring AAJ events.
• AAJ, however, does not currently designate specific structured settlement companies or settlement transfer (factoring) companies and grant them exclusive endorsements.

• Secondary Market - Unlike AAJ, it appears that NATLE does enter into affinity programs including a new program with Strategic Capital, a factoring company based in Toronto.
  
  • This factoring affinity relationship was confirmed by a Strategic Capital sales executive during the AAJ meeting in Miami Beach.
  • According to this Strategic Capital sales executive, the NATLE factoring affinity program is still being developed and will include recommended best business practices for factoring companies.

Educational Programs

• Content - The AAJ 2007 Winter Conference omitted any educational programs related to: structured settlements; settlement planning; settlement trusts including special needs trusts, Medicare set-aside trusts, or 468B trusts; settlement transfers (factoring); Medicaid; Medicare; the Deficit Reduction Act of 2005; or the impact of the ABA Model Rules of Professional Conduct upon plaintiff attorneys specific to structured settlements.
• Competency - AAJ's continuing educational neglect of structured settlement and settlement transfer issues  raises serious questions about whether plaintiff attorneys, in general, are competent to identify and address increasingly complex settlement planning and special needs planning issues. If not, from whom should claimants (and plaintiff attorneys) obtain such professional advice?  Should a claimant be expected to pay additional professional fees for settlement planning advice and expertise?  Or should these professional fees be deducted from the plaintiff attorney's compensation?

Product Developments

• The Halpren Group introduced a new settlement planning product at the 2007 AAJ Winter Regional.The new product is a patent-protected settlement trust investment program that allegedly forces "liquidations when the investment value exceeds a target amount" and forces "additional investment when the investment falls below the target amount".
• The Halpren Group, which has historically refused to join and/or participate in structured settlement trade associations such as NSSTA and SSP, advocates and offers non-annuity "Exempt Structured Settlements" including settlement trusts funded with governmental obligations.
• The Halpren Group markets directly to plaintiff attorneys and for many years has sponsored  AAJ programs and events.

• At the 2006 AAJ Winter Conference, Rich Halpren debated then SSP President Paul Lesti about the relative advantages of trusts vs. annuities.
• At that same AAJ meeting, Halpren introduced and distributed to AAJ members the now-famous Saltzburg and Chemerinsky legal memoranda.  These memoranda challenge plaintiff attorneys to investigate structured settlement compensation arrangements, educate their clients and obtain their clients "informed consent" for any such compensation arrangements.

Exhibitors

Every year, an increasing number of structured settlement stakeholders exhibit at AAJ meetings.

Structured settlement companies which exhibited at the 2007 AAJ Winter Conference included:

• Forge Consulting;

• The Halpren Group;

• Creative Capital;

• Ferlisi Jolley Associates;

• Lesti Structured Settlements;

• Mass Mutual Structured Settlements;

• Millennium Settlements;

• Robert Johnson & Associates; and

• Strategic Capital.

For a prior S2KM blog post about AAJ (formerly ATLA), see the "ATLA 2006 Annual Meeting".

Postscript 2/15/2007: John Darer has written a blog post which mischaracterizes this post in a selective and careless manner.  John takes issue with my including (above) Strategic Capital among the "structured settlement companies" that exhibited at the AAJ 2007 Meeting.  John believes structured settlement transfer (aka factoring) companies should not be permitted to call themselves structured settlement companies.  I disagree with John's analysis and conclusions about structured settlements and factoring. 

My purpose here is to point out:

• My listing above of Strategic Capital as a "structured settlement" exhibitor is what appears in the official AAJ Conference Program;
• John failed to reference this post's earlier characterization (above) of Settlement Capital as a "factoring company" within the "secondary structured settlement market".   
• During a subsequent telephone conversation with John, I communicated these observations.
• John and I agreed we disagree about the value and role of factoring in structured settlements, settlement planning and special needs planning.

ATLA 2006 Annual Meeting

ATLA (the “Association of Trial Lawyers of America”) held its 2006 Annual Meeting in Seattle from July 15-20. The most important result: ATLA members voted to change the organization’s name to the “American Association for Justice” (AAJ or A2J?).

As explained in a written communication to attendees signed by 17 former ATLA presidents: “Our current name – the Association of Trial Lawyers of America – is all about us. It describes who we are. In contrast, our ….new name – the American Association for Justice – is about what we do. And what we do is fight for justice – for our clients and all Americans each and every day".

The featured A2J speakers included James Carville, John Edwards and Eliot Spitzer.

From a structured settlement and settlement planning perspective, the most important A2J speakers were:

• William Dussault – “Ethical Considerations in the Use and Implementation of Structured Settlements”.

• Matthew Garretson – “What You Must Know About Medicare’s Growing Role in Catastrophic Personal Injury Cases”.

• Robert DeRose and Deborah Kohl – “Social Security Issues in Workers Compensation Cases”.

Approximately 300 companies exhibited at the A2J Annual Meeting at a minimum cost of $2600 per exhibitor. Many of these exhibitors also contribute to ATLA programs as sponsors and advertisers. Exhibitors of interest to the structured settlement and settlement planning industries included:

• Annuity Providers – Mass Mutual; MET Life; John Hancock.

• Structured settlement producers – Creative Capital, Enterpriz Economic Consulting, EPS Settlements, High Impact Litigation, Innovative Settlements, Lesti Structured Settlements, Mass Tort Settlement Services, Millenium, Forge, Ringler Associates, Robert Johnson & Associates, Settlement Services Group, SSP.

• Trust producers – Rich Halpern & Associates; the Settlement Services Group.

• Banks (offering special needs trusts) – Wells Fargo, US Bank.

• Litigation Financing (non-recourse) – American Asset Finance, Fast Funds, LawCash, LawFinance Group, Law Max, Lawstreet Capital, Peachtree Funding and Plaintiff Support Services.

• Non-bank recourse lenders – Advocate Capital and Counsel Financial.

• Economists – Enterpriz Consulting and Robert Johnson & Associates.

• Life Care Planners – Beacon Rehabilitation Services

• Medicare and Medicaid lien adjustors – Settlement Services Group

• Trade Associations – Society of Settlement Planners (SSP)

• Technology companies – many: including Structure Online and translation.net.

• Factoring companies – Wentworth and Strategic Capital.

Obviously these and other companies now recognize one truism about the Future of Structured Settlements: plaintiff attorneys are the primary “purchasers” and/or “deciders” for numerous financial and insurance products.

By comparison, with only a few exceptions, ATLA (now A2J or AAJ) has done a regrettably poor job in educating its members about important, developing issues related to these same exhibitors, sponsors and advertisers – and to the emerging industries they represent including:

• Structured settlements;
• Settlement planning;
• Settlement trusts;
• Settlement transfers (aka factoring);
• Legal finance.

As a separate comment (and criticism) about A2J’s educational program in Seattle: except for Ringler Radio’s mobile podcast recording studio, the conference was completely devoid of any evidence or education about Web 2.0 for Lawyers.  By comparison, and simultaneous with the ATLA meeting in downtown Seattle, Edward Tufte spoke to consecutive one day sell-out audiences (500 persons at $360 per person) about the topic of “envisioning information” - an important Web 2.0 core competency.