Beyond Structured Settlements

Settlement Planning 2012 Conferences

During the past two months, S2KM attended and reviewed three national conferences that featured settlement planning issues:

• ASNP 2012 Annual Meeting
• Risk Settlement Planning Practicum - see also: Structured Settlements and Settlement Planning
• SSP 2012 Annual Meeting
  • Part 1
  • Part 2

 In addition to many technical and product presentations (identified and/or summarized in the above links), what did attendees learn about fundamental settlement planning issues?  And what fundamental issues still need to be addressed more directly at future conferences before settlement planning becomes a recognized profession?

Definitions - Three conference participants offered definitions for "settlement planning" and/or "settlement planner":

• Joseph Tombs - "Settlement planning is a profession helping recipients of settlement proceeds use those proceeds to achieve post-loss goals and transition successfully to post-settlement financial life. Settlement planners represent a blend of several professionals: part tax lawyer, trial lawyer, special needs lawyer, financial planner, annuity specialist, social worker, and medical case worker."
• Timothy Morbach - "Settlement planning requires due diligence and informed consent. In that context, settlement planning provides a framework within which settlement stakeholders are able to craft case-specific terms and conditions, legal documents, financial instruments, plus related work product, to resolve claims and achieve safe harbor reflecting their respective best interests."
• Patrick Hindert - "The primary difference between special needs planning and settlement planning is that special needs planning includes clients whose disabilities result from many causes including but not limited to personal injury or workers compensation accidents."
• Note - "Rule 1: Terminology" in the SSP Standards of Professional Conduct provides multiple definitions related to settlement planning including the following for "settlement planner": "a representative who provides advice and other services to a person participating in the design, negotiation or implementation of a settlement or satisfaction of judgment for the benefit of a person claiming a legal entitlement to an award of damages or other compensation. A settlement planner may represent a plaintiff, a defendant, an insurer, a guardian ad litem, an heir of a claimant, an attorney or another person participating in the settlement process."

Emergent Profession - Several conference speakers who discussed settlement planning from a structured settlement perspective described settlement planning as a larger and more complex successor business and profession:

• Joseph DiGangi - "Today we find our industry at a crossroad. In order to move forward, our only choice is to build great business models around the planning first approach. Settlement planning represents a needs-based consultative business model based on benefits, not products."
• Joseph Tombs - "Selling structures is easy. Expectations are low. Any primate can run quote software. A fixed annuity is one of the most simple financial products in the world. We are building a new profession that requires constant education and practice standards. Settlement planning increases expectations and potential liabilities. The more we study and practice settlement planning, the more we realize its complexity and understand its challenges."
• Charles Schell - "The Claims Management model benefits the settlement planning industry and Settlement Planners should acknowledge the benefits which include product marketing and continued protection of IRC sections 104(a)(2) and 130. Concurrently, defense brokers should recognize the benefits of collaborating, rather than competing, with Settlement Planners. These benefits include access to and trust of the customer, an awareness of financial needs and family issues plus multi-product financial solutions that feature structured settlements and enhance their sale."
• Jack Meligan - "SSP and its members have been promoting the practice of Settlement Planning as a more comprehensive solution for the financial issues facing personal injury victims and their families, and the profession of Settlement Planning as the next evolutionary step for members of the financial and legal communities that serve these injured Americans."
• Patrick Hindert - "The structured settlement business models that seem "normal" today began with a choice that made sense in the late 1970s and early 1980s. They have survived despite changes impacting the justification for that choice. Settlement planning is an emergent system in which many different elements interact. Settlement planning is producing a new business model that is influencing all of its constituent elements including structured settlements."

Multi-Professional - The professional backgrounds of conference participants provides some indication of an emerging community of professional practice and its collective knowledge base:

• Special Needs Attorneys - Michele Fuller, David Lillisand; Kevin Urbatsch; Rene Reixach; Jason Lazarus; Annette Hines; Linda Brown; Vincent Russo; Michael Amoruso; Harry Margolis.
• Tax attorneys - Robert Wood; Jeremy Babener; David Higgins.
• Miscellaneous attorneys - Professor Carl Pierce; Richard Risk; Daniel Hindert; Patrick Hindert; Karen Meyers; Mark Popolizio; Steve Riley.
• Settlement Trustees - Travis Finchum; Frank Maguire; Christi Fried; Wesley Cosgriff; James Creel.
• Financial and insurance professionals - Jack Meligan; Charles Schell; Joseph Tombs; Joseph DiGangi; Mark Wahlstrom; Mal Deener; Timothy Morbach; John Woolway; Robert Noack; Paul Hansen; Major General James W. Comstock; Anthony Prieto; Robert Birney; Jerry Hulick.
• Medicare Set-Aside Specialist - Douglas Shaw.
• Lien Resolution Specialist - Daniel Alverez.
• Note: none of the conferences featured guardian ad litems, life care planners or damage allocators as speakers.

Unanswered Questions - From S2KM's perspective, future settlement planning conferences need to more directly address the following issues:

• How large is the United States settlement planning market?
• Who comprises (and selects) the settlement planning team?
• What criteria and process (e.g. request for proposal) are appropriate for selecting members of the settlement planning team?
• What professional licenses and certifications are applicable?
• What primary laws and regulations apply to settlement planning?
• What work product does each settlement planning team member provide?
• Who integrates their individual work product into a settlement plan - and how?
• When is a settlement plan appropriate?
• What are the standard components of a settlement plan?
• What are the product suitability and disclosure standards for settlement planning?
• What does a settlement plan cost?
• What other metrics (besides cost) are appropriate for evaluating the success of a settlement plan?
• How are settlement planning team members compensated?
• What alternative compensation methods and/or business models would allow settlement planning to become more efficient and/or reduce costs?
• Once implemented, who has responsibility to monitor and/or amend the settlement plan?
• What are the Defendant’s responsibilities and duties in settlement planning?

For professionals and product providers interested in learning more about settlement planning, see:

• The Society of Settlement Planners (SSP) website.
• The Registry of Settlement Planners (RSP) website
• The structured settlement wiki - settlement planning page

Structured Settlements and Settlement Planning

Selected video presentations from the Risk Settlement Planning Practicum are now posted online including Patrick Hindert's "History of Structured Settlements".  The conference, hosted April 13-14, 2012 by the University of Tulsa College of Law and attended by attorneys and law students, is believed to be the first law school conference about settlement planning.

Additional practicum presenters and topics - with online video links when available:

• Richard Risk - Introduction
• Joseph Tombs - Overview of Settlement Planning
• Professor Carl Pierce - Standards of Professional Conduct
• Jack Meligan - Pitfalls in Settlement Planning
• Jeremy Babener - Taxation in Personal Injury Cases
• Mark Popolizio - How Medicare Impacts Settlement Planning

Hindert, Managing Director of The Settlement Services Group (TSSG), primary author of "Beyond Structured Settlements" and co-author of "Structured Settlements and Periodic Payment Judgments" (S2P2J) provided a 75 minute discussion explaining the historical and evolutionary relationship between structured settlements and settlement planning. The discussion featured  diagrams by Timothy Morbach:

• Traditional Structured Settlement Funding
• Structured Settlement History
• Settlement Planning - with Structured Settlement Funding
• Structured Settlement Transfer

Hindert's discussion:

• Portrayed settlement planning as an emergent system with structured settlements as a core component.
• Highlighted increasing complexity and variations within the structured settlement life cycle.
• Emphasized the concomitant need for compliance and accountability to satisfy changing legislative and regulatory requirements.
• Specifically addressed: qualified settlement funds; special needs trusts; structured settlement transfers; and the ELNY liquidation.

SSP 2012 Annual Meeting - 2

Charles Schell, incoming President of the Society of Settlement Planners (SSP), concluded the SSP 2012 Annual Meeting by communicating his thoughts for improving the settlement planning market and expanding its core structured settlement annuity product. In his remarks, Schell addressed alternative business models and challenged participants in both models to collaborate to improve business standards and practices.

What follows is a summary of Schell's SSP comments.

Alternative business models

"Structure brokers under the traditional Claims Management model have the advantage of access to claims adjusters. However, their single-product sale is frequently dismissed by injury victims and their families for many reasons including low interest rates, lack of liquidity and the defense brokers' ties to the defendant. As a result, many injury victims and their families make uninformed decisions or resent the limited financial options presented at the time of settlement.

"In contrast, injury victims and their families generally welcome Settlement Planners into their homes as trusted advisers because they are recommended by plaintiffs' attorneys. By introducing a menu of insurance and financial products and providers, Settlement Planners promote education and information sharing. They encourage the injury victim and his/her family to actively participate in the planning process. From my personal experience, more information equals more structured settlement annuities because the product is generally right in every case at some level of participation as one asset class.

"The Claims Management model benefits the settlement planning industry and Settlement Planners should acknowledge the benefits which include product marketing and continued protection of IRC sections 104(a)(2) and 130. Concurrently, defense brokers should recognize the benefits of collaborating, rather than competing, with Settlement Planners. These benefits include access to and trust of the customer, an awareness of financial needs and family issues plus multi-product financial solutions that feature structured settlements and enhance their sale.

Business standards and practices

"To grow the structured settlement market, both Settlement Planners and traditional Claim Management structured settlement practitioners must improve their business standards and practices. To do so, we must understand, embrace and promote full disclosure, product suitability standards and written, informed consent. Our disclosure practices should include compensation and conflicts of interest. Our product suitability standards should satisfy a fiduciary and/or "best interest" test. We should insist that our customers understand, and acknowledge their understanding of, our proposed products and settlement plans by signing a written informed consent form.

"Rather than complain about secondary market business practices, primary market stakeholders should take direct actions to improve the secondary market. First, by adopting our own "best interest" or fiduciary suitability standards, the primary structured settlement market can improve settlement planning. The result will be fewer cases that are "over-structured" and subsequently require structured settlement recipients to sell payment rights to obtain needed liquidity.

"Second, we can improve the secondary market by promoting one simple, best practice from the primary market - multiple quotes. Unfortunately, single quote transfers remain a common practice within the structured settlement secondary market resulting in unnecessarily high discount rates. By educating and encouraging judges to require multiple quotes as a necessary condition for meeting the "best interest" test, the primary market can help produce an important and immediate secondary market improvement.

"To summarize: my proposed strategy to improve and grow both the structured settlement and settlement planning markets:

• "Study and improve our business standards and practices.
• "Develop "customer centric" solutions that help injury victims.
• "Build collaborative business models by focusing on shared interests."

Acknowledgement: In addition to serving as SSP's President, Charles Schell is a founding partner of Forge Consulting. Forge is also an owner of The Settlement Service Group (TSSG) for which Patrick Hindert, S2KM's blog author, serves as Managing Director.

For additional S2KM reporting about the Society of Settlement Planners, see the structured settlement wiki.

SSP 2012 Annual Meeting - 1

The French author and poet Victor Hugo has been translated and quoted as saying: "There is nothing more powerful than an idea whose time has come."

Has the time come for "settlement planning" to be recognized as a powerful idea deserving professional study and status in the United States? Recent conferences, including the Society of Settlement Planners (SSP) 2012 Annual Meeting, suggest that settlement planning is becoming both an important profession and an alternative business model for the structured settlement industry.

As a foundation for professional status, SSP has previously developed the Registered Settlement Planner (RSP) Program and adopted Standards of Professional Conduct. The 2012 Annual Meeting, held April 30 - May 1 in Las Vegas, featured presentations by leading settlement planning practitioners and subject matters experts. In addition, several product providers introduced insurance and financial products to complement the traditional structured settlement annuity.

What is settlement planning? Joseph Tombs, a former SSP President and co-founder of the RSP program, defines settlement planning as "... a profession helping recipients of settlement proceeds use those proceeds to achieve post-loss goals and transition successfully to post-settlement financial life."

What is a settlement planner? The SSP Standards of Professional Conduct define "settlement planner" as "... a representative who provides advice and other services to a person participating in the design, negotiation or implementation of a settlement or satisfaction of judgment for the benefit of a person claiming a legal entitlement to an award of damages or other compensation."

SSP conference Keynote Speaker Michael Ellsberg, author of "The Power of Eye Contact" and "The Education of Millionaires", discussed how to "Invest in Your Own Human Capital".

Settlement Planning Practitioners and Subject Matter Experts and Topics:

• 2011 SSP President Jack Meligan - SSP Accomplishments
• 2012 SSP President Charles Schell - SSP Goals
• Joseph DiGangi - Reinventing the Settlement Industry
• Douglas Shaw - Medicare Liens
• Robert Wood - Tax Update
• Jeremy Babener - Settlement Agreements and IRS Challenges
• Karen Meyers - Suitability Standards
• Patrick Hindert - Settlement Planning Business Models
• David Higgins - Litigation Rollover Accounts
• Jason Lazurus - Liability MSAs
• Frank Maguire - Overcoming Stalled Markets
• Mark Wahlstrom - Market Trends and Challenges
• Daniel Hindert - The ELNY Liquidation
• Richard Risk - History of Settlement Planning
• Dan Alverez - Lien Resolution
• Joseph Tombs - The RSP Program

Settlement Planning Product Providers

• Wesley Cosgriff - Secured Futures Trust
• John Woolway - Vantage Investment Partners
• Robert Noack - Aequitas Capital Management
• Christi Fried - Continental Trust Services
• Paul Hansen - Morgan Stanley Smith Barney
• Major General James W. Comstock (ret.) - Alternative Design Insurance Services
• Anthony Prieto - Synergy Settlement Services
• James Creel - First Capital Surety & Trust Co.
• Robert Burney - Integrity Financial, Inc.
• Mal Deener - Symetra Life Insurance Company (on behalf of Berkshire Hathaway Life Insurance and National Indemnity)

In subsequent blog posts, S2KM will review selected SSP conference topics. For S2KM reporting of prior SSP meetings, see the structured settlement wiki.

Alternative Business Models

The future of structured settlements depends upon which of two alternative business models ultimately prevails - the traditional (defense-controlled) claim management model or the emerging (claimant centric) settlement planning model. (Note: see Addendum).

The Claim Management Model

The claim management business model was developed by members of the National Structured Settlement Trade Association (NSSTA), which is hosting its 2012 Annual Meeting this week in Washington, D.C. The claim management model has dominated the United States structured settlement industry since the enactment of the Periodic Payment Settlement Act in 1982. Its general characteristics:

• Defense control resulting from defense funding;
• Defense-approved lists of annuity providers and brokers;
• Proactive case identification and negotiation participation by defendants designed to sell structured settlements;
• De minimus regulation of sales conduct resulting in a lack of:
  • Disclosure - of compensation sharing and/or conflicts of interest;
  • Product suitability standards; and/or
  • Informed written consent by structured settlement recipients.
• Political and case-specific opposition to single claimant 468B qualified settlement funds (QSFs);
• A hostile view of the secondary structured settlement market.

The business justification for the claim management business model for defendants and liability insurers:

• Reduce claim costs by utilizing structured settlements; and
• Protect themselves from future risks by utilizing qualified assignments.

The traditional cost/risk analysis of the claim management model, however, does not adequately consider the impact on defendants of:

• Negotiating and defending damages using structured settlements funded with historically low interest rates;
• The added claim management costs specifically resulting from review of structured settlement-related file documentation;
• Potential accountability and liability resulting from:
  • Increasing legislative and regulatory protection for consumers and investors;
  • Defendant status as deep pocket originators of long-term payment promises with complex life-cycles;
  • Sales activities by defendant employees, attorneys and agents without qualified compliance supervision.

The Settlement Planning Model

As defendants and liability insurers re-think the traditional claim management structured settlement model, they should also investigate (for their own self-interest) an emerging, alternative structured settlement business model - the settlement planning model.

What is settlement planning? Joseph Tombs, a former President of the Society of Settlement Planners (SSP) and co-founder of the Registered Settlement Planner (RSP) program, defines settlement planning as "... a profession helping recipients of settlement proceeds use those proceeds to achieve post-loss goals and transition successfully to post-settlement financial life."

What is a settlement planner? The SSP Standards of Professional Conduct define "settlement planner" as "... a representative who provides advice and other services to a person participating in the design, negotiation or implementation of a settlement or satisfaction of judgment for the benefit of a person claiming a legal entitlement to an award of damages or other compensation."

Although:

• The SSP Standards recognizes that "a settlement planners may represent a plaintiff, a defendant, an insurer, a guardian ad litem, an heir of the claimant, an attorney or another person participating in the settlement services", settlement planning is more "claimant centric" than the claim management model and involves a commensurate reallocation of responsibilities and risks away from defendants and liability insurers.
• Not dependent upon QSFs, the settlement planning model recognizes that QSFs provide important advantages and protections for plaintiffs and defendants.
• Product neutral, the settlement planning model recognizes structured settlement represents a core settlement planning tool that combines relatively low investment and dissipation risks.

The basic characteristics of the settlement planning model and professional, as outlined by Joseph DiGangi at the NSSTA 2009 Winter Meeting:

• Planning orientation
• Solutions before products
• Blended products and services
• Product neutrality
• Disclosure and informed consent
• Professional training and designations
• Comprehensive skill sets and knowledge base

From a claimant centric perspective, the settlement planning process includes five stages:

• Needs assessment
• Design
• Negotiation
• Implementation
• Monitoring

 Multiple professional associations and 2012 conferences are now studying various components and issues related to the settlement planning business model:

• The Academy of Special Needs Planners (ASNP) - S2KM attended and reviewed the ASNP 2012 Annual Meeting.
• Risk Settlement Planning Practicum - Hosted by the University of Tulsa Law School, S2KM reviewed this settlement planning conference whose presenters included Patrick Hindert, S2KM's primary blog author. Hindert spoke about the "History of Structured Settlements" and provided a schematic analysis of the structured settlement business cycle.
• Society of Settlement Planners (SSP) - S2KM will attend and review the SSP 2012 Annual Meeting April 30 - May 1 in Las Vegas. Among the presenters, Hindert will address "Settlement Planning Business Models: the Defense Perspective"

ADDENDUM (April 26, 2012): After reading S2KM's blog post, Charles Schell, President-Elect of SSP, asked the following question (which Schell promised to address at the SSP Annual Meeting): "Is it necessary for one or the other business model to prevail or could each side benefit by recognizing the role of the other?"

For additional information about settlement planning (aka settlement consulting or special needs settlement planning), see the structured settlement wiki.

Risk Settlement Planning Practicum

Sheltered from the violent storms that unleashed dozens of tornadoes across Oklahoma and the plains states on April 13-14, 2012, the University of Tulsa College of Law hosted the Richard B. Risk Jr. Settlement Planning Practicum which organizers believe was the first time any law school has sponsored a settlement planning educational conference.

Risk, a national authority on structured settlement law and one of the founders of the Society of Settlement Planners (SSP), endowed the settlement planning practicum which is expected to become an annual event for attorneys and law students. Risk invited and introduced the practicum presenters in the following speaking order: Joseph Tombs, Patrick Hindert, Mark Popolizio, Jeremy Babener, Jack Meligan and Professor Carl Pierce.

Joseph Tombs

Tombs, a lawyer, certified financial planner and former SSP President who, working with Risk, helped organize the Registered Settlement Planner (RSP) certification program, addressed "Common Issues Attorneys Face When Settling Cases". As part of his presentation, Tombs contrasted settlement planning and financial planning. One primary difference, according to Tombs, is the relative importance in settlement planning of "dissipation risk". Other differentiating factors identified by Tombs include the importance of: government benefits, medical forecasting and special needs legal issues. Tombs discussed structured settlements as a core settlement planning tool that combines relatively low investment and dissipation risks.

Tombs emphasized the multi-professional skill sets settlement planning requires and described settlement planning as an evolving profession stating: "The more we study and practice settlement planning, the more we realize its complexity and understand its challenges." He offered the following definition for settlement planning: "a profession helping recipients of settlement proceeds use those proceeds to achieve post-loss goals and transition successfully to post-settlement financial life."

Patrick Hindert

In his presentation titled "The History of Structured Settlements", Hindert (co-author of "Structured Settlements and Periodic Payment Judgments" and author of S2KM's blog) provided a visual analysis featuring schematic diagrams to explain how structured settlement has evolved from a claim management tool into a core component of the larger and more complex settlement planning profession - and how competing business models have restricted the growth of the structured settlement annuity market.

Hindert stated key structured settlement stakeholders have succumbed to "path dependence" by failing to strategically study and analyze continuing industry changes. Structured settlement business models and practices that once made sense and represented "industry standards", according to Hindert, have survived despite the eclipse of their justification, benefit and/or better alternatives.

Hindert described settlement planning as an "emergent system" and quoted John McWhorter, a linguist at Columbia University, to help explain the significance for structured settlements:

"Emergent systems [settlement planning] are ones in which many different elements interact. The pattern of interaction then produces a new element [settlement planning] that is greater than the sum of the parts, which then exercises a top-down influence on the constituent elements [including structured settlements]."

To improve and grow the structured settlement market, Hindert recommended more detailed and comprehensive study of alternative structured settlement payment models and life cycles within the broader context of settlement planning as an important and necessary first step.

Mark Popolizio

A nationally recognized legal authority in Medicare Secondary Payer (MSP) compliance and a current board member of the National Alliance of Medicare Set-Aside Professionals (NAMSAP), Popolizio addressed how Medicare impacts settlement planning. Starting with an introductory Medicare road map, he next discussed CMS' reimbursement rights for conditional Medicare payments - who is at risk; what is Medicare's recovery amount; how to challenge conditional payments; how to obtain information; CMS' most recently announced policies and payment options; and recent case law developments.

Popolizio also discussed Medicare set-aside arrangements (MSAs), in the context of both workers compensation and liability cases, as CMS' recommended method for protecting Medicare's future interests under the MSP Act. For liability cases, he began by emphasizing why the key issue is not: "Are liability MSAs required?" Instead, Popolizio reviewed two recent CMS memoranda providing informal information about how CMS looks at liability MSAs. Finally, Popolizio offered his own recommendations (a three-step process) for approaching the liability MSA issue and also reviewed recent related case law.

Jeremy Babener

Babener, a rising star among structured settlement legal and tax experts, offered a comprehensive overview of "Taxation in Personal Injury Cases". He began by outlining sources for tax authority, the variables for tax liability and the character of income. Next, he discussed the exclusion for personal injury damages and explained the language of IRC 104(a)(2) before addressing other damages in personal injury cases - past and future medical expenses; punitive damages; and pre and post-judgment interest.

Babener explained the importance of documentation, including the complaint and the settlement agreement, to maximize the exclusion for personal injury damages. He highlighted specific facts that frequently create problems with the IRS and conversely how to encourage the IRS to respect the documents so as to obtain the preferred tax result. Babener concluded by addressing these additional settlement tax considerations: legal expenses; structured settlements; qualified settlement funds; and transfers of structured settlement payment rights.

Jack Meligan

Meligan, a founder and current President of the SSP, discussed "Pitfalls in Settlement Planning and How to Avoid Malpractice"; offered reasons why personal injury claimants and their attorneys need settlement planning advice from a qualified professional or team of professionals; and reviewed an example of a settlement plan. In addition, Meligan:

• Summarized three cases (Grillo; Lyons; and Spencer) to demonstrate why structured settlements need to be considered and risks associated with certain business behavior;
• Cited statistics from American Bar Association studies to underscore the frequency and risk of malpractice cases against personal injury attorneys;
• Spotlighted danger areas for plaintiff attorneys: MSP compliance; deductability of attorney fees; and documentation of confidentiality clauses; and
• Cautioned plaintiff attorneys against failing to retain an independent settlement advisor; or to advise their clients about all settlement options (including the pros and cons of structured settlements); or to completely document their files as proof of their best practices.

Professor Carl Pierce

Professor Pierce is the W. Allen Separk Distinguished Professor of Law and Director of the Howard Baker, Jr. Center for Public Policy at the University of Tennessee. Among his professional activities, Professor Pierce has served as Reporter for the Tennessee Bar Association Standing Committee on Ethics and Professionalism and as Associate Reporter for the American Bar Association Special Commission on Evaluation of the Rules of Professional Conduct. During 2007-2008, Professor Pierce served as Consultant to the Society of Settlement Planners (SSP) and helped review and draft the SSP's Standards of Professional Conduct for Settlement Planners (SSP Standards).

Professor Pierce provided a summary comparative analysis of both the National Structured Settlement Trade Association (NSSTA) Statement of Ethics and Professional Responsibility (NSSTA Code of Ethics) and the SSP Standards. Despite substantial experience working with litigators, Professor Pierce acknowledged surprise by the degree of hostility between some plaintiff and defense structured settlement consultants. Professor Pierce:

• Observed that all law school graduates need some exposure to structured settlements and settlement planning;
• Suggested that the business collaboration models among insurance companies, plaintiff attorneys and settlement planners could look very different in the future; and
• Recommended that representatives of NSSTA and SSP meet to discuss and compare their respective statements of ethics and standards.

Congratulations to Richard Risk, the University of Tulsa College of Law and the guest speakers who participated in the Settlement Planning Practicum. S2KM understands that Tulsa College of Law will publish a video compilation of the practicum speaker presentations on YouTube.

Spring 2012 Conferences

During the next four weeks, S2KM will attend and review three professional educational conferences addressing structured settlement and settlement planning issues:

• Richard B. Risk Jr. Settlement Planning Practicum
• National Structured Settlement Trade Association (NSSTA) Annual Meeting
• Society of Settlement Planners (SSP) Annual Meeting

Risk Practicum

A national authority on structured settlement law, Richard Risk has endowed a series of annual settlement planning "practicums" at his law school alma mater, The University of Tulsa College of Law. Risk believes the 2012 practicum, scheduled for April 13-14, will represent the first time any law school in the country has formally recognized settlement planning as a topic of legal education. Speakers: Joseph Tombs; Patrick Hindert; Mark Popolizio; Jeremy Babener; Jack Meligan; Carl Pierce.

NSSTA Annual Meeting

NSSTA's Annual Meeting, scheduled for April 25-27 in Washington, D.C., will feature a mixed agenda of business and political meetings; NSSTA "Takes the Hill" meetings with Members of Congress and senior Congressional Staffers; plus an educational program headlined by Senator Max Baucus, Congressman Richard Neal, NOLHGA Chairman Thomas Ronce and President Peter Gallanis, Mike Montemurro of the IRS, a Congressional Chiefs of Staff panel, plus various NSSTA leaders and property & casualty insurance representatives.

SSP Annual Meeting

SSP will host its Annual Meeting April 29-May 1 in Las Vegas. The SSP educational program will feature 27 speakers discussing strategies to improve and grow the settlement planning market. Some of the SSP presentation categories:

• Revitalizing and reinventing structured settlements
• New NAIC annuity regulations
• Insurance, investment and administrative options
• Tax developments, strategies and legislative proposals
• Medicare (MSA) and Medicaid (SNT) updates
• What ELNY means for settlement planners

In addition to these three 2012 conferences, S2KM previously attended and reviewed the Academy of Special Needs Planners (ASNP) 2012 Annual Meeting. For S2KM's complete reporting about professional associations whose members participate in structured settlements and settlement planning, see the structured settlement wiki.

New York Liquidation Hearing - 9

Following 11 days of hearings at the Nassau County New York Supreme Court, presiding Judge John M. Galasso is deciding whether to sign an Order of Liquidation and Approval of a Restructuring Agreement for Executive Life of New York (ELNY) as proposed by the Superintendent of the New York State Department of Financial Services (Superintendent), as ELNY's Receiver.

The ELNY hearings have raised a variety of issues not all of which Judge Galasso will be expected or required to address:

• Will Judge Galasso approve the ELNY Liquidation Order and Restructuring Agreement as proposed by the Superintendent? 
• Does Judge Galasso have any other options?
• Why wouldn't Judge Galasso appoint a "Special Master" to consider objections and/or alternatives to the proposed ELNY Restructuring Agreement?
• Would his denial of the proposed Order necessarily result in a "statutory liquidation" under New York law?
• What would a statutory liquidation mean for: 1) ELNY annuity policyholders and payees; 2) NOLHGA and the participating Guaranty Associations (PGAs); 3) New York Governor Andrew Cuomo and Superintendent Benjamin Lawsky; 4) the structured settlement industry?
• Would any of the ELNY structured settlement shortfall payees be better off under a statutory liquidation?

Assuming Judge Galasso does approve the proposed Order:

• Will the Liquidation Order grant legal immunity to the Superintendent, as ELNY Receiver, and his agents, including the New York Liquidation Bureau (NYLB), for their acts and omissions in managing ELNY's Rehabilitation since 1991?
• What is the legal justification for any such grant of immunity?
• Did Judge Galasso commit reversible errors when he denied various motions by attorneys representing ELNY structured settlement payees who expect to experience shortfalls under the proposed Restructuring Agreement?
• Would attorneys for the ELNY shortfall payees appeal the result?
• What would be the basis for their appeal?
• Assuming an appeal bond is required, how much would it cost?
• Assuming the ELNY shortfall payees won an appeal, what would they hope/expect to accomplish with a new hearing?
• Besides an appeal, what other options, if any, exist for ELNY structured settlement shortfall payees?

Additional issues raised, but not definitively resolved, during the ELNY hearing:

• When did ELNY become insolvent?
• Who was responsible for ELNY's insolvency?
• How many of the ELNY structured settlement shortfall annuities are funded with Qualified Assignments as opposed to "Buy and Hold" funding?
• Who are the defendants, liability insurers and/or brokers who purchased or funded ELNY annuities with anticipated shortfalls?
• Which PGAs will contribute to specific ELNY contracts?
• Which life insurance companies have offered to make voluntary contributions and/or enhancements to Guaranty Association Benefits Company (GABC)?
• Why would they contribute anything? And, why won't they contribute more?
• How much additional money would be required to make all ELNY structured settlement payees whole?
• What impact, if any, will the ELNY Liquidation have upon:
  • The structured settlement industry?
  • The existing state insurance regulatory system?
  • The insurance liquidation process in New York?

For additional S2KM reporting about the ELNY liquidation, see the structured settlement wiki.

ASNP 2012 Annual Meeting

The Academy of Special Needs Planners (ASNP) hosted its Sixth Annual Conference March 8-10, 2012 in Memphis, Tennessee. Consistent with its prior conferences, ASNP and Conference Chairperson Michele Fuller provided an exceptional educational experience featuring preeminent speakers, valuable topics, quality handout materials, plus effective interaction with sponsors and exhibitors.

ASNP is one of three national associations of attorneys, the others being the Special Needs Alliance (SNA) and the National Academy of Elder Law Attorneys (NAELA), whose members engage in special needs planning. The primary difference between special needs planning and settlement planning is that special needs planning includes clients whose disabilities result from many causes including but not limited to personal injury or workers compensation accidents.

One of the highlights of the ASNP conference was a special introductory program titled "Basics of Special Needs Planning" presented by Fuller and two other nationally renowned special needs attorneys, Kevin Urbatsch and David Lillesand. This program addressed the core components of special needs planning (including the role of structured settlements), explained public benefits, and discussed the basics of special need trust (SNT) administration.

Structured settlements were also addressed by other ASNP presenters:

• Rene Reixach - During his presentation titled "Impact Litigation", Reixach highlighted continuing litigation whereby state Medicaid agencies are attempting to disqualify SNTs funded with structured settlements arguing the existence of the secondary market makes structured settlement annuities "saleable" and therefore "countable" as an "available resource".
• Eric Skidmore - Skidmore, a Supervisor in the Office of SSI and Representative Payee Policy at the Social Security Administration (SSA), provided a "Social Security Update" during which he reconfirmed an unpublished SSA position supporting what Reixach reported - i.e. the SSA believes the existence of the secondary market renders structured settlement annuities "available resources" that potentially disqualify special needs trusts beneficiaries from receiving Medicaid.
• Jason Lazarus - Speaking about "Liability MSAs", Lazarus reconfirmed the current cost advantages of funding Medicare Set-Aside arrangements (MSAs) with structured settlement annuities as opposed to cash. His presentation included structured settlement case examples that underscored this cost advantage.

One glaring omission that characterizes most national structured settlement and settlement planning conferences is the surprising lack of attention paid to real life problems and issues experienced by persons with disabilities and their families. The 2012 ASNP conference emphasized these real life problems and issues with three valuable presentations:

• Annette Hines and Linda Brown - Hines and Brown, both special needs attorneys whose families include persons with disabilities, spoke about "Transition Planning" - the change in status for disabled persons from behaving as a student to assuming emergent adult roles in the community. Subtopics discussed: a "Day in My Life" from a parents' perspective; myths about special needs planning; transition agencies; disability support systems; selecting trustees and guardians; role of guardians; personal budgets; housing options including Section 8 qualification and the rent vs.buy decisions; plus group home issues including expense sharing.
• Vincent Russo and Michael Amoruso - Russo and Amoruso presented a series of video vignette interviews of families with disabled persons in their discussion titled "Creating the Right Plan for the Right Situation." Each of the interviews originally appeared on the television show "Family Comes First" for which Russo serves as a host. After the ASNP audience watched each interview, Russo and Amoruso asked questions and offered observations to help ASNP conference attendees learn to differentiate individuals and families on the basis of such issues as: independence; information needs and overloads; life visions; and legal capacity. They emphasized the need to make special needs trusts responsive to specific family situations.
• Harry Margolis and Jerry Hulick - Margolis and Hulick discussed a special needs case study from a financial perspective that emphasized the role of life insurance.  Note: although life insurance companies feature prominently in both the special needs and structured settlement markets, there appears to be almost no overlap among agents distributing their products even though both markets focus on disabled individuals and their families.

Another glaring omission to date at national structured settlement and settlement planning conferences has been the lack of educational inquiry about how the Patient Protection and Affordable Care Act [Affordable Care Act (ACA) - aka Health Care Reform] impacts their customers, their products and their traditional business models. The justification for this educational omission may be the uncertainty resulting from the current constitutional review of the ACA by the United States Supreme Court.

Fortunately, the ASNP has not been paralyzed educationally by this constitutional uncertainty. At the ASNP 2011 Annual Meeting, Cynthia Barrett offered her introductory analysis of how Health Care Reform impacts persons with disabilities. At the ASNP 2012 Annual Meeting, David Lillesand discussed how the prohibition against "pre-existing condition" exclusions mandated by the ACA (already in effect in 22 states) impacts special needs legal practice generally and self-settled (first party) special needs trusts specifically.

In summary, based upon his experience in Florida, where the ACA's prohibition against pre-existing exclusions currently exists, Lillesand believes:

• The need for self-settled (first party) special needs trusts has decreased (except when a beneficiary requires long term institutional care) because the ACA provides better insurance options than Medicaid for many persons with pre-existing medical conditions including personal injury victims.
• Existing self-settled (first party) special needs trusts should be reviewed, in the context of the ACA's prohibition against pre-existing condition exclusions and available medical insurance options, and in many cases terminated.
• Damages for future medical costs in personal injury lawsuits could be reduced assuming the premium costs of newly available insurance premiums become admissible in proving and/or defending damages.

Apropos to transition planning for persons with disabilities and terminating special needs trusts, Travis Finchum, Fuller and Urbatsch spoke about "Trust Transitions" - what to do when your bank trustee doesn't want you anymore or you don't want them? Their subtopics included: "the dark side of pooled trusts"; security of funds managed by individual trustees and pooled trusts; trust protectors; questions to ask potential private professional trustees; fiduciary certification and standards; plus discussion and analysis of trust provisions and revision issues.

To help ASNP attendees improve their legal practice, Steve Riley addressed "Key Strategies for Growing Your Practice and One Sure Fire Way to Kill It". The killer, according to Riley: "Inertia - which is easy; but change is hard" - which is also a good lesson for structured settlement and settlement planning stakeholders.

Congratulations to Chairperson Michele Fuller, the speakers and exhibitors for another outstanding ASNP educational conference. For S2KM's reporting about prior ASNP educational conferences, see the structured settlement wiki.

S2P2J Release 51

Publisher Law Journal Press anticipates an April 2012 distribution date for hardcopy supplements for Release 51 of "Structured Settlements and Periodic Payment Judgments" (S2P2J). Online S2P2J will also be updated April 2012 to include Release 51 materials. First published in 1986, S2P2J is co-authored and updated semi-annually by Daniel W. Hindert, Joseph J. Dehner and Patrick J. Hindert. Both the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP) utilize S2P2J as an educational resource for their certification programs.

Release 51 Highlights

Release 51 for "Structured Settlements and Periodic Payment Judgments" features a comprehensive Executive Life update including expanded and updated coverage for the Executive Life of New York (ELNY) liquidation proceedings now in progress. In related reporting, Release 51 also:

• Expands and updates prior reporting for life insurance insolvency procedures and state guaranty association laws;
• Offers advice to plaintiff attorneys about how to address the risk of non-payment by annuity providers; and
• Summarizes recent case developments impacting Aurora, the successor company to Executive Life Insurance Company of California (ELIC),

Release 51 also updates Medicare Secondary Payer (MSP) developments and conditional Medicare payment requirements. Contributing author Peter H. Wayne IV provides current analysis and advice about Medicare Set-Aside (MSA) arrangements in liability cases discussing new and related case law, new CMS pronouncements and new CMS field office guidance with practice tips for structured settlement and settlement planning consultants, attorneys and claim supervisors.

Release 51 expands existing coverage of structured settlement business standards and practices including analysis of the following legislation impacting settlement planners:

• The NAIC Suitability in Annuity Transactions Model Regulation;
• The NAIC Annuity Disclosure Model Regulation;
• Dodd-Frank's impact on fiduciary and suitability standards; and
• The Uniform Prudent Investor Act.

Other topics addressed in Release 51:

• Structured settlement metrics for defendants and liability insurers.
• The Treasury's final regulations for IRC section 104(a)(2) incorporating amendments resulting from the Small Business Job Protection Act of 1996.
• The new IRS Lawsuits, Awards and Settlements Audit Techniques Guide.

"Structured Settlements and Periodic Payment Judgments" is now available in both hardcopy and online versions. For summaries of prior Release Highlights, see the structured settlement wiki.