Joint overlapping educational conferences hosted by the Society of Settlement Planners (SSP) and the Academy of Special Needs Planners (ASNP) March 9-12, 2016 in Tucson, Arizona provided S2KM and other attendees an opportunity to evaluate the current status of structured settlements within the larger, more complex personal injury settlement planning market. The SSP conference also transferred association leadership from Neil Johnson to Joe Tombs with Tombs promising to maintain Johnson's leadership direction and to "pull SSP back completely from structured settlement politics."
Among S2KM's conference conclusions: Many personal injury settlement planners characterize structured settlements as a strategic product, and recognize new marketing opportunities for structured settlements resulting from recent legislation such as the Affordable Care Act and the ABLE Act . The traditional and collective structured settlement industry should similarly embrace an important opportunity to grow its premium volume in this larger, more complex, more dynamic market than it has in the past by more effectively:
- Analyzing the evolving personal injury settlement and special needs planning markets;
- Addressing concerns and issues about structured settlements identified by plaintiff and special needs attorneys; and
- Re-positioning structured settlements from a single product sale to the core component of an integrated settlement solution.
SSP TOPICS AND SPEAKERS
- Introduction - Neil Johnson
- Comprehensive Settlement Planning - Joe Tombs; Charly Schell; Joe DiGangi; Tim Denehy
- Rules that Apply to Insurance Brokers - David Childers; Jeremy Babener
- The Grillo Case - Craig and Josephine (Grillo) Sullivan
- The Mraz Case - Mark Wilson and Patrick Hindert
- Sudden Money - John Darer
- Alternative Products - Martha Hunt; John Arendt; James Creel; Chris Shumate; Michael Upchurch; Rick Miller.
- Medicare Compliance, Entitlement Planning and Lien Resolution Issues - Anthony Prieto
- Joint ASNP/SSP Session - Structured Settlements and Special Needs Trusts - Frank Johns; Joe Tombs; Jack Meligan.
- ELNY and Factoring Industry Lawsuits - Edward Stone
- Small Business Legal Strategies - Paul Valentine
- Missed Tax Opportunities at Settlement - Jeremy Babener
- Foreign Assignment Companies - Jeremy Babener
- NSSTA's Survey of Plaintiff Attorneys - Patrick Hindert
- SSP President's Statement - Joe Tombs
ASNP TOPICS AND SPEAKERS
- ABCs of Public Benefits - David Lillesand
- ABCs of Special Needs and Settlement Planning - Kevin Urbatsch and Michele Fuller
- Keynote: "Raising Special Kids" - Maureen Beyers & Michael Farrell
- SSI Update - David Lillesand
- SNTs and Retirement Benefits - Melanie Marmion
- Recent Trends in Special Needs Planning - Blaine Brockman
- Joint ASNP/SSP Session - Structured Settlements and Special Needs Trusts - Frank Johns; Joe Tombs; Jack Meligan.
- "Tricky Issues" in SNT Administration - Travis Finchum; Herb Thomas and Daniel Cutter.
- Ask the Experts Panel - Kevin Urbatsch (Moderator)
DISCLAIMERS: Because of overlapping conference schedules, S2KM was able to attend only three ASNP presentations but did receive and has reviewed all ASNP conference handouts. S2KM's Managing Director, Patrick Hindert, testified as an expert witness in the Mraz case concerning structured settlement and QSF issues on behalf of Adriana and Addison Mraz.
S2KM COMMENTS AND RECOMMENDATIONS
- In his closing message as SSP President, Neil Johnson continued to emphasize several positive themes including industry unification and increasing collaboration between SSP and NSSTA. Among Johnson's proposed solutions for industry unity: 1) recognizing and accepting product diversity; 2) focusing on client and customer service; 3) identifying and pursuing permanent shared interests without necessarily agreeing on all issues; 4) engaging all perspectives to discuss industry problems and issues; 5) improving relationships among stakeholder groups; 6) promoting and practicing settlement planning not settlement selling.
- Newly elected SSP President Joe Tombs promised to "maintain the direction of Neil Johnson's leadership and even accelerate it in every way possible." He identified the following "main themes" for SSP going forward: "to pull completely back from structured settlement “politics”, redouble our efforts at educating our members and promoting a Code of Ethics, and a membership push to quadruple our high water mark for number of members. We intend to actively encourage our members who sell structured settlement to join and to become actively engaged in NSSTA. We will continue to offer a hand of friendship and cooperation in their agenda although we will be decidedly apolitical. We will also make no attempt no manage our member’s opinions or their expressions of their opinions."
- As for structured settlements, Tombs stated: "we intend to emphasize comprehensive settlement planning which will have the natural result of de-emphasizing structured settlement annuities to some extent as we move alternatives including trusts, taxable annuities, investment accounts, etc. closer to the forefront. We will be increasingly product-neutral and more advice-driven and client-need-focused in the future." Note: despite Tombs' assertion, and perhaps somewhat counter intuitively, multiple SSP conference speakers maintained that settlement trust sales, in particular, have actually increased their sales of structured settlement annuities.
- Tombs also promised "to intensify [SSP's] efforts to stave off any further “infiltration" of our society by factoring companies and their employees. We will want to remain abreast of the goings on in that market as we have always attempted, but as a practical matter we are cutting off any new members or sponsors from that side of things."
Marketing Feedback - NSSTA Survey of Plaintiff Attorneys
- During 2014, the National Structured Settlement Trade Association (NSSTA) commissioned a three-part Structured Settlement Survey project, conducted by CLM Advisors, and previously reviewed by S2KM, of senior claims executives (Part 1), claims professionals (Part 2) and plaintiff attorneys (Part 3).
- Although NSSTA has made reports of all three surveys available to its members, and featured presentations about Part 1 and Part 2 at previous NSSTA educational conferences, NSSTA has not yet featured its Part 3 survey of plaintiff attorneys as an educational conference presentation. NSSTA has also prioritized "rejuvenating defense programs" as one of three preliminary "Growth Initiatives" with no equivalent current Growth Initiative focused specifically on plaintiff attorneys or personal injury settlement planning.
- As one SSP conference presentation, S2KM's Managing Director, Patrick Hindert, discussed S2KM's analysis of NSSTA's Part 3 Structured Settlement Survey which, in S2KM's opinion, provides valuable insights for improving structured settlement marketing and expanding and accelerating structured settlement premium growth. For example:
- Only 4% of the responding plaintiff attorneys viewed structured settlement consultants as adding value for negotiations and/or case evaluations separate from, or in addition to, their knowledge of structured settlements.
- 35% stated that structured settlement consultants fail to deliver value because they are concerned with structuring as much of a settlement as possible.
- 52% contact a structured settlement broker one week (possibly less) prior to a mediation.
- 38% make contact only after a case settles.
- Less than 25% are likely to have a client sign a letter acknowledging that they were exposed to the opportunity to structure a portion of their settlement before opting for an all cash settlement.
- Although 89% believe they "have adequate knowledge of structured settlements so that [they are] able to recognize when they would be in the best interest of an injured party...", only 28% said they suggest a structured settlement for cases involving Medicare set-asides (MSAs).
- Only 26% have ever structured their fees.
Settlement Planning - A Special Needs Perspective
- Most presentations by special needs attorneys at structured settlement conferences focus exclusively on special needs trusts. As one result, many structured settlement professionals fail to understand the broad and expanding scope of special needs planning - or how it impacts, overlaps with and differs from personal injury settlement planning. A similar misconception exists among special needs attorneys many of whom identify financial and insurance settlement planners exclusively with structured settlements. The title of the one joint SSP/ASNP presentation in Tucson ("Structured Settlements and Special Needs Trusts") re-enforced this misconception. Fortunately and positively, the actual presentation discussion, moderated my Jack Meligan and featuring Frank Johns and Joe Tombs, addressed a broader agenda.
- Separately, both the ASNP and SSP conferences featured multiple presentations which captured the expanding expertise of their respective members. For structured settlement professionals, S2KM found ASNP's two "Pre-Session" presentations ("The ABCs of Public Benefits" by David Lillesand and "The ABCs of Special Needs and Settlement Planning" by Kevin Urbatsch and Michele Fuller) especially informative. Also recommended for structured settlement professionals seeking a more comprehensive understanding of special needs planning: Blaine Brockman's presentation ("Recent Trends in Special Needs Planning"),
- Urbatsch and Fuller speak and write frequently about personal injury settlement planning and are recognized as leading national settlement planning experts among special needs attorneys. Their settlement planning presentations frequently discuss structured settlement "issues" - often with negative connotations and without rebuttal or explanations from structured settlement experts. What follows are structured settlement "issues" Urbatsch and Fuller identified in Tucson. In S2KM's experience: 1) many special needs attorneys agree with these issues; and 2) structured settlement proponents need to proactively respond to these issues - or risk continuing/increasing loss of potential annuity premium:
- "Income stream is inflexible and cannot respond to emergency or major cash needs;
- "High initial fees;
- "Investment returns nearly always lower than what a diversified portolio would produce;
- "Big ticket items, such as a home, cannot be easily acquired;
- "Unscrupulous settlement planning brokers over-structuring because of high commission;
- "Little regulatory oversight over industry – no fiduciary responsibility or licensing required to sell;
- "Misleading statements about flexibility;
- "How it fits into Plaintiff’s overall financial plan?
The Grillo Case
- The Grillo case, which establishes potential legal liability for plaintiff attorneys who do not advise their clients about structured settlements, was the subject of an SSP conference presentation by Craig and Josephine (Grillo) Sullivan. The Sullivans shared the remarkable life story of their daughter, Christina, the Foundation she inspired and the Texas State Statutory amendment her case helped to enact.
- For structured settlement brokers and settlement planners, the Grillo case provides a logical starting point for discussing structured settlements with plaintiff attorneys. As a point of comparison, consider response #5 above under "Marketing Feedback - NSSTA Survey of Plaintiff Attorneys."
- Another important settlement planning "takeaway" from the Sullivans' SSP presentation: both Craig and Josephine emphasized the value of Christina's original life care plan which served as a care management "roadmap" throughout Christina's life accurately predicting future needs and developments which the Sullivans would not otherwise have anticipated.
- This important observation, provided by the only care givers to appear as speakers at the combined SSP/ASNP conferences highlights an important settlement planning issue: Why do other settlement planning professionals ignore life care planners - especially considering their strategic role defining "future needs" for personal injury damage analysis, as well as future expense allocations for Medicare set-asides and Affordable Care Act coverage? For examples:
- As leading nurse life care planner Wendie Howland stated in this 2014 S2KM interview: "I have never been asked to review a settlement plan to see how well it matches my recommendations."
- The Urbatsch/Fuller presentation summarized above which identified multiple professionals for the "Settlement Planning Team", omitted life care planners.
- "Comprehensive" settlement plans S2KM has reviewed typically don't include any life care plan, or other document, providing a detailed "needs analysis".
- With the exception of the National Alliance of Medicare Set-Aside Professionals (NAMSAP), a majority of whose members are life care planners, none of the many structured settlement or settlement planning conferences S2KM has attended during the past several years has offered specific presentations addressing the topic of "needs analysis" - or, with rare exceptions, featured a life care planner as presenter.
- Key related issues: 1) what does "needs analysis" mean in the settlement planning context? Who is qualified, if not life care planners, to provide "needs analysis" for settlement planning? What is the relationship between a life care plan prepared for trial (damage analysis) and a life care plan for settlement planning? Who, besides a life care planner, is qualified to transpose one to the other?
The Mraz Case
- The traditional objective and responsibility for plaintiff attorneys in personal injury cases has been to obtain the largest amount of compensation for their clients whether by judgment or settlement. By this standard, the law firm Lief, Cabraser, Heimann & Bernstein was notably successful in obtaining a $55 million verdict and subsequent $24 million settlement in 2009 against Chrysler in the Mraz wrongful death case.
- Settlement planning, in general, and structured settlements, more specifically, however, prioritize an additional set of objectives and responsibilities for plaintiff attorneys. As a result, when the Lief, Cabraser law firm failed to obtain a structured settlement for Addison Mraz, the minor daughter of the deceased, after her mother, Adriana Mraz, allegedly requested Lief, Cabraser to obtain a structured settlement on Addison's behalf, Adriana brought a lawsuit alleging Lief, Cabraser attorneys breached the duty of care they owed to Addison.
- On December 22, 2015, among other findings, a California trial court jury determined Lief, Cabraser attorneys did not breach the standard of care or any fiduciary duty they owed Addison Mraz. Nevertheless, unrelated to damages associated to the loss of the structured settlement, the jury awarded Addison Mraz $400,000 of fees and costs she previously paid to Lief, Cabraser. The case is currently on appeal.
- Mark Wilson, the attorney who represented Adriana and Addison Mraz in their lawsuit against Lief, Cabraser, was a featured speaker at the SSP conference. Based upon the Marz case, and regardless of what occurs on appeal, Wilson highlighted the following structured settlement responsibilities as potential duties of care for plaintiff attorneys and recommended that structured settlement professionals and settlement planners utilize CLE programs to educate plaintiff attorneys about their potential liabilities. Plaintiff attorneys should:
- Educate themselves about structured settlement issues including how to avoid constructive receipt as well as the appropriate utilization of QSFs and non-qualified assignments.
- Recommend competent structured settlement professionals to clients (and retain them for advice) prior to settlement negotiations.
- Insert appropriate language in term sheets and/or settlement agreements to preserve clients' structured settlement options.
- If and when necessary, know how to correct mistakes to preserve or re-establish their clients' structured settlement options.
Plaintiff Broker Diversification
- The most successful plaintiff structured settlement brokers appear to be diversifying their products and services. It works, according to SSP speaker Anthony Prieto, "because it changes the conversation from a marketing perspective. There are a lot more people who want to talk to me about updates in MSP compliance or lien resolution than structured settlements. You see more cases when you offer other services. You become a problem solver as opposed to a problem identifier."
- Prieto identified multiple sources of alternative revenue now available to settlement planners in 2016: alternative products (retail annuities, life insurance, managed money); trust company fees or referrals; lien resolution or verification fees or referrals; MSP compliance fees or referrals; attorney fee deferral programs; QSF referrals and administration fees.
- Although one SSP panel, discussing "Comprehensive Settlement Planning", emphasized the importance of "planning before products", another SSP panel spoke specifically about expanding opportunities for alternative (non-traditional structured settlement) settlement planning products: Martha Hunt (equity-indexed annuity riders); John Arendt (reinsurance); James Creel (settlement trusts); Michael Upchurch (rehabilitation facilities); Rick Miller (indexed annuities).
- Consistent with the themes of "diversification" and "changing the conversation", John Darer made a convincing case for "transition expertise" as a critical settlement planning skill.
- What potential professional liability issues accompany plaintiff broker product and service diversification? The SSP conference did not directly address this issue comprehensively.
- Speaking about "ELNY and Factoring Industry Lawsuits", attorney Edward Stone asserted that the "New Normal" (i.e. personal injury settlement planning) will not work if the core product (i.e. structured settlements) does not work. Focusing specifically on structured settlements, Stone asked whether a broker (plaintiff and/or defendant) owed any duty of care - and to whom? Also whether split commission arrangements changed the analysis? Based upon ELNY, he offered several related lessons for settlement planners.
- Insurance law expert David Childers provided SSP conference attendees with a traditional analysis of standards of care and duties of care for insurance brokers, agents and producers under Arizona law.
CONCLUSION: Personal injury settlement planning is a large, complex, dynamic marketplace within which structured settlements historically has represented a strategic, if arguably under performing, product. The traditional structured settlement industry has heretofore avoided the educational analysis and strategic association relationships necessary to help its "New Generation" membership successfully transition to the "New Normal". It remains to be seen whether, when and how successfully future industry leadership will figure out how to put old wine in new bottles. Based upon this year's joint SSP/ASNP conference (and mixing metaphors), it appears the "New Normal" train is already leaving the station with a diversified cargo of blended products and services.
For additional S2KM analysis about personal injury settlement planning, see the structured settlement wiki.