Beyond Structured Settlements

Structured Settlements in 2011 - 2

In a prior blog post, S2KM highlighted the historic significance of the ELNY liquidation as the dominant 2011 structured settlement industry development. This blog post offers a strategic perspective of the industry's status in 2011 focusing in part on the industry's three national associations and also providing a broader perspective for ELNY.

Strategic Overview - Primary Market

The National Structured Settlement Trade Association (NSSTA) celebrated its 25th anniversary in 2011. Among its 2011 accomplishments, NSSTA noticeably improved its marketing and educational programs while focusing substantial resources to help minimize problems related to the ELNY liquidation. NSSTA has attempted to balance the need to inform its members (not the public) about ELNY's status with the need to promote the strength of its life insurance markets and the state guaranty fund system.

Speaking at NSSTA's 2011 Annual Meeting, Thomas Ronce, Chairman of NOLHGA, described the current life and health guaranty system in the United States as experienced, well-financed and armed with a multitude of optional legal and financial tools. Applied to ELNY, this state guaranty system will substantially improve the recovery for many ELNY structured settlement recipients. The state guaranty system, however, will not make whole every ELNY structured settlement recipient. Unfortunately, even with guaranty fund payments and additional enhancements, many ELNY structured settlement recipients are expected to experience shortfalls.

NSSTA's 2011 Annual Meeting and Fall Educational Conference also showcased the current strength of the structured settlement market and its product providers.

• Jim Morris, President, Chairman and CEO of Pacific Life Insurance Company, accentuated the current financial strength of U.S. life insurance companies generally and explained why structured settlement annuities represent an excellent strategic product for life companies. Confirming Morris' assessment, three new product providers (Mutual of Omaha, National Indemnity and Hartford) entered (or re-entered) the structured settlement marketplace during 2011.
• William T. Robinson III, President of the American Bar Association (ABA) strongly endorsed structured settlements as "professional and dignified solutions" for injury victims based upon his first-hand experience as a litigation attorney. Robinson also suggested the ABA and NSSTA should identify shared interests and lobbying opportunities.
• American General Life President Mary Jane Fortin described AIG, a structured settlement product provider that received more than $180 billion of loans and investments from the United States government in 2008, as "a strong, stable and resilient company dedicated to keeping our promises". Fortin also dispelled several "myths" about AIG, summarized AIG's recovery from the 2008 financial crisis and expressed optimism about the future of life insurance industry and structured settlements.

Despite these positive assurances, however, primary market structured settlement annuity sales have continued to trend downward for the past three years, arguably because of the 2008 financial crisis and historically low interest rates which many experts predict will continue for the foreseeable future. What has been missing from NSSTA's leadership during 2011 has been a positive vision for NSSTA's own future and the future of structured settlements.

David Ringler, NSSTA's first President, spoke during the NSSTA 2011 Annual Meeting. Ringler stated the most important reason for creating NSSTA was "having a place where everyone and anyone can sit down with each other and discuss the issues and viewpoints regardless of beliefs."  Sometime during the past 25 years, NSSTA lost sight of this original vision and now generally excludes industry voices and perspectives that challenge traditional structured settlement business models and practices.

As one result, two additional professional associations have formed with alternative structured settlement perspectives:

• The Society of Settlement Planners (SSP) - SSP espouses the claimant's right to select his or her own structured settlement adviser and funding company. SSP promotes structured settlement annuities as a core product for special needs settlement planning and favors greater utilization of IRC 468B Qualified Settlement Funds (QSFs).
• The National Association of Settlement Purchasers (NASP) - NASP promotes the right of structured settlement recipients, in compliance with federal and state laws, to sell their payment rights provided a state judge approves the sale in advance as being in the "best interest" of the transferor/payee taking into account the welfare and support of the payee's dependents.

To its credit, NSSTA expanded the scope of its educational programs in 2011 to discuss QSFs and to provide its members with more detailed information about structured settlement secondary market. The perspective for these NSSTA discussions, however, remains defensive and protective without any attempt to envision or discuss new business opportunities or product improvements.

By comparison, SSP's vision for the the future of structured settlements is defined and supported by its "Standards of Professional Conduct". SSP views structured settlements as a core product for personal injury settlement planning. SSP's vision agrees with and encompasses the business model Joseph DiGangi introduced to NSSTA in 2009 as "Settlement Consulting" which he characterized as "a wake up call for the industry." SSP's educational conferences continue to push structured settlement industry thinking beyond its historic boundaries and the inevitability of its path dependence.

In addition to SSP, three national legal associations are developing special needs business practices and models that expand the framework and opportunities for structured settlements:

• Academy of Special Needs Planners (ASNP)
• National Academy of Elder Law Attorneys (NAELA)
• Special Needs Alliance (SNA).

Faced with the ELNY crisis, declining annuity sales and the continuing prospect of low interest rates, some primary market structured settlement stakeholders now recognize that business practices and models that made sense in the past may have survived despite the eclipse of their earlier justification.  S2KM believes more primary market stakeholders should expand their strategic perspectives and re-think structured settlements in the context of the changing legal and financial landscape.

For example, here are four 2010 developments with important consequences for structured settlement stakeholders that have heretofore received inadequate primary market educational attention:

• Patient Protection and Affordability Care Act - how does health care reform impact injury victims and what opportunities does it create for structured settlements?
• Dodd-Frank Wall Street Reform and Consumer Protection Act - how will the Consumer Financial Protection Bureau (CFPB) address structured settlement complaints?
• NAIC Suitability in Annuity Transactions Model Regulation - what does "suitability" mean for structured settlement annuities and how does "suitability" differ from the "best interest" standard applicable to trustees, investment advisers and structured settlement transfers?
• Spencer v. Hartford class action settlement - what are the lessons learned and resulting new best practices for structured settlements?

Strategic Overview - Secondary Market

The ELNY liquidation is also having a negative impact on the secondary structured settlement market. Some industry experts have estimated that as many as 1000 of ELNY structured settlement annuities (out of the 4168 total) have undergone transfers of some or all payment rights. Investors who have purchased ELNY annuity payment rights may not be eligible to receive contributions from state guaranty funds which historically protect "consumers". The NYLB's December 7, 2011 letters warned ELNY payees "if you have transferred any part of your right to receive ELNY SSA benefits to a third party, you may not be eligible to receive benefits from CABC related to the benefits you transferred."

Although the financial crisis of 2008 had a devastating short term impact on the structured settlement secondary market, the market has experienced robust sales in 2011 as institutional investors continue to be attracted to the relatively high rates of returns generated by restructured (post transfer) payment right obligations. More individual investors, including personal injury claimants and their attorneys, have also begun purchasing restructured payment rights although some industry experts caution against potential tax and securities law uncertainties.

The structured settlement secondary market changed dramatically in 2011 with the announced merger of  J.G. Wentworth and Peachtree Settlement Funding. The merger combined the two largest purchasers of structured settlement payment rights with an estimated 80-85 percent of the market.

The merger highlights a remarkable turnaround for Wentworth whose shareholders control the majority of the combined companies. In 2009, Wentworth and two affiliated companies entered Chapter 11 bankruptcy protection after the company "encountered liquidity problems amid a tightening credit market". Wentworth laid off 120 of its 200 employees and closed its office in Las Vegas. Its general corporate bonds were "almost worthless" and were trading, if at all, for pennies on the dollar. Less than six months later, Wentworth emerged from bankruptcy with an announcement that JLL Partners (Wentworth's owners) had invested an additional $100 million in the firm.

In a significant case (Symetra v. Rapid Settlements) highlighting controversial business practices which were opposed by NASP as well as structured settlement annuity providers, a Texas court issued injunctions during 2011 prohibiting Rapid Settlement's prior business practices of using arbitration to by-pass state structured settlement protection statutes and taking security interests to gain rights of first refusal for future transfers.

Check the structured settlement wiki for additional S2KM structured settlement reporting:

• ELNY liquidation
• Annual industry reports
• Professional association meetings

ADDENDUM (12/12/2011) - S2KM's report above omits at least one important 2011 strategic structured settlement development. NSSTA and its product provider members launched the first-ever industry metrics study during 2011. For more information about metrics, see S2KM's "Structured Settlement Metrics" series featured on the structured settlement wiki.

Structured Settlement Metrics - 5

How satisfied with their structured settlements are injury victims (and their attorneys) who have opted for structured settlements instead of, or in addition to, lump sum alternatives?

As part of S2KM's series discussing structured settlement metrics and analytics, this blog post addresses that question by summarizing selected results from three structured settlement surveys related to customer satisfaction:

• NSSTA 2006 Survey - as summarized during both the National Structured Settlement Trade Association (NSSTA) 2007 Winter Meeting and 2007 Annual Meeting;
• AIG 2007 Survey - as reported on the AIG website and summarized during the NSSTA 2008 Annual Meeting.
• J.G. Wentworth 2008 Survey - as reported in a press release on October 29, 2008 and a media report on November 5, 2008.

In prior blog posts, S2KM examined structured settlement "quality" and "performance" metrics and analytics in the context of a 2011 National Litigation Management Study sponsored by the Council on Litigation Management (CLM). That study identified structured settlement as the "most penetrated external initiative" among 30 litigation-related service areas analyzed based upon interviews with leading litigation management executives.

In a subsequent blog post, S2KM will provide commentary and suggest conclusions about customer satisfaction with structured settlements based upon the results of the three surveys.

NSSTA Survey - The National Structured Settlement Trade Association (NSSTA) survey consisted of attorneys involved in structured settlements (43 telephone surveys) and structured settlement recipients (1275 telephone and Internet surveys). Titled: "A Study of the Structured Settlement Process Conducted on behalf of the National Structured Settlement Trade Association", the survey was directed by Robert E. Hoyt, the Dudley L. Moore, Jr. Chair of Insurance at the Terry College of Business at the University of Georgia. Among the results:

• Structured settlement recipients:
  • 65% said they had not heard about structured settlements prior to settlement.
  • Most were uncertain whether a structured settlement consultant was involved with their case.
  • 34% recalled receiving educational information while 75% of this 34% said the information was helpful.
  • 66% first learned about structured settlements from their trial attorney.
  • 75% said they were very happy their settlement included structured settlement annuities.
  • 75% said they would recommend a structured settlement.
• Attorneys involved in structured settlements:
  • 95% said they are proponents of structured settlements.
  • 70% said they retain a structured settlement consultant at least for some cases.
  • When asked: "Whom do you prefer to use for purposes of financial planning for your clients?", the attorneys responded:
    • 30% - Trust company/department.
    • 28% - Financial planner.
    • 23% - Structured settlement consultant.
    • 19% - No response.

AIG Survey - Conducted by Esearch.com, Inc., the AIG survey included 1000 U.S. participants. 80% of the participants had no connection with any personal injury case while 20% had previously been involved directly or indirectly through a family member in a personal injury case. Participants who had no connection to a personal injury case were asked to read two hypothetical scenarios and answer questions on how they would react. Those with a direct connection to a personal injury case were not only asked to read the hypothetical scenarios, but also to answer questions based upon their real life experience.

• In AIG's first survey hypothetical, AIG provided no information about structured settlements. Results:
  • 65% of respondents said they would elect a lump sum of which
  • 49% said they believed they could make their own long term decisions and
  • 26% said the lump sum was more appropriate to pay bills and pay off debt.
• In AIG's second survey hypothetical, AIG provided survey respondents with information about structured settlements - presumably this "AIG Backgrounder" which AIG features on its website. Results: 73% of respondents said they would elect a structured settlement.
• 206 of 1000 participants said they or their family had been involved with a personal injury case. Results for those 206 participants:
  • 86% had elected lump sum.
  • 57% said they were unaware of structured settlements.
  • 64% said their attorneys did not inform them about structured settlements.
  • 57% of those that elected a lump sum said their settlement funds were already depleted.
  • 71% of respondents who said they favored a structured settlement did so "to provide a regimented stream of income designed to cover expenses".

J.G. Wentworth Survey - The J.G. Wentworth survey consisted of 115 participants who had previously sold some or all of their structured settlement payment rights to Wentworth and focused upon the reasons they: 1) agreed to a structured settlement; and 2) subsequently sold (transferred) some or all of their structured settlement payment rights. According to a J.G. Wentworth marketing executive, the survey resulted from recommendations made at the 2008 Structured Settlement Thought Leadership Conference. Relevant questions and results:

How many years ago did you settle your original lawsuit?

• 70.9% - More than 10 years ago.
• 14.5% - 5 to 10 years ago.
• 13.6% - 1 to 5 years ago.
• 0.9% - Past 12 months.

When you settled your original lawsuit, why did you accept payments over time rather than a single lump sum of cash?

• 23.4% of the participating structured settlement recipients said they never were given a lump sum option.
• 38.3% had been minors whose settlements were approved and/or selected by judges and guardians.
• 38.3% of the respondents offered the following reasons for accepting a structured settlement:
  • 23.4% - Payments over time seemed like a better deal.
  • 7.4% - Not sure I could manage a large amount of cash.
  • 6.4% - To pay future medical expenses or special needs.
  • 1.1% - Faster way to settle.

How satisfied are you that you accepted a structured settlement?

• 25.0% - As a minor, a structured settlement was considered the best option.
• 24.1% - Mostly satisfied.
• 21.3% - Neither satisfied nor dissatisfied.
• 18.5% - Completely satisfied.
• 6.5% - Slightly dissatisfied.
• 4.6% - Completely dissatisfied.

Do you wish you and your attorney had negotiated for a single lump sum settlement?

• 31.5% - No.
• 27.8% - As a minor, I was unable to negotiate my settlement terms.
• 20.4% - Maybe.
• 10.2% - Yes.
• 10.2% - I don't know.

When you settled your original lawsuit, how well informed were you about structured settlements?

• 30.5% - Due to my status as a minor, I was not informed.
• 27.6% - Very well informed.
• 24.8% - Not well informed.
• 17.1% - Well informed but still had questions post-settlement.

Why did you sell all or part of your structured settlement?

• 60.2% - Pay bills.
• 8.3% - Start a business.
• 8.3% - Home improvement.
• 5.6% - Pay for education.
• 5.6% - Cash made more sense than waiting.
• 4.6% - Buy a house.

Did selling your structured settlement help solve your financial problem?

• 40.7% - Mostly.
• 32.4% - Yes.
• 21.3% - Only helped a little.
• 5.6% - No, it did not help.

Would you sell payments again?

• 36.3% - Maybe.
• 30.1% - No.
• 18.6% - Yes.
• 8.0% - Probably.
• 7.1% - I have already sold all of my payments.

If you sold only part of your settlement, do you plan to keep the rest of your payments as a structured settlement?

• 42.3% - Yes.
• 35.1% - I don't know.
• 9.0% - No, I plan on selling all of my payments.
• 8.1% - I already sold all of my payments.
• 5.4% - No, I plan on selling some of my payments.

For complete S2KM reporting and commentary about structured settlement metrics and analytics, see the structured settlement wiki.

Structured Settlement Metrics - 3

A 2011 National Litigation Management study sponsored by the Council on Litigation Management (CLM):

• Identified structured settlement as the "most penetrated external initiative" among 30 litigation-related service areas analyzed based upon interviews with leading litigation management executives;
• Determined that more than 74 percent of the study's participants rated their available litigation management metrics as "Fair" or worse for measuring the effectiveness of their litigation management programs; and
• Concluded that, to be successful, national litigation management service programs must deliver metrics and analytics that justify the quality, performance, and satisfaction levels litigation management executives are seeking.

What metrics and analytics should litigation management executives utilize to justify and evaluate their structured settlement programs?

In two prior blog posts, S2KM summarized findings from CLM's Litigation Management study and highlighted historic justifications, characteristics and metrics for defense structured settlement programs. This blog post and two subsequent posts will examine historic structured settlement performance analytics and discuss those analytics in the context of the "quality, performance and satisfaction levels" litigation management executives should be seeking.

Recognizing no official or accepted industry records exist for total historic structured settlement annuities written and/or annuity payment rights transferred, S2KM offers the following estimates based upon industry input and sources including "Structured Settlements and Periodic Payment Judgments" (S2P2J), Melissa Evola's primary market compilations, and DBRS' June 8, 2011 Pre-Sale Report for J.G. Wentworth's Fixed Rate Asset-Backed Notes Series 2011-1:

• Primary market (1976-2010)
  • Total annuities written: 716,500
  • Total Premium: $124 billion
• Secondary market (1986-2010)
  • Total number of annuity (or partial annuity) transfers: 98,300
  • Total recipients who have sold payment rights: 65,600
  • Total aggregate payment streams purchased: $7.5 billion

S2KM welcomes continuing industry input and reserves the right to revise these estimates and/or future estimates based upon industry input.

Regardless of how many structured settlement annuities have been written, or transferred, or how much structured settlement annuity premium has been generated, or payment streams purchased, the key issue for evaluating the "quality" of structured settlements concerns structured settlement payout performance. Most specifically, how many annuity-funded structured settlement recipients or transferees have or have not received 100% of their promised periodic payments?

For annuity funded structured settlements, the payout performance to date has been excellent though not perfect. Overall, even when structured settlement annuity providers such as Confederation Life, Monarch Life and Capital Life have entered receivership, the protections provided by state life and health guaranty associations have proven to be an important safety net - at least for the purchaser/obligors and original structured settlement recipients.

The only exception to date, of which S2KM is aware, for some annuity-funded structured settlement recipients not receiving 100% of their promised periodic payments is Executive Life Insurance Company of California (ELIC) which became insolvent in 1991 and involved approximately 5500 structured settlement annuities as well as many other life insurance products. Note also, however:

• New York's Insurance Superintendent has petitioned for Executive Life Insurance Company of New York (ELNY), to enter liquidation and undergo restructuring. Although all ELNY structured settlement annuities have been paid in full to date, the exact impact of the ELNY liquidation and restructuring plan on individual structured settlement payees and transferees will not be known at least until the state life and health guaranty associations finalize the amount of their ELNY contributions.
• The DBRS report cited above indicates that J.G. Wentworth, and/or investors of J.G. Wentworth's securitized structured settlement payment rights, have suffered losses of 0.11% from the 59,000 transactions J.G. Wentworth has consummated since 1995 without identifying the specific source of these losses.

Selected highlights from ELIC's receivership and rehabilitation plan - Sources: Sections 3.05[10] of "Structured Settlements and Periodic Payment Judgements" (S2P2J) and the structured settlement wiki.

• Beginning in 1991, California insurance regulators and courts addressed the 5,500 structured settlement annuities issued by ELIC in a series of actions, stretching over two years and culminating in the sale of ELIC in late 1993.
• During this time, most structured settlement recipients received 70% of their scheduled periodic payments. The supervising Los Angeles Superior Court permitted approximately 600 “hardship” claimants to petition for and receive continuation of full scheduled payments.
• Recipients who experienced a 30% shortfall were of two categories: assigned and non-assigned cases. Approximately 800 ELIC structured settlement recipients had agreed to a qualified assignment using ELIC's parent, First Executive Corporation (FEC), as assignee. FEC entered bankruptcy in 1991.
• For the 4700 ELIC structured settlement recipients who had not agreed to a qualified assignment, the original obligor (defendant or liability insurer) continued to be liable. Many of these original obligors made direct arrangements with individual ELIC structured settlement recipients to pay the 30% difference. Others waited until the overall shortfall could be determined.
• In 1993, the supervising court approved an ELIC sales agreement and rehabilitation plan under which a newly formed company, Aurora National Life Assurance Company, Inc. (Aurora) assumed ELIC's structured settlement obligations.
• ELIC's former policyholders and structured settlement recipients were given the opportunity to either opt out of the rehabilitation plan and receive the liquidation value of their existing ELIC contracts or opt in to a new restructured contract with Aurora.
• Structured settlement recipients choosing to opt out of the Aurora plan were promised a cash payment of 56% of their ELIC annuity's value when ELIC became insolvent (without any state guaranty association enhancement) plus subsequent payments depending upon future events which could provide an additional estimated 28% of their annuity value.
• The other choice was to accept a revised annuity from Aurora which for most former ELIC structured settlement payees would be enhanced by payments from state life and health guaranty funds. Most of the former ELIC structured settlement payees who selected this option (approximately 4000) received 100% of the value of their ELIC policies plus 5.34% interest for past shortfalls.
• For the remaining 1500 ELIC structured settlement payees (including Aurora opt outs) shortfalls, which S2P2J's authors originally estimated to average 10%, exist.
• The future (post 1994) enhancements for former ELIC structured settlement payees, however, received an unexpected bonus source in 1998 when an anonymous whistle-blower alleged that Crédit Lyonnais was the real buyer of ELIC and controlled Aurora through secret agreements. Because banks were prohibited from owning U.S. insurance companies in 1993, the California Insurance Department sued Credit Lyonnais and other parties alleging violations of the federal Bank Holding Company Act, the California Insurance Code and other California statutes.
• The results of these lawsuits:
  • A 2003 settlement with Credit Lyonnais for $730.5 million of which $211 million was distributed to opt out policyholders and former structured settlement payees and $403 million to Aurora to supplement payments for opt in policyholders and continuing structured settlement payees; and
  • A 2005 verdict against the other defendants including $700 million in punitive damages which awaits retrial following appeal and remand on the issue of damages.

The Executive Life insolvencies, both of which originated in 1991, represent exceptions that prove the rule: the payout record ("quality" metric) of structured settlement annuities has been excellent - based upon the performance record of annuity providers who have issued an S2KM-estimated 716,500 structured settlement annuities since 1976.

The quality of structured settlement annuities was further highlighted during the 2011 Annual Meeting of the National Structured Settlement Trade Association (NSSTA) by:

• Jim Morris, Chairman, President, and CEO of Pacific Life Insurance Company, who accentuated the current financial strength of U.S. life insurance companies and explained why structured settlement annuities represent an excellent strategic product for life companies; and
• Thomas Ronce, a member of the NOLHGA Board of Directors, who highlighted lessons learned and industry improvements resulting from the Executive Life experience:
  • Risk-based capital testing - more sophisticated systems to measure insurance and investment risk in life insurers.
  • Coordinated, sophisticated, national regulatory consultation for troubled companies doing business nationally.
  • Skilled, professional leadership and stakeholder participation in the processes to resolve insolvencies of nationally significant insurers.

For S2KM's complete reporting and analysis about: 1) Executive Life and 2) structured settlement metrics, see the structured settlement wiki.

SSP and NSSTA 2011 Annual Meetings - 5

One of three fundamental transitions reshaping the structured settlement industry is the change from a singular, illiquid and non-assignable product to multiple products with greater flexibility to address changing needs and circumstances of injury victims. This transition includes the potential of greater product liquidity for traditional structured settlements provided by IRC section 5891 and the state protection statutes.

During their 2011 annual meetings and educational conferences, both the Society of Settlement Planners (SSP) and the National Structured Settlement Trade Association (NSSTA) addressed this structured settlement industry transition.

NSSTA's Legal Committee organized two educational programs featuring secondary market structured settlement issues:

• Peter Vodola, Katherine Scanlon and Amy Ravitz - "Legal Committee Update on Developments in the Law"; and
• Judge Edward Burke and Judge Steven Denton (moderated by Vodola) - "Judicial Perspective" (on structured settlements).

The Legal Committee Update approached "factoring" from the perspective of "what is it and why should we [NSSTA] care?" Their "what is it" segment:

• Introduced NSSTA members to IRC section 5891;
• Highlighted the "best interest" test and disclosure requirements of state protection statutes; and
• Summarized the Ceron v. Henderson case which S2KM previously reported as part of S2KM's "business standards and practices" series.

NSSTA's "why should we care" (about factoring) comments focused upon:

• How factoring companies are "adversely defining" the term "structured settlement" with aggressive television and internet advertising;
• How structured settlement factoring cases have inundated many state court dockets; and
• How NSSTA members should respond to plaintiff attorneys and judges who resist structured settlements because of proliferating factoring transactions.

The theme of NSSTA's "Judicial Perspective", as stated by participating Judge Denton, might have been: "don't presume that judges understand structured settlements". Previously a plaintiff attorney, Judge Denton claimed a familiarity with structured settlements but acknowledged he had never been asked to approve a structured settlement transfer application. Conversely, Judge Burke stated that his structured settlement experience was limited to reviewing and approving transfer applications.

Among his NSSTA comments, Judge Burke identified his "heroes" to include the superior court judges involved in the California Fresno County factoring cases. Judge Burke's judicial praise is both noteworthy and difficult to understand. In Henderson v. Scieteco (one of the Fresno County factoring cases) , a California appellate court subsequently reversed the entire consolidated order from the Fresno County Superior Court because of "multiple prejudicial errors in making its factual findings and in reaching legal conclusions" (emphasis added).

Also in Henderson v. Scieteco, the California appellate court held that public policy supports state court approved structured factoring transactions (emphasis added). NSSTA's Legal Committee representatives failed to mention this case when they discussed "public policy" and factoring during their structured settlement legal update.

Some judges not only understand structured settlements, but also have experience with both primary and secondary market structured settlement cases and publish local court rules for structured settlements. See, for example, Rule 68.2 and Rule 68.3 of the Local Rules for the Hamilton County, Ohio Probate Court.

SSP offered three presentations about non-traditional structured settlement products as part of its educational program segment titled "Practice Improvement: Marketing and New Products",

• Anthony Prieto and Tim Denehy - "The Use of Structured Settlement Annuity Payment Rights";
• Brian Michaels - "Expanded Use of Non-Qualified Assignments"; and
• Rick Miller - "Equity Indexed Annuities and Settlement Planning".

Prieto and Denehy introduced a product called "The Settlement Asset Management Trust (SAM trust) with Enhanced Structured Income (ESI)" which is essentially an irrevocable spendthrift trust generating level monthly income payments for durations of 10-30 years plus access to discretionary distributions.

The ESI component, according to Prieto and Denehy, consists of payment rights previously sold (i.e., transferred or factored) by a structured settlement recipient to a third party purchaser (factoring company) with an approved court order pursuant to a state protection statute. The SAM trust product managers purchase the payment rights from one or more factoring companies and transfer the payment rights to the SAM trust.

According to Prieto and Denehy, the resulting SAM trust can produce a taxable interest rate that is "typically three (3%) percent higher than comparable fixed products with similar guarantees and safety." Their explanation for the enhanced interest rate: the ESI does not have the same high internal costs as a typical annuity during the first few years of the annuity policy.

Although the flow of structured settlement payment rights purchased from various factoring companies is typically uneven, Prieto and Denehy maintain the SAM trustee can consolidate selected payment rights to create an even payment flow to the SAM trust beneficiary who might be an injury victim or a plaintiff attorney.

In addition to an interest rate risk, Prieto and Denehy acknowledge the ESI has an insurance company insolvency risk similar to a traditional structured settlement. According to Prieto and Denehy, however, a typical SAM trust will include between two and ten separate payment rights purchases thereby diversifying the insolvency risk.

Although some secondary market brokers and factoring companies have previously sold "re-cycled" structured settlement payment rights to individuals, Prieto and Denehy believe their product is different because the SAM trust integrates multiple streams of separate payment rights and also includes a cash allocation permitting discretionary distributions.

For additional S2KM reporting about the SSP and NSSTA 2011 Annual Meetings, see the structured settlement wiki.

See "Structured Settlements and Periodic Payment Judgments" (S2P2J) for additional information about:

• Non-qualified (under IRC section 130) assignments and products - Section 3.08A; and
• Judicial review of transfer applications - Section 16.05

Wentworth and Peachtree to Merge

The owners of J.G. Wentworth and Peachtree Settlement Funding, the two largest purchasers of structured settlement payment rights, have agreed to merge the two companies according to a March 10, 2011 article published by "The Deal Pipeline".

According to the Deal Pipeline article:

• The merger of the two private-backed businesses will be structured as a stock swap.
• JLL Partners, J.G. Wentworth's current stockholders, will own most of the combined companies;
• The parties are still in talks to line up financing.
• The deal may not close for several weeks.
• DLJ Merchant Banking Partners, owned by Credit Suisse AG, purchased Peach Holdings (parent of Peachtree Settlement Funding) for $775 million in November 2006 with co-investments from LLR Partners Inc. and Greenhill Capital Partners.

The announced merger highlights a remarkable financial turnaround for J.G. Wentworth:

• On June 1, 2009, J.G. Wentworth and two affiliated companies entered Chapter 11 bankruptcy protection after the company "encountered liquidity problems amid a tightening credit market".
• Standard & Poor's Rating Services had earlier announced, at J.G. Wentworth's request, that it would no longer rate J.G. Wentworth's counterparty credit and senior secured debt.
• During this period, J.G. Wentworth laid off 120 of its 200 employees and closed its office in Las Vegas.
• According to industry sources at that time, Wentworth's $325 million of general corporate bonds were "almost worthless" and were trading, if at all, for pennies on the dollar.
• Less than six months later, J.G. Wentworth emerged from bankruptcy with an announcement that JLL Partners had invested an additional $100 million in the firm.

For S2KM's complete historic reporting about J.G. Wentworth, see this S2KM blog link.

Business Standards and Practices - 4

In a decision filed January 26, 2011 (Ceron v. 321 Henderson Receivables), a California Court of Appeals has unanimously affirmed one portion of a California Superior Court judgment sustaining demurrers by J.G. Wentworth and its affiliates (J.G. Wentworth) to purported class action legal challenges against prior court approved structured settlement transfers while simultaneously reversing another portion of the same Superior Court judgment which had denied injunctive relief under California's unfair competition law for alleged continuing violations by J.G. Wentworth of the California Structured Settlement Protection Act.

Plaintiff Raul Ceron alleged in his complaint that J.G. Wentworth violated the California Structured Settlement Protection Act by deducting up to $1500 from every transfer purchase to off-set independent legal and/or financial advice received by plaintiff and other structured settlement payment right transfer payees as required under the California statute.

Plaintiff's complaint further alleged:

• In making the structured settlement transfers, J.G. Wentworth engaged in an illegal scheme of directing individuals towards specific attorneys;
• J.G. Wentworth required plaintiff and other individual transfer payees to pay up to $1,500 for the purported independent professional advice whereas the California protection act requires the factoring companies to pay the cost;
• J.G. Wentworth concealed the facts it made attorney referrals and that individual transfer payees paid up to $1,500 for the referrals in violation of the California protection act.
• This scheme violated section 10134, subdivision (f)(3) of the California protection act;
• Section 10134, subdivision (f) sets forth requirements for an independent adviser: "Independent professional advice' means advice of an attorney, certified public accountant, actuary, or other licensed professional adviser meeting all of the following requirements:
  • "(1) The adviser is engaged by a claimant or payee to render advice concerning the legal, tax, or financial implications of a structured settlement or a transfer of structured settlement payment rights.
  • "(2) The adviser's compensation for rendering independent professional advice is not affected by occurrence or lack of occurrence of a settlement or transfer.
  • "(3) A particular adviser is not referred to the payee by the transferee or its agent, except that the transferee may refer the payee to a lawyer referral service or agency operated by a state or local bar association."
• Plaintiff and other potential class members were damaged because J.G. Wentworth paid plaintiffs' attorneys, who were unlawfully referred, out of plaintiffs' proceeds;
• J.G. Wentworth continues to violate the California protection act by asserting plaintiffs' costs for independent legal and financial advice may be collected from transfer payees.

The plaintiff's complaint contained claims for: declaratory relief; unjust enrichment; conversion; unfair business practices in violation of the California Business and Professions Code; injunctive relief; and an accounting. The complaint requested damages and equitable relief including: declarations that J.G. Wentworth's conduct violated the California protection act and the prior court orders approving the transfers were void; determinations that J.G. Wentworth's conduct constituted an unfair business practice; restitution; disgorgement; an accounting; and an injunction against future unlawful, unfair or fraudulent acts. The plaintiff argued his 2004 and 2007 court orders approving transfers were subject to collateral legal attack because J.G. Wentworth obtained the court orders through extrinsic fraud

In response, J.G. Wentworth:

• Demurred to the complaint generally and sought judicial notice of plaintiff's prior written transfer declarations noting inconsistencies between plaintiff's allegations and exhibits attached to his complaint;
• Argued the demurrer should be sustained without leave to amend as to multiple causes of action because Superior Court Judges had approved plaintiff's transfers under the California protection act;
• Pointed out that some of the exhibits attached to the complaint showed that plaintiff was given notices and disclosures about his right to seek independent counsel for his prior transfers and that plaintiff also was advised J.G Wentworth:
  • Would pay up to $1,500 for an attorney to provide legal advice concerning the transfer petition; and
  • Could not make referrals to any specific adviser.
• Asserted plaintiff's unjust enrichment claim had no merit because:
  • Plaintiff did not allege that he paid any attorney fees in connection with the petitions;
  • Plaintiff had confused the duty to notify the payee of the right to seek independent professional advice before entering into the purchase agreement (section 10136, subdivision (b)) with the obligation to pay fees of up to $1,500 in connection with the petition proceedings. (section 10139.5, subdivision (e).);
  • An exhibit to the complaint showed that plaintiff engaged his attorney in connection with the purchase agreement, not the petition proceeding;
  • J.G. Wentworth had no obligation to pay any fees for independent professional advice regarding the purchase agreement.
• Argued plaintiff's unfair competition claim had no merit because plaintiff did not allege he had suffered any injury from the improper referral;
• Asserted some of plaintiff's claims were time barred and the class allegations should be stricken.

California Superior Court Judge Anthony J. Mohr had dismissed the plaintiff's complaint, sustained without leave to amend J.G. Wentworth's demurrer to a purported class action and additionally ruled:

• The transfers of structured settlement payment rights were not subject to collateral attack because they had been approved as fair and consistent with the California protection act in prior final court orders;
• The approval petitions had been litigated to decision where potential class members had received hearings;
• He could not set aside decisions of other judges in the absence of extrinsic fraud;
• To the extent that plaintiff alleged fraud in the complaint, it was only intrinsic fraud which did not provide a basis for relief;
• Factoring companies were not fiduciaries subject to a greater standard of care;
• Plaintiff filed a timely notice of appeal from the order dismissing the complaint.

In its review of the Superior Court decision, the California Appellate Court:

• Noted that California amended its structured settlement protection act in 2009 including section 10136, subdivision (b) which addresses "independent legal and financial advice". Unlike the pre-2009 statute, Current section 10136, subdivision (b) provides that factoring companies must pay the costs for independent professional advice. Because the plaintiff's attorney referral and structured settlement transfers occurred in 2007, the California Appellate Court applied the pre-2009 version of section 10136, subdivision (b) in deciding this case.
• Ruled that Judge Mohr correctly sustained J.G. Wentworth's demurrers to the claims which sought to set aside the prior court approvals stating: "... once a transfer of structured settlement payments has occurred through the detailed court approval process, it cannot be collaterally attacked as void by any party as a violation of statute, absent direct and affirmative evidence of fraud."
• Disagreed with the plaintiff that the court approvals can be collaterally attacked in this case because J.G. Wentworth fraudulently misrepresented the facts in the petition process. According the Appellate Court,
  • Extrinsic fraud (showing that a party has been deprived of a fair opportunity to present a claim or defense in court) provides a basis for relief but intrinsic fraud (when the party has been given notice of the action and has had an opportunity to present his case and to protect himself from any mistake or fraud of his adversary but has unreasonably neglected to do so) does not;
  • Plaintiff's only claims of fraud in this case were intrinsic - i.e. that J.G. Wentworth misrepresented it had complied with the California structured settlement protection act during the court approval process;
  • The plaintiff did not allege he was denied a fair hearing or prevented from presenting any evidence as a result of his legal representation;
  • Although there may be an exception to the extrinsic versus intrinsic fraud rule in some cases where the party concealing material evidence has a fiduciary relationship with the other litigant. the complaint did not allege sufficient facts to show J.G. Wentworth had a fiduciary relationship with the plaintiff or any possible class members;
  • The complaint did not allege that:
    • The lawyers provided to plaintiff or other class members gave incorrect advice; or
    • The plaintiff was improperly advised about the propriety of entering into the transfers; or
    • The plaintiff sought leave to amend to set forth such allegations.
• Dismissed the plaintiff's unjust enrichment claim for past court approved transfers for similar reasons - i.e. the transfers had been adjudicated to be fair, reasonable and lawful through the court approval process and may not subsequently be collaterally attacked.

The California Appellate Court, however, did reverse the Superior Court dismissal related to one cause of action ruling that the plaintiff's complaint sufficiently alleged a claim for injunctive relief against unfair business practices.

• The Appellate Court noted section 10139.4 of the California structured settlement protection act provides that a violation of the act is an unfair business practice within the meaning of the California Business and Professions Code section 17200.
• The complaint alleged that, since March 2002 and continuing to the present time, J.G. Wentworth engaged in conduct which violates the act and sought injunctive relief against the alleged continued violations.
• In reversing the Superior Court on this one cause of action, the Appellate Court did not address the statute of limitations and class certification issues or express any opinion concerning the plaintiff's standing to pursue post-2009 claims for payments made by J.G. Wentworth to alleged unlawfully referred attorneys.

For additional information about transfers of structured settlement payment rights and the California structured settlement protection act see S2KM's structured settlement wiki and Chapter 16 of "Structured Settlements and Periodic Payment Judgments". For S2KM's continuing coverage of structured settlement business standards and practices, see S2KM's structured settlement wiki.

NAELA's Special Needs Summit - 2

This S2KM blog post strategically analyzes the National Academy of Elder Law Attorneys (NAELA) 2010 Special Needs Summit from a structured settlement perspective. A prior S2KM post summarized the NAELA Special Needs Summit. A subsequent S2KM post will strategically analyze the NAELA Special Needs Summit from the perspective of Internet-based knowledge management.

For related S2KM learning resources, see S2KM's public read-only wikis:

• Structured settlement
• Structured settlement public policy
• Web 2.0 for lawyers

From a structured settlement perspective, the strategic business overlap with special needs attorneys encompasses disabled personal injury victims, their families and trial attorneys. Various knowledge leaders, knowledge networks and communities of practice within this strategic business and public domain utilize alternative terminology to describe their businesses without comparative analysis of the terminology itself. Here are some recommended resources to help special needs attorneys understand this growing legal market segment:

• Settlement law - hardcopy textbooks:
  • Robert W. Wood
    • "Taxation of Damage Awards and Settlement Payments"
    • "Qualified Settlement Funds and 468B"
  • Matt Garretson: "Negotiating and Settling Tort Cases"
  • Stuart Zimring, Rebecca Morgan and Bradley Frigon: "Fundamentals of Special Needs Trusts"
• Structured settlement law - Daniel Hindert, Joseph Dehner and Patrick Hindert: "Structured Settlements and Periodic Payment Judgments"
• Settlement consulting - see S2KM's report and analysis of Joseph DiGangi's presentation at the 2009 NSSTA winter meeting.
• Settlement planning - see S2KM's report about the SSP 2009 conference.
• Special needs settlement planning - see S2KM's report about the ASNP 2009 conference and Tim Nay interview.

S2KM regularly attends and publishes reports summarizing and analyzing national educational conferences sponsored by selected professional associations and universities whose speakers and attendees participate within the strategic business overlap of structured settlements and special needs law:

• National Structured Settlement Trade Association (NSSTA)
• Society of Settlement Planners (SSP)
• National Association of Settlement Purchasers (NASP)
• American Association for Justice (AAJ)
• National Academy of Elder Law Attorneys (NAELA)
• Academy of Special Needs Planners (ASNP)
• National Alliance of Medicare Set-Aside Professionals (NAMSAP)
• Stetson Law School - Special Needs Trust conference

Strategic question: from a structured settlement perspective, what was most important about NAELA's first-ever Special Needs Summit? 

Strategic answer: None of the NAELA speakers or unprograms:

• Attempted to define "special needs law" or any of its ancillary legal and business domains.
• Addressed any of the following structured settlement legal priorities and developments - all of which are strategically important for special needs attorneys:
  • IRC sections 104(a), 130, 468B or 5891;
  • Treasury Hearings for IRC 104(a)(2) regulations
  • Treasury 2009-10 Priority Guidance Plan - dropping single claimant 468B.
  • Spencer v. Hartford class action lawsuit - alleging civil RICO violations.
  • Unauthorized practice of law
  • Dissipation studies
  • Single claimant 468B funds
  • Executive Life of New York
  • Secondary structured settlement annuity market:
    • State structured settlement protection statutes.
    • J.G. Wentworth bankruptcy
    • Fresno County factoring cases
    • Rapid Settlements arbitration model
    • California protection statute amendments - including "best interest" definition

Why should special needs attorneys be interested in structured settlement law? This S2KM structured settlement diagram summarizes a complex legal and financial transaction that requires special needs legal knowledge, documentation and representation and also presents business and career opportunities for special needs attorneys:

• IRC 468B qualified settlement funds
• IRC 130 qualified and non-qualified assignments
• Special needs trusts
• Medicare set-aside arrangements
• Structured settlement transfers

Additional S2KM structured settlement resources for special needs attorneys interested in learning more about structured settlement law:

• Market surveys
• Growing the market
• Structured settlements in 2009
• structured settlement wiki
• structured settlement public policy wiki.

S2KM's next blog post will analyze NAELA's Special Needs Summit from an Internet-based knowledge management perspective.

Structured Settlements in 2010 - 1

2010 promises to be an important year for the structured settlement industry.

Strategic structured settlement priorities for 2010:

• Public policy - what laws currently define structured settlement public policy and how do these laws impact:
  • 468B qualified settlement funds;
  • Non-qualified 130 structured settlements;
  • Structured settlement factoring transactions?
• Legislative reform - how will anticipated new legislation change structured settlements:
  • Health care reform;
  • Financial reform;
  • Tax reform?
• Business standards and practices - what business standards and practices will prevail following:
  • SSP's Standards of Professional Conduct;
  • Spencer v. Hartford;
  • J.G. Wentworth's re-emergence from bankruptcy;
  • Fresno County factoring cases and California SB 510
    
• Business models - who will create new business models and success metrics for:
  • Structured settlement claim management;
  • Settlement consulting;
  • Structured settlement secondary market;
  • Internet-based structured settlements?

Professional association meetings - S2KM will report structured settlement and settlement consulting educational results from four (4) professional association meetings during the first six (6) months of 2010:

• NAELA Special Needs Summit - February 25-27 in New Orleans;
• ASNP Annual Meeting - March 19-20 in Charleston, S.C.
• SSP Annual Meeting - April 27-28 in Washington, D.C.
• NSSTA Annual Meeting - May 4-6 in Washington, D.C.

For prior S2KM reports about structured settlement and settlement consulting professional associations, see S2KM's structured settlement wiki.

For S2KM's most recent strategic analysis of the structured settlement industry, see S2KM's blog post "Structured Settlements in 2009".

Structured Settlements in 2009 - 2

This S2KM post follows "Structured Settlements in 2009 - 1" and features topical links to S2KM 2009 blog reports.

For 2010 industry updates, please continue to visit S2KM's blog as well as S2KM's structured settlement wiki.

Prior S2KM annual industry reports:

• Structured settlements in 2008
• Structured settlements in 2007
• Structured settlements in 2006

Professional Association Meetings

• NSSTA - National Structured Settlement Trade Association
  • Winter meeting
  • Annual meeting
  • Fall meeting
• SSP - Society of Settlement Planners
  • Preview
  • Annual meeting
• NASP - National Association of Settlement Purchasers
  • Part 1
  • Part 2
  • Part 3
• ASNP - Academy of Special Needs Planners
  • Annual meeting
  • Tim Nay interview

Settlement Consulting

• Part 1
• Part 2
• Part 3
• Part 4

Spencer v. Hartford

• Report 1
• Report 2
• Report 3
• Report 4

IRC 468B Qualified Settlement Funds

• Single Claimant 468B QSF Update
• IRC 468B and 5891
• Robert Wood's QSF Book
  • Summary and Review
  • Robert Wood Interview
• Jeremy Babener's QSF Paper
  • Summary
    
  • Review
    • Part 1
    • Part 2
  • Jeremy Babener Interview
• US Treasury Priority Guidance Plan 2009-2010

Dissipation Studies

• Introduction
• Jeremy Babener's Dissipation Paper
  • Summary and Review
  • Jeremy Babener Interview
  • Jeremy Babener Responds

Structured Settlement Credo

• Part 1
• Part 2
• Part 3
• Part 4
• Part 5

Rapid Settlements

• Pacific Life v. Rapid Settlements
• Allstate v. Rapid Settlements

Fresno County Factoring Cases

• Report 1
• Report 2
• Report 3

Additional S2KM Analysis

• Re-Thinking Structured Settlements
• Structured Settlement 2009 Mid-Year Update
• Structured Settlement 2009 Strategic Analysis
• Structured Settlements and Government Benefits
• Settlement Trust Due Diligence

Additional Primary Market Developments

• Forge Purchases TSSG
• Richard Halpern

Additional Secondary Market Developments

• S&P Withdraws JG Wentworth Credit Ratings
• Structured Settlement Securitizations

"Structured Settlements and Periodic Payment Judgments"

• S2P2J Release 45
• S2P2J Release 46

NASP 2009 Annual Meeting - 3

This blog post continues S2KM's summary and analysis of the NASP 2009 Annual Meeting. Prior S2KM blog posts about NASP are accessible on S2KM's structured settlement wiki.

NASP's 2009 strategic educational analysis occurred primarily during a two-hour panel discussion titled "Re-thinking Structured Settlements". S2KM assisted NASP in organizing this panel discussion. Jeremy Babener's NASP presentation titled "Factoring and the Structured Settlement Tax Subsidy" preceded and contributed to NASP's strategic discussions.

NASP Panel Discussion: "Re-thinking Structured Settlements".

Moderator: Earl Nesbitt, Executive Director of NASP.

Panelists: Jeremy Babener; Matthew Bracy; Daniel Hindert; Richard Risk; Andrew Savysky; Robin Shapiro; Michael Upchurch.

Format: S2KM identified and submitted to NASP a preliminary list of strategic structured settlement questions. NASP encouraged the panelists to identify and address S2KM questions that most interested them. NASP allocated time for audience questions and participation.

Primary S2KM questions addressed by the NASP panel:

• Which 2009 events and developments (legal; financial; political) will most significantly impact the future of structured settlements?
• What are the best and worst structured settlement business practices?
• Are factoring transactions good or bad for structured settlements?
• Does public policy support state court ordered structured settlement factoring transactions?
• How has the financial crisis changed the structured settlement market? Note: although NASP's strategic panel acknowledged the importance of this issue, the panel also recognized the related comprehensive discussion by the NASP "Capital Markets" panel.

2009 structured settlement developments - as sequentially identified and discussed by the NASP panel:

• Financial and credit crisis - addressing both primary and secondary market consequences;
• Election of President Obama - highlighting anticipated legislation including health care reform and tax reform;
• J.G. Wentworth bankruptcy - what it means for traditional secondary market business models;
• Primary market departures - why leading structured settlement annuity providers continue to leave the market;
• Diminishing annuity sales - why structured settlement annuity sales are down when fixed annuity sales generally are way up;
• Spencer v. Hartford - how the recent United States Second Circuit Court decision (denying Hartford's appeal) impacts the Hartford class action lawsuit and which other structured settlement programs are now at risk for potential RICO class action lawsuits?
• Revised California protection statute - viewed by the panel as a legislative victory for the structured settlement industry and featuring specific "best interest" criteria for state judges to consider in California settlement transfer cases.
• Fresno County cases - viewed by the panel as a judicial victory for the structured settlement industry with an appellate court ruling that public policy supports state court approved structured settlement factoring transactions.
• Rapid Settlement cases - viewed by the panel as a victory for the structured settlement industry with continuing judicial denial of arbitration alternatives to state court approved transfers pursuant to IRC 5891 and state structured settlement protection statutes.
• Scott Rothstein ponzi scheme - identified as a legal and public relations reminder that all participants in settlements featuring periodic payments with potential subsequent payment transfers would benefit from applicable legislation (protection statutes) and required state court approvals.

Best and worst business standards and practices - as identified and discussed by the NASP panel:

• Primary market
  • Best practices
    • SSP's "Standards of Professional Conduct for Settlement Planners" - including Rule 9 titled "Factoring Structured Settlements";
    • IRC 468B qualified settlement funds;
    • Full market quoting surveys;
    • Multiple (blended) product offerings, licensing and expertise.
  • Worst practices
    • Alleged RICO violations in the Spencer v. Hartford class action lawsuit;
    • Over-structuring the wrong cases and with the wrong periodic payments;
    • Lack of disclosure to injury victims - about compensation sharing; conflicts of interest; IRC 5891; and state protection statutes;
    • No applicable "best interest" legislation or standards;
    • Mischaracterization by and of "agents" (loyal to annuity providers) as "brokers" (loyal to injury victims);
    • Defendant "approved lists" of agents and funding companies;
    • Affiliated company funding programs;
    • "Pay for play" endorsements by professional associations.
• Secondary market
  • Best practices
    • Business practices required by IRC 5891 and NCOIL's model state structured settlement protection statute - including judicial approval; best interest standard; disclosure; notification;
    • Standards and business practices endorsed by NASP;
    • Competitive bidding fostered by the Internet.
  • Worst practices
    • "Cash now" advertising;
    • Non-competitive bidding fostered by television advertising;
    • Failure to fund (or delayed funding) of court ordered settlement transfers.

Is the secondary market good or bad for structured settlements? This question was discussed in detail during the NASP 2008 Annual Meeting with Jack Meligan and Michael Upchurch providing a primary market critique of the secondary market. NASP's 2009 Annual Meeting featured two published critics of secondary market business behavior: Judge Edward Burke of Arizona and attorney Daniel Hindert of Utah. In addition, Michael Upchurch participated on the NASP strategic analysis panel. If the NASP program reached any conclusion for this issue, it was: the secondary structured settlement market is a reality. Whether the secondary market is good or bad for structured settlements depends upon business behavior and business results in both the primary and secondary markets.

Does public policy support state court ordered structured settlement factoring transactions? Jeremy Babener discussed the public policy arguments for and against factoring transactions. Babener concluded that more information is needed to make a comprehensive public policy declaration. The recent California appellate court decision in Henderson v. Scioteco holds that public policy supports state court approved factoring transactions. Babener, acknowledged the importance of the decision, but disagreed with the California court's characterization of IRC 5891 as an "express sanction" of factoring. Richard Risk agreed with Babener that IRC 5891 does not contain a clear statement of public policy about factoring. Risk, however, pointed to examples of IRC 5891 legislative history that contradict any claim that public policy is against structured settlement factoring. As one example, Risk cited the Joint Committee on Taxation’s report released on March 18, 1999, “Tax Treatment of Structured Settlement Arrangements,” which Risk interprets as public policy support that structured settlements can co-exist with factoring.

S2KM applauds NASP for:

• Focusing much of its 2009 educational program on strategic structured settlement industry issues; and also for
• Inviting and featuring  structured settlement industry experts with diverse viewpoints and opinions.