Beyond Structured Settlements

2008 NSSTA Annual Meeting - 2

S2KM summarized the 2008 Annual Meeting of the National Structured Settlement Trade Association (NSSTA) in a prior blog post (2008 NSSTA Annual Meeting - 1). This blog post highlights industry issues and S2KM questions resulting from the NSSTA meeting.

"Transitional Industry" - in his first comments to NSSTA's membership, new NSSTA Executive Director Joseph Ricci characterized structured settlements as a "transitional industry". NSSTA's 2008 President Chris Diamantis and Michael Miller, Chairperson of NSSTA's Legal Committee, reinforced Ricci's perspective of industry change.

Industry Issue: what is the future of structured settlements?

NSSTA's Analytic Framework - for the structured settlement market.

• NSSTA's immediate past President Henry Strong identified NSSTA's management priorities during the NSSTA 2007 Fall Meeting:
  • Expand the structured settlement market;
  • Recapture the structured settlement brand;
  • Improve NSSTA's Internet technology competences;
  • Increase NSSTA's financial strength and accountability.
• NSSTA's new President Chris Diamantis identified NSSTA's strategic priorities during the NSSTA 2008 Annual Meeting:
  • Factoring
  • Advocacy and marketing
  • Professionalism
  • Governance and communication

S2KM Questions

• Expand the structured settlement market
  • What market growth would result from successfully integrating structured settlements and other government benefits with legislation and regulations that specifically address structured settlements?
  • What legal authority currently exists for structured settlements with other government benefits - including Medicare; Medicaid; Section 8 Housing; and Veterans benefits?
  • What specific legislation and regulations are necessary and possible to accomplish this legislative integration and market growth?
  • What public policies and other trade associations would favor such legislation and regulations?
  • How will the secondary annuity market impact structured settlement rules for government benefits?
  • What is NSSTA's strategy for defining and enacting structured settlement rules for government benefits?
  • What education, alliances and lobbying will a successful strategy require?
• Recapture the structured settlement brand
  • Who has what ownership rights to the "structured settlement" brand?
  • Did factoring companies steal the "structured settlement" brand - or has the primary market abandoned its customers by failing to proactively identify and address customer needs?
  • What impact has NSSTA's post-2001 factoring strategy had upon the growth of:
    • The primary structured settlement market?
    • The secondary structured settlement market?
• Improve NSSTA's Internet competencies
  • How are the world's leading trade associations and communities of practice using the Internet?
  • What about trade associations with whose members NSSTA members regularly interact?
  • What learning strategies and tools do these associations and communities utilize for Internet-based communication, collaboration and knowledge management?
  • What are the current Internet skill sets, applications and tools of NSSTA and NSSTA members?
  • What Internet skill sets, applications and resources are most important for NSSTA and NSSTA's members?
  • How does the Internet impact the structured settlement brand and NSSTA's business model?
• Increase NSSTA's financial strength and accountability
  • What is NSSTA's current financial status?
  • What financial information does NSSTA share with its members?
  • What are NSSTA's options and strategy for increasing:
    • NSSTA membership?
    • NSSTAPAC contributions?
  • Should NSSTA members anticipate dues increases?
  • Are NSSTA dues increases necessary and/or justifiable?
  • From a financial perspective, what are NSSTA's most important resources and priorities?
• Factoring
  • Why is factoring NSSTA's #1 strategic issue?
  • What are NSSTA's current factoring objectives and strategy?
  • What successes can NSSTA identify for its post-2001 factoring strategy?
  • Will NSSTA's new factoring strategy include:
    • Industry leadership for structured settlement factoring transaction issues?
    • Education for NSSTA members and structured settlement stakeholders about the secondary markets?
    • Discussion about best secondary market practices for annuity providers and structured settlement intermediaries?
    • Communication and shared learning with the National Association of Settlement Purchasers (NASP)?
    • Review of the NSSTA Bylaw Amendments about factoring?
• Advocacy and marketing
  • What, and to whom, is NSSTA advocating and marketing?
  • What is NSSTA's political position for single claimant 468B funds?
  • What is NSSTA's strategy for growing the structured settlement market?
  • What is NSSTA's strategy for integrating structured settlements with other government benefits?   
    
  • What is NSSTA's Internet strategy for advocating and marketing structured settlements?
  • Which other trade associations represent potential NSSTA partners for advocating and marketing structured settlements?   
• Professionalism
  • What is the status of the Broker Relationship Initiative (BRI) and the BRI "Standards of Professional Conduct for Structured Settlement Consultants"?
  • Have any NSSTA Directors or representatives compared:   
    
    • The proposed BRI Standards of Professional Conduct with the SSP Standards of Professional Conduct ?
    • The NSSTA certification program (CSSC) with the SSP certification program (RSP)?  
    • NSSTA educational programs with SSP educational programs.
  • In advocating and marketing structured settlements, will NSSTA address standards of professional practice?   
    
• Governance and communication
  
  • What has NSSTA done to identify, recruit and promote the next generation of structured settlement leaders?
  • Who are the next structured settlement industry leaders?
  • How is NSSTA using the Internet to improve its governance and communication?   
    
  • What is NSSTA's policy and strategy for working with:
    
    • Other trade associations?
    • Structured settlement journalists?
  • Is NSSTA enforcing its recent factoring Bylaw Amendments?   
    
  • How does NSSTA evaluate its own performance - including the performance of its committees and management company?   
  • How can web 2.0 tools and technologies improve NSSTA's performance?

For additional S2KM coverage about NSSTA and related trade associations, see S2KM's Structured Settlement Wiki.

Disclaimer: Patrick Hindert, S2KM's Managing Director and blog author, is an associate member of NSSTA.  Hindert formerly served as a NSSTA President, Director, Treasurer, NSSTAPAC Chairperson, and Chairperson of NSSTA's Legislation and Regulation Committee.  Neither S2KM nor Hindert, however, speak for, or on behalf of, NSSTA or any other trade association or business organization.

2008 NSSTA Annual Meeting - 1

The National Structured Settlement Trade Association (NSSTA) hosted its 2008 Annual Meeting at the Hilton La Jolla Torrey Pines Resort April 16-19. Approximately 250 persons attended.

This S2KM blog post summarizes the 2008 NSSTA Annual Meeting.  A subsequent S2KM blog post will provide observations and commentary.

The 2008 NSSTA Annual Meeting lacked a specific theme and keynote speaker. However, in his brief introductory comments to NSSTA members, newly-named NSSTA Executive Director Joseph Ricci set the meeting tone when he characterized structured settlements as a "transitional industry". Ricci, representing SmithBucklin, NSSTA's new management company, succeeds Randy Dyer as Executive Director.  In La Jolla, NSSTA honored and thanked Elvie Lou Luetge, Dyer's longtime assistant, "for her many years of dedicated service to NSSTA".

Additional Highlights from the NSSTA Annual Meeting:

• Retiring NSSTA President Henry Strong introduced Chris Diamantis as NSSTA's 22nd President. Speaking on behalf of the NSSTA Board of Directors, Strong had earlier identified the following management priorities for NSSTA and SmithBucklin at the NSSTA 2007 Fall Meeting:
  • Expand the structured settlement market;
  • Recapture the structured settlement brand;
  • Improve NSSTA's Internet technology competences;
  • Increase NSSTA's financial strength and accountability.
• Diamantis confirmed a "New Age" for NSSTA with Ricci and SmithBucklin.  He also summarized the results from NSSTA's most recent strategic plan. To better "define and confront its challenges", Diamantis identified the following strategic issues as prioritized by NSSTA's Board of Directors:
  • Factoring
  • Advocacy and marketing
  • Professionalism
  • Governance and communication
• Diamantis introduced the following new Directors, elected by NSSTA's voting members, to replace retiring NSSTA Board members Jeff Bowers, John Roeser, and J.P. Steele:
  • Dan Durbin
  • Jim Logan
  • Larry Niemi
• Steele announced the results of a Structured Settlements Survey Report sponsored by AIG and conducted in September 2007 by Esearch.com, Inc. The results of the survey, which appear on the AIG website, highlight the need to better educate plaintiff attorneys and injury victims about structured settlements.
• NSSTA Lobbyist Eric Vaughn delivered an informative "Washington Report". Vaughn's report:
  • Analyzed the upcoming 2008 election from a structured settlement perspective;
  • Summarized current structured settlement legislative and regulatory issues;
  • Highlighted federal IRA-like proposals for "Disability Savings Accounts" as "the most critical legislative issue" confronting the structured settlement industry;
  • Announced NSSTA's intention to expand its legislative alliances with other trade associations;
  • Further reported:
    
    • A communication from a recent White House meeting where one participant predicted the structured settlement market could grow to $12 to $18 billion per year - if structured settlements can successfully be integrated with other government benefits including Medicare and Medicaid;
    • Congress has pushed back enforcement of the Deficit Reduction Act of 2005.  Regulations are expected.
  • CMS is not yet enforcing or requiring MSAs in liability cases.  Regulations are expected. 

• As part of a NSSTA Legal Committee educational report that also featured Vaughn and tax expert Tom Ronce, Committee Chairman Michael Miller: 
  
  • Echoed the theme of industry change by highlighting the growing number and complexity of structured settlement legal cases;
  • Summarized recent NSSTA Legal Committee education topics including:
    • Agent responsibilities and exposures;
    • Settlement documentation. 

• Provided only the second educational presentation about structured settlement factoring for NSSTA members since 2001 - the previous NSSTA presentation about factoring occurred at the 2007 NSSTA Winter Meeting. In addition to his historical overview of factoring, Miller also summarized results from 100 factoring cases in which his law firm, Drinker Biddle, has participated since January 2008.
  • Of the 100 cases:
    • State judges approved 88 cases and denied 2 cases;      
      
    • 10 cases were withdrawn prior to a judicial decision.      
      
  • Miller listed the discount rates for each case and characterized the discount rates as generally excessive. 

• Other topics and speakers at the 2008 NSSTA Annual included:
  • An Actuary's Perspective on Structured Settlement Pricing - Joel Cohn
  • State Guaranty Funds Primer - Craig Ulman
  • How to Educate Attorneys on Special Needs Trusts - Bradley Frigon
  • Etiquette Through the Eyes of the Mediator - Bill Burrow, Troy Roe, Andrew Albert, Pat Farber       
  • The Cost of Rating It Wrong - Robert Michael Shavelle, Vinaya Sharma
  • Mass Tort Insiders - Thomas Girardi, Pat Farber, Walter Lack      
  • Personal Branding - Peter Montoya
  • The Next Frontier - James Logan, Leah Jamison

For S2KM's most recent coverage of NSSTA see:

• 2008 NSSTA Winter Meeting
  
• 2007 NSSTA Fall Meeting
   

West Virginia Update

The West Virginia legislature has amended and reenacted the state's current structured settlement protection statute.  According to Representative Ronald N. Walters, one of the bill's sponsors, West Virginia Governor Joe Manchin is expected to sign House Bill 4613 into law within the next few days.

The reenacted statute is noticeably different than West Virginia House Bill 4380 which S2KM previously summarized. Most significantly, the reenacted statute does not include any maximum discount rate. The original bill contained a maximum discount rate not to exceed "the current annual average percentage rate of interest on twenty year residual mortgages offered in this state, as determined by the banking commissioner." Factoring companies claimed this maximum discount rate would eliminate structured settlement transfers in West Virginia. Walters acknowledged his original intent was to do just that.

If signed into law by Governor Manchin, the amended West Virginia statute (now titled House Bill 4613) will:

• Add some consistency between West Virginia's statute, IRC section 5891 and the Model State Structured Settlement Protection Act (Model Act) by:
  • Broadening application from "an infant or an incompetent person" to anyone with structured settlement payment rights arising from a personal injury or other claim; and
  • Eliminating a $40,000 threshold amount;
• Confirm that a court may appoint a guardian ad litem for any person; and must appoint a guardian ad litem for an infant, an incompetent or a ward of the court;
• The court will award the guardian ad litem reasonable fees for representing the consumer.
• The transfer company will pay for "such attorneys' fees and costs".
• Require the guardian ad litem to:
  • Review the requisite disclosures;
  • Make an independent inquiry to determine whether the proposed transfer:
    • Is fair and reasonable;
    • In the best interests of the consumer and any dependents of the consumer;
    • Has not been attempted or accomplished before.
• Report the results of that inquiry to the court during the hearing;
• Inform the consumer about "possible adverse tax consequence to the consumer" - a responsibility the guardian ad litem and the transfer company will now jointly share in West Virginia;
• Reconfirm the current West Virginia approval standard: the consumer must now "clearly" demonstrate that
  • He or she, or his or her family, is facing a financial hardship that the transfer would alleviate and the transfer would not subject the consumer or the consumer's family to undue hardship; or
  • The transfer is in the best interest of the consumer.

Reaction from the factoring companies to the new West Virginia statute has been generally positive. According to Earl Nesbitt, Executive Director of the National Association of Settlement Purchasers (NASP), the amended West Virginia legislation will have a "minimal impact".

Nesbitt, however, did express concern about NSSTA's conduct (or lack thereof) in West Virginia. In Nesbitt's view, NSSTA's failure to actively lobby for the Model Act in West Virginia violated the spirit, if not the letter, of NSSTA's 2000 agreement with NASP to support the Model Act.

NSSTA representatives have refused to comment about the West Virginia legislation - except to say  "NSSTA supports the Model Act."  According to Walters, NSSTA's General Counsel Craig Ulman did contact Walters early in the process to communicate that "NSSTA supports the Model Act". Other than one telephone communication, however, Walters said he has heard nothing from NSSTA and has received no support from NSSTA. "Craig [Ulman] told me I was on my own".

In Walters' view, "the Model Act does not go far enough". According to Walters, "West Virginia's new law will provide greater protection and greater clarification plus a tougher standard" than the Model Act. Walters said he may introduce additional legislation in 2009 requiring factoring companies to have insurance licenses.  Walters, one of legislative sponsors of West Virginia's House Bills 4380 and 4613, also manages the Charleston, West Virginia office of Structured Financial Associates, Inc. (SFA). SFA is a NSSTA member although Walter individually is not.

Some of the questions NSSTA members should be asking their leaders (and themselves) about settlement transfers:

• What are NSSTA's legislative and educational objectives and strategies for settlement transfers?
• What does NSSTA mean when NSSTA says "we support the Model Act"?
• How did NSSTA support the Model Act in West Virginia?
• Is the new West Virginia statute better or worse than the Model Act:
  • For consumers?
  • For state judges?
  • For transfer companies?
• What should NSSTA members say to their clients and other structured settlement stakeholders about settlement transfers?
• What conduct by NSSTA members represents best professional practices relative to settlement transfer issues and responsibilities?

For additional information:

• West Virginia's Structured Settlement Protection Statute - see this prior S2KM blog post.
• State Structured Settlement Protection Statutes - see Chapter 16 of "Structured Settlements and Periodic Payment Judgments"
• Secondary Life and Annuity Markets - see this prior S2KM blog post.

2008 AAPD Leadership Gala Dinner

On March 5, 2008, the American Association of People with Disabilities (AAPD) will host its 2008 Leadership Gala Dinner in Washington, D.C. Structured settlement leaders from both NSSTA and SSP will be attending the AAPD dinner - in addition to many Congressional and Disability leaders. Senator Bob Dole will be the Keynote Speaker. NSSTA is one of the event sponsors.

Founded in 1995, AAPD, according to its website , "is the largest cross-disability membership organization in the United States, working toward the economic self-sufficiency and political power for the more than 50 million Americans with disabilities. AAPD organizes the disability community to be a powerful force for change – economically, politically, and socially....AAPD works in coalition with other disability organizations for the full implementation and enforcement of disability nondiscrimination laws, particularly the Americans with Disabilities Act (ADA) of 1990 and the Rehabilitation Act of 1973".

The AAPD Leadership Gala Dinner serves as "a forum", according to the AAPD website: "for recognizing, empowering, and supporting both emerging and established leaders in the disability community, as well as for inspiring and mobilizing all attendees to increase their advocacy in support of realizing the promise of the Americans with Disabilities Act (ADA)."

The AAPD Gala will honor the 2008 recipients of AAPD's two leadership awards:

• Paul G. Hearne/AAPD Awards - Brett Eisenberg and Rahnee K. Patrick.
• Henry B. Betts Award - Eric Rosenthal.

Andrew J. Imparato, President and CEO of AAPD, was the featured speaker at NSSTA's 2007 Fall Meeting in Tampa, Forida. Imparato is a visionary and inspirational leader. The following comments appear in S2KM's earlier blog commentary about Imparato's presentation to NSSTA.

Andrew Imparato:

• "Outlined AAPD's strategy to:
  • Unite disabled persons as a political block and business market;
  • Change the social security statutory definition of "disability":
    • From "unable to work" to
    • Address "barriers to work" for disabled persons;
  • Create a disabled middle class - transitioning the disabled from poverty to economic self-sufficiency;
  • Extend some variation of the current structured settlement legislative model to disabled persons generally.
• "Identified AAPD's political priorities for:
  • Social Security Disability Insurance (SSDI);
  • Supplemental Security Income (SSI);
  • Medicaid; and
  • Medicare.
• "Criticized current United States' government benefit programs for:
  • Maintaining people in poverty and punishing people who try to escape poverty;
  • Not designing Medicaid and Medicare for working age persons who want to work.
• "Encouraged NSSTA members to involve themselves at the local level with independent living centers.
• "Invited NSSTA members to join AAPD and attend AAPD's March 5, 2008 Gala in Washington, D.C."

Both NSSTA and SSP are to be congratulated for supporting AAPD. The annual AAPD Gala Leadership Dinner provides an appropriate forum for NSSTA and SSP to begin to identify common goals and collaboration opportunities.

For S2KM's most recent reporting about:

• The National Structured Settlement Trade Association (NSSTA) - see this S2KM blog post.
• The Society of Settlement Planners (SSP) - see this S2KM blog post.
• Note: Patrick Hindert, S2KM's blog author, is a member of AAPD, NSSTA and SSP.

Structured Settlement Transfers in Rhode Island

During the past three weeks, The Providence Journal has published two articles by Staff Writer Edward Fitzpatrick about structured settlement transfers (aka factoring) in Rhode Island.  The articles feature State Superior Court Judges who express strong negative opinions about factoring companies as well as concerns that existing laws and judicial procedures in Rhode Island may not adequately protect structured settlement recipients.

Under the Rhode Island structured settlement protection statute, enacted in 2001, state judges must determine whether a proposed transfer of the payment rights "is in the best interest of the payee taking into account the welfare and support of the payee's dependents." Judges must also ensure that persons attempting to sell structured settlement payment rights have been advised to speak with a lawyer.

According to The Providence Journal articles, these judicial concerns have already resulted in two changes for transfer transactions in Rhode Island:

• Superior Court Presiding Justice Joseph F. Rodgers, Jr. has announced new court procedures under which Rodgers will personally hear all structured settlement transfer applications to determine the number of transfers and to establish uniform procedures for filing and handling transfers; and
• Rhode Island Attorney General Patrick C. Lynch, responding to a request from Rodgers, has agreed to make available attorneys from the attorney general's consumer protection unit to advise individuals who are seeking to sell structured settlement payment rights to help ensure that people are making informed decisions.

Both of these changes appear to be positive steps for structured settlement recipients. They also highlight and reinforce some important features and safeguards included in most state structured settlement protection acts (SSPAs):

• The requirement of advanced court approval is a cornerstone of each of the SSPAs, as well as IRC section 5891;
• Since 2001, structured settlement transfers are not effective and are subject to a 40 percent excise tax unless approved in advance by a state court.
• Although the SSPAs are not uniform, most are derived from the Model Structured Settlement Protection Act (Model Act);
• Since 2000, the National Structured Settlement Trade Association (NSSTA) and the National Association of Settlement Purchasers (NASP) have jointly promoted the Model Act to state legislatures with considerable success including support from state attorneys general, state bar associations and the National Conference of Insurance Legislators (NCOIL);
• Under each of the SSPAs, factoring companies ("transferees") are required to make written disclosures to structured settlement recipients ("payees");
• These disclosures are designed to highlight the value of the payments to be transferred and to contrast the value with the amount of money the payee will actually receive;
• In most states, the transferee must disclose the "discounted present value" of the payments determined by using the "Applicable Federal Rate" most recently published by the Internal Revenue Service for purposes of valuing annuities;
• At least some aspects of the Model Act's procedural requirements are spelled out under each of the SSPAs;
• Most of the SSPAs include supplemental protections for payees and their dependents as well as for structured settlement obligors and annuity issuers;
• In most states, these supplemental protections include notice requirements for interested parties plus a finding by the court that payees have either received independent professional advice or have knowingly waived their right to receive it;
• Similar to Rhode Island, the standard for judicial approval in most states is the "best interest" test: is the proposed transfer in the best interest of the payee taking into account the welfare and support of the payee's dependents?
• As judges become more experienced and knowledgeable about structured settlement transfers, some states can be expected to set additional requirements under their SSPAs: for example, New Pennsylvania Rule 229.2, a state rule of civil procedure promulgated by the Pennsylvania Supreme Court in 2007.
• According to R. Stanton Wettick, Jr., an Allegheny County Judge who serves as Chairman of the Pennsylvania Civil Procedural Rules Committee: "New Rule 229.2 is intended to provide the additional information necessary for a trial court to determine whether a petition to transfer structured settlement payment rights meets the best interest standard".
• In addition, some states can be expected to propose amendments to their structured settlement protection statutes: for example, West Virginia House Bill 4380, currently under consideration by the West Virginia legislature.

The February 3, 2008 Providence Journal article (headlined "Judge Warns of Financial 'Vultures'") focuses on a single proposed factoring transaction.  The article highlights harsh comments about factoring companies from the reviewing Superior Court Judge Netti C. Vogel and other Rhode Island superior court judges. Their primary complaints about factoring companies include: excessive late night advertising and high discount rates; plus the lack of independent advice for payees. 

The simplicity of the immediate solution for these judicial concerns in Rhode Island is noteworthy:

• Superior Court Judge Vogel determined the proposed transfer in the McNeil case was not in McNeil's "best interest" and therefore denied the transfer.  Under the SSPAs, judges are the gatekeepers. They are assigned the responsibility for protecting payees under state structured settlement protection statutes.   
• With support from Rhode Island Attorney General Lynch, Presiding Superior Court Judge Rodgers has addressed three important issues:
  • Tracking the number of transfer requests;
  • Creating uniform procedures for transfer applications;
  • Making available state consumer protection attorneys "to see how the law is being applied, whether the law needs to change, and to provide people with some measure of representation."

Additional S2KM recommendations:

• Both the primary and secondary structured settlement markets need to improve their educational marketing for judges and other structured settlement stakeholders;
• Primary market professionals who want to improve the secondary market should change their strategy. Instead of merely attacking and complaining about factoring companies, they should: 
  
  • Educate themselves about the secondary markets;   
    
  • Assume a more proactive advisory role about settlement transfers;
  • Re-learn how to sell structured settlements and how to grow the structured settlement market in a changing legal environment.   
    
• All structured settlement participants should encourage the development of "best practices" for secondary market transactions including competitive bidding for all proposed transfers.

For additional information about structured settlement transfers, see:

• Chapter 16 of "Structured Settlements and Periodic Payment Judgments";
• Online resources provided in this S2KM blog post.
  

Addendum (posted February 20, 2008) - More descriptive recommendations for two settlement transfer resources:

• ABA Article – Co-authored by Daniel Hindert and Craig Ulman, the 2005 ABA article titled “Tranfers of Structure Settlement Payments: What Judges Should Know About Structured Settlement Protection Acts” is the definitive analysis for judges as well as for professionals who want to understand the role of judges in settlement transfers.
• “Structured Settlements and Periodic Payment Judgments” – Originally published in 1986, this hardcopy textbook is co-authored by Daniel Hindert, Joseph Dehner and Patrick Hindert.  Release 39 originated, and subsequent releases have updated, a new chapter titled “Transfers of Structured Settlement Payment Rights”.

West Virginia House Bill 4380

The 2000 agreement between the National Structured Settlement Trade Association (NSSTA) and the National Association of Settlement Purchasers (NASP) to support the Model Structured Settlement Protection Act (Model Act) appears to be in jeopardy this week in West Virginia.

Since 2000, NSSTA and NASP have jointly promoted the Model Act to state legislatures with considerable success including support from state attorneys general, state bar associations and the National Conference of Insurance Legislators (NCOIL). Forty-eight states have enacted structured settlement protection statutes many of which are patterned after the Model Act.  Recent amendments to these state protection statutes, such as Pennsylvania Rule 229.2, have generally received favorable reviews from both NSSTA and NASP.

NASP representatives, however, are accusing NSSTA of violating their legislative agreement by failing to oppose West Virginia House Bill 4380. Currently under consideration by the West Virginia House Banking and Insurance Committee, House Bill 4380 would amend and reenact Section 46A-6H-3 of the Code of West Virginia titled "Transfers of Right to Receive Future Payments".

The stated purpose of House Bill 4380 is "to increase protection of beneficiaries to structured settlements as they relate to settlement transfers". In its current form, House Bill 4380 contains three controversial provisions not included in the Model Act:

• A requirement for a court to approve a guardian ad litem for the consumer in all transfer cases;
• A "clear and convincing evidence...of financial hardship" standard in addition to the Model Act's "best interest" standard;
• A maximum discount rate not to exceed "the current annual average percentage rate of interest on twenty year residual mortgages offered in this state, as determined by the banking commissioner."

Representatives of NASP, which opposes House Bill 4380, claim the above provisions violate the Model Act and, if enacted, could effectively end structured settlement transfers in West Virginia. NASP representatives have called upon NSSTA to honor its agreement to support the Model Act by opposing House Bill 4380. NASP contends that NSSTA's failure to oppose House Bill 4380 is a de facto violation of their 2000 legislative agreement and threatens future cooperation between the two trade associations. In addition, they point out that Ronald N. Walters, one of legislative sponsors of House Bill 4380, also manages the Charleston, West Virginia office of Structured Financial Associates, Inc. (SFA).  SFA is a NSSTA member.

According to a NSSTA source, however, "NSSTA has had nothing to do with introducing House Bill 4380.  Although NSSTA does not intend to oppose House Bill 4380, NSSTA still approves the Model Act."

For additional information about state protection laws, see Section 16.04 ("Structured Settlement Protection Acts") in "Structured Settlements and Periodic Payment Judgments".

The King of Torts Addresses Structured Settlements

The keynote address by esteemed trial attorney Joseph Jamail (aka "The King of Torts") was one of the highlights of the NSSTA 2008 Winter Meeting.

Jamail and Jay Harvey, the immediate past-president of the Texas Trial Lawyers Association (TTLA), who also spoke at the NSSTA meeting in Austin, represent the most recent plaintiff attorneys to appear at NSSTA meetings to endorse structured settlements.

Among other endorsements from plaintiff attorneys, the King of Torts' structured settlement proclamations now appear on NSSTA's website :

• "Structured settlements provide the ultimate safeguard for settlement funds."
• "Structured settlements help lawyers protect the needy from the greedy."

The message and choreography of NSSTA's plaintiff attorney appearances and endorsements are strikingly similar. Escorted and introduced by, or featured with, their NSSTA-member structured settlement advisors (Robin Young for Joe Jamail), these trial attorneys announce their support for structured settlements and make positive, uplifting comments about the structured settlement industry. The NSSTA audience applauds - with enthusiastic standing ovations for celebrity attorneys such as the King of Torts. NSSTA allocates little or no time for questions. No controversial issues are addressed. Everyone walks away happy. NSSTA posts the positive sound bites on its website and declares a public relations victory.

NSSTA's continuing strategy to feature plaintiff attorney endorsements is understandable in the context of results from NSSTA's recent marketing study titled "A Study of the Structured Settlement Process Conducted on behalf of the National Structured Settlement Trade Association". This survey "of attorneys involved in structured settlements and structured settlement recipients" was conducted for NSSTA during 2006 and 2007 by the University of Georgia Research Center. The purpose of the study, as reported by Joseph M. Costello at the NSSTA 2007 Annual Meeting, was "to better understand the perceptions these stakeholders have of structured settlements".

Some of NSSTA's announced findings based upon research including telephone interviews with 43 plaintiff attorneys:

• 95 percent of the plaintiff attorneys surveyed said they were proponents of structured settlements;
• 75 percent said they would recommend a structured settlement in an appropriate case;
• 70 percent said they retain a structured settlement consultant;
• And yet, according to NSSTA:
  • Only 7% of personal injury settlements between $75,000 to $100,000 involve structured settlements; and only 30% of personal injury settlements over $1 million;
  • Plaintiff attorneys prefer (and presumably recommend) the following financial planning resources for their clients:
    • Trust company/department - 30%
    • Financial planner - 28%
    • Structured settlement consultant - 23%
    • No response - 19%

Among NSSTA's "lessons learned" from the survey: plaintiff attorneys are a critical point of contact for structured settlement education and marketing.

Based upon these findings, NSSTA's public relations strategy with plaintiff attorneys makes a lot of sense as a critical priority for the growth of structured settlements. Endorsements by prominent plaintiff attorneys (including especially "The King of Torts") are positive and valuable for the structured settlement industry.

To grow the structured settlement market, however, current industry stakeholders (including NSSTA, SSP, NASP and their members) need to engage attorneys in a more well-defined educational conversation about structured settlements. Targeted attorneys should include judges, mediators, special needs attorneys, trustees, guardians, defense attorneys, legislators and regulators - as well as plaintiff trial attorneys.

For plaintiff attorneys, this recommended educational conversation should address priorities S2KM previously identified in a blog post criticizing the lack of structured settlement education at the AAJ 2007 Annual Convention.

On a positive note for AAJ and structured settlements, the December 2007 issue of "Trial" magazine (the "Journal of the American Association for Justice") provides a small, but timely and related, educational step forward. The issue is titled "Find Your Way to Settlement - Smart Strategies for Your Next Case". Among many settlement articles and structured settlement advertisements, one article addresses structured settlements - Dov Apel's article: "Settling the Cerebral Palsy Case". In his article, Apel summarizes some (but far from all) of the most important structured settlement issues for plaintiff attorneys including: protecting the confidentiality of injury victims' personal medical information; and 468B qualified settlement funds.

In addition to Joseph Jamail's valuable endorsement and public relations sound bites (plus considerable annuity premium), what is the structured settlement legacy of The King of Torts? This author hopes Joseph Jamail's most important and lasting structured settlement contribution will result from his advice in Austin:

"Advocacy should be part of the practice and training of structured settlement professionals".

S2KM endorses the King of Torts' advice and further encourages:

• Continued structured settlement research and advocacy focused on injured and disabled persons;
• Continued education about structured settlement public policy and laws - including how to improve the laws and related legal processes;
• Respectful and open discussion about issues related to such research, advocacy, education and improvement.

For additional information about the role and responsibility of plaintiff attorneys in structured settlements, see Chapter 5 of "Structured Settlements and Periodic Payment Judgments".

Addendum 01282008

Since writing and publishing this post, the author has received comments from NSSTA representatives pointing out some of NSSTA's efforts and successes in engaging plaintiff attorneys in educational dialogue about structured settlements - including what needs to improve and change.  S2KM acknowledges NSSTA's efforts to engage some of its plaintiff attorney speakers in meaningful educational dialogue. President Henry Strong, in particular, should be recognized and thanked for his questions to plaintiff attorney Webb Brennan at the NSSTA 2007 Fall Meeting.  Although this author did not attend that presentation, Strong's questions apparently resulted in valuable and frank discussion about structured settlements including problems.  That type of discussion represents a positive step in refocusing and growing the structured settlement market and should be encouraged and continued. S2KM apologizes for missing the Webb Brennan discussion and for failing to sufficiently credit NSSTA in the above post for its efforts to develop meaningful educational dialogue with plaintiff attorneys.

NSSTA 2008 Winter Regional Meeting

The National Structured Settlement Trade Association (NSSTA) hosted its 2008 Winter Regional Meeting January 16-18 at the Barton Creek Resort in the Texas hill country west of Austin. Approximately 150 persons attended.

NSSTA's educational program and featured speakers highlighted some of the strategic changes impacting the structured settlement industry as well as the challenges facing NSSTA as a trade association.

Prominent NSSTA themes in Austin:

• Trial Attorneys - Historically defense-oriented, NSSTA now features prominent plaintiff attorneys at every meeting. "King of Torts" Joe Jamail was the keynote speaker in Austin. Jay Harvey, immediate past President of the Texas Trial Lawyers Association (TTLA), also spoke in Austin.
• Disabled Persons and Associations - NSSTA's new structured settlement marketing brochure features Megan O'Neil, a structured settlement recipient who works with the World Institute on Disability (WID). O'Neil was a featured speaker at NSSTA's 2007 Annual Meeting. NSSTA will be a primary sponsor of the American Association of Persons with Disabilities (AAPD) Gala Dinner March 5, 2008 in Washington, D.C. Andrew Imparato, AAPD's President, was a featured speaker at the  NSSTA 2007 Fall Regional Meeting. Imparato and AAPD promote and aspire to "empower" disabled persons which include structured settlement recipients.
• Government Benefits - NSSTA recently formed a government benefits committee which is currently co-chaired by Doug Brand and John McCulloch. In Austin, special needs attorney Pi-Yi Mayo spoke about special needs trusts and the Deficit Reduction Act of 2005 while special needs attorneys Robert Sagrillo and Robert Lewis participated on a panel that addressed the Medicare secondary payer rule and the Medicare, Medicaid and SCHIP Extension Act of 2007.
• Legal Documentation - Mike Miller and Toni Warbington repeated a presentation they made at NSSTA's 2007 Fall Meeting about the legal and practical issues associated with structured settlement legal documentation. Their presentation emphasized some of the potential legal exposures as well as recent case law.
• Legislative and Regulatory Developments - Eric Vaughn, NSSTA's lobbyist, summarized current Federal legislative developments and outlined NSSTA's political strategy including regulatory priorities and potential alliances with other trade associations. Craig Ulman, NSSTA Legal Counsel, provided a status report on Executive Life of New York.
• Marketing - NSSTA member Mark Wahlstrom, owner and host of The Settlement Channel, introduced a new email-based marketing strategy (titled "An Army of One") developed by NSSTA's Marketing Committee. As a reminder of why annuities are financially secure, Wayne Mehlman of the American Council of Life Insurers (ACLI) spoke about the solvency requirements and regulatory oversight of the Life Insurance Industry.
• Professionalism - Several NSSTA presentations addressed issues related to this topic. Lynn Courier provided an update on the Broker Relationship Initiative. Bo Short spoke about leadership. NSSTA members Mike Kelly, Teri Triplett and Will Shapiro discussed their personal strategies for maintaining and advancing their professionalism.

NSSTA's Challenges

• Leadership - With few exceptions, NSSTA's leadership currently consists of white males age 50 and over whose professional careers have been restricted to life insurance, casualty claims and traditional structured settlements. Where is the next generation of structured settlement leaders? Why aren't these future leaders attending and speaking at NSSTA meetings? What new skill sets, knowledge, experience and ideas will this new generation of leaders bring to the structured settlement industry? How will the current generation of structured settlement leaders capture and transfer their collective knowledge? How relevant and valuable is traditional structured settlement knowledge in a transitioning market with new laws and business models?
• All Things to All People - In Austin, NSSTA proposed to "represent all viewpoints and interests on all Federal and state legislative and regulatory issues" related to structured settlements. Is that possible - or even desirable? Can NSSTA successfully reconcile the competing interests of companies like AIG and associations like AAPD, WID, NAELA, AAJ, SSP, and their members, clients and constituents, on issues like single claimant 468B? Can NSSTA reconcile a "claim management" (defense controlled) structured settlement model with a "settlement planning" (plaintiff controlled) structured settlement model?
• Secondary Markets - How long, how effectively and how beneficially can NSSTA and its current leadership ignore (from an educational and professional responsibility perspective) the development of the secondary life and annuity markets? What impact will NSSTA's current strategy have upon the long-term growth of the primary structured settlement market? Have the factoring companies really stolen the "structured settlement" brand - or, alternatively, have NSSTA and its members abandoned and ignored their customers? Why not openly discuss settlement transfers at NSSTA meetings? Why not define what constitutes "best professional practices" and re-learn how to sell structured settlements in the new legal and business environment?
• Government Benefits - Both the Deficit Reduction Act of 2005 and the Medicare, Medicaid and SCHIP Extension Act of 2007 are likely to have a significant impact on the future of structured settlements. Can NSSTA successfully lobby to preserve and expand the use of structured settlements to fund special needs trusts and Medicare set-aside arrangements? Which traditional structured settlement annuity features will survive? What new knowledge, skill sets, services, resources and business models are necessary for current structured settlement participants to survive and remain successful?  Is NSSTA being truthful and/or credible when they tell Congress "structured settlements enable injured victims to live ...free of reliance on government assistance"?
  
• Unauthorized Practice of Law - The traditional claim management structured settlement model encourages (and in some cases requires) intermediaries to engage in the unauthorized practice of law - specifically, the "drafting of legal documents by non-lawyers". Structured settlement legal issues, including the drafting of legal documents, become even more complex in the settlement planning model which must regularly consider issues related to Medicare, Medicaid, special needs trusts, Medicare set-aside arrangements and the secondary life and annuity markets. The most recent NSSTA Regional Meeting presentations of "All Things Considered" have addressed structured settlement legal documentation.  These educational programs represent an important and valuable start in understanding what constitutes the authorized and unauthorized practice of structured settlement law. Hopefully, NSSTA and NSSTA's Legal Committee will continue this education.
• Internet Business Transition - Can NSSTA and its members successfully transition their business to the Internet? Does NSSTA have a strategy to accomplish this objective?  How can NSSTA use web 2.0 technologies and tools to improve its education and business processes?  Does Smith Bucklin, NSSTA's new association management company, possess the necessary skill sets and experience to help NSSTA and its members with this transition?  What is the next step?

Congratulations to NSSTA, especially President Henry Strong and Educational Committee Chairman William Tocchi, for a valuable 2008 Fall Regional Meeting.  The NSSTA 2008 Annual Meeting will take place April 16-19 in La Jolla, California.

For additional S2KM blog posts about NSSTA, see NSSTA 2007 Fall Regional Meeting and incorporated links.

Structured Settlements in 2007

Happy holidays from S2KM Limited. Thank you for reading S2KM's blog during 2007. This final 2007 S2KM blog post highlights some of this year's important structured settlement developments and issues.  For additional background information, see:

• S2KM Mid-2007 Structured Settlement Report
• Structured Settlements in 2006

Industry Growth and Development

• Industry insiders are predicting final 2007 structured settlement annuity sales (qualified and non-qualified) will match or slightly exceed total 2006 production of $6.1 billion.
• Membership growth in 2007 for the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP), the primary structured settlement trade associations, also appears flat. Neither of these associations has articulated a strategy for growing the structured settlement industry.
• NSSTA replaced long-time Executive Director Randy Dyer in 2007 with association management company Smith Bucklin. NSSTA has announced it will continue a business relationship with Dyer. However, NSSTA has not yet announced Dyer's new role or responsibilities.
• Annuity provider Mass Mutual exited the structured settlement industry in 2007 joining other recent industry departures such as Genworth, Travelers and Aegon. No new annuity providers entered the structured settlement market in 2007.
• The secondary life and annuity markets continued to be controversial within the structured settlement industry in 2007. Semetra resigned from NSSTA in 2007 based in part on their disagreement with NSSTA's Bylaw Amendments related to structured settlement factoring. Neither NSSTA nor SSP allows factoring companies to join their associations.
• Although the secondary structured settlement market continues to grow in 2007, the overall pace of its growth appears to have leveled off for many, but not all, participants.
• Preliminary strategic recognition and some consolidation continued during 2007 within these overlapping markets:
  
  • Structured settlements;
  • Personal injury settlement planning;
  • Litigation funding;
  • Special needs planning;
  • Secondary insurance and annuity markets.

Legislation and Regulations    

• New York Governor Eliot Spitzer announced a $750 million "agreement in principle" for Executive Life of New York in 2007. The agreement is designed to continue paying all ELNY annuitants 100% of their benefits. The announcement represents a public relations victory for the structured settlement industry. Many questions about the agreement, however, remain unanswered. For example: the amount of contributions from indemnity (casualty) insurers who own or have assigned structured settlement annuities.
• State Medicaid Agencies are continuing to adopt annuity provisions from the Deficit Reduction Act into their state Medicaid Plans. Interpretations and applications of these new annuity rules remain inconsistent creating process bottlenecks and denials. The impact of the secondary annuity markets on Medicaid qualification remains unclear in 2007. The Social Security Administration (SSA) announced in 2007 that it will draft POMS for annuities in 2008. For additional information about the Deficit Reduction Act, see:
  • Release 41 of "Structured Settlements and Periodic Payment Judgments";
  • Inconvenient Questions; and
  • NAELA Annuity Policy White Paper.
• 48 states have enacted structured settlement protection statutes. Overall, these statutes appear to be accomplishing their purposes and functioning with increasing certainty and efficiency. Pennsylvania's judiciary adopted Pennsyvania Rule 229.2 in 2007 tightening some rules and processes within that state's protection statute.
• The U.S. Treasury has not ruled on single claimant 468B funds in 2007.

Case Law - some of the significant 2007 cases:    

• DOJ Sovereign Immunity Defense - see "Drinker Biddle's Structured Settlement Update" for analysis of two DOJ sovereign immunity cases: Transamerica v. Settlement Capital and Continental Casualty v. United States.
• Primary Market Disclosure Case - "Pullman & Comley's Structured Settlement Insights" provided the first Internet analysis of Joseph v. The City of New York which Pullman & Comley characterizes as ""the first court opinion to analyze the requirements in structured settlement protection acts that disclosures be made when negotiating a structured settlement."
• Rapid Settlements cases challenging secondary market laws and business practices including:
  
  • Rapid v. Symetra; and
  • CNA v. Rapid Settlements

• Murphy v. IRS - Eleven months after ruling that taxing damage awards for nonphysical compensatory damages violated the United States Constitution, the United States Court of Appeals for the District of Columbia Circuit has reversed itself in Murphy v. IRS by holding that the United States can tax awards for emotional distress and injury to reputation.
• Macomber v. Travelers - the parties agreed to a confidential settlement in 2007.  It is unclear what legal precedents, if any, the earlier Connecticut State Supreme Court rulings in this case will hold for current or future structured settlement litigation.
  

Educational Programs and Resources

• Both NSSTA and SSP offered certification programs in 2007.    
• S2KM attended educational programs for the following trade associations in 2007 and wrote blog posts (see links) evaluating their structured settlement educational programs:          
  
  • National Structured Settlement Trade Association (NSSTA).          
  • Society of Settlement Planners (SSP)          
  • American Association for Justice (AAJ)          
  • National Academy of Elder Law Attorneys (NAELA)          
  • Academy of Special Needs Planners (ASNP)          
  • National Association of Settlement Purchasers (NASP)    
• The structured settlement industry continued to offer various additional educational resources in 2007:          
  
  • Blogs, podcasts, wikis and concept maps;          
    
  • Digital and hardcopy newsletters;          
    
  • Hardcopy legal textbooks.

Business Standards and Practices

• 2007 developments
  
  • Broker Relations Initiative - status report provided in this S2KM blog post.
  • SSP Ethics Project - status report provided in this S2KM blog post.
• 2007 issues:
  
  • Structured settlement public policy
  • Claim management vs. settlement planning
  • Consumer and investor protection including:
    
    • Compensation disclosure;
    • Informed consent;
    • Single claimant 468B funds;
    • Unfair claim practice legislation;
    • Fiduciary responsibilities for professional advisors.

• Additional compensation issues:
  • Rebating
  • Affinity programs
  • Secondary market transactions
• Unauthorized practice of law.

Secondary Life and Annuity Markets - 1

Recent developments related to the secondary life insurance and annuity markets should encourage several professional associations to learn more about these markets - and to provide improved education in 2008 for their members about these markets.

Responsible professional associations include:

• The National Structured Settlement Trade Association (NSSTA)
• The Society of Settlement Planners (SSP)
• The National Academy of Elder Law Attorneys (NAELA)
• The American Association for Justice (AAJ)
• The Academy of Special Needs Planners (ASNP)
• The Special Needs Alliance (SNA)

Recent secondary market developments include:

• Mealey's Conference: "Life Insurance in the Secondary Market" - Mealey's in-person conference, developed in collaboration with Drinker Biddle, is occuring December 11-12, 2007 at the Harvard Club of New York City.
• Deal Flow Media (DFM) - DFM, a publisher and educator focusing on specialty financial markets including life settlements, has announced it will enter the structured settlement market in 2008.
• A.M. Best - A.M. Best recently introduced "Best's Structured Finance Center", a web portal for the insurance-linked securities market.
• NCOIL - The National Conference of Insurance Legislators (NCOIL) adopted a Model Life Settlements Act at its most recent meeting.
  

For additional information about life settlements, see:

• Wikipedia's "life settlement" entry
  
• New York Insurance Department's "Life Settlements: Top Ten Questions".
• Deal Flow Media's "The Life Settlements Report"

For additional and related S2KM commentary, see:

• Structured Settlement Secondary Market
  • Structured Settlement Transfers
  • Settlement Transfer Update
  • Settlement Transfers - Release 39
  • How the Primary Market Views Factoring
  • NSSTA Bylaw Amendments
  • J.G. Wentworth v. Peachtree Settlement Funding
  • Settlement Transfers: Wentworth and Symetra
  • Rapid v. Symetra
  • Review of Robert Wood's article: "Structured Settlements: Factor vs.Commute".
  • See also: Chapter 16 in hardcopy "Structured Settlements and Periodic Payment Judgments" written by Daniel Hindert, Joseph Dehner and Patrick Hindert.
• National Association of Settlement Purchasers (NASP)
  
  • 2007 Annual Meeting
  • 2006 Annual Meeting
  • NASP Wiki
• Deal Flow Media
  • Deal Flow Media structured settlement webinar
• Drinker Biddle
  • Drinker Biddle's "Structured Settlement Update"