Beyond Structured Settlements

Delta Settlements 2011 Annual Meeting

When David and Dorothy Snyder sold Delta Settlements to Michael Upchurch in 2008, David Snyder stated: "One of the main reasons Dorothy and I selected Michael Upchurch to purchase our company is that we felt he will bring much needed "added value" to you, the [Delta] Producers. ... We are confident that once you have had a chance to work with Michael, you too will feel comfortable with his honesty and integrity, and will help him grow the company to become the foremost plaintiff firm in the business."

Based upon Delta Settlements 2011 Annual Meeting this past week on Amelia Island, Florida, the Snyders' evaluation of Upchurch and the "value added" he brings to Delta and its producers was justified. Upchurch has continued to focus Delta's marketing on injury victims and their attorneys while improving Delta's operating systems and technology.

Delta's producers and administrators were joined at their annual meeting by structured settlement representatives from Allstate, MetLife, Pacific Life, and Prudential, who separately highlighted their companys' financial strength, product innovations and servicing improvements.

Delta's guest speakers also included Patrick Hindert, Managing Director of The Settlement Services Group (TSSG), primary author of "Beyond Structured Settlements" and co-author of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

Titled "Structured Settlements and Settlement Planning", Hindert's presentation featured:

• Diagrams and maps to help explain transitional industry issues; 
• Highlights from the SSP and NSSTA 2011 Annual Meetings;
• Analysis of Spencer v. Hartford and Executive Life of New York; plus
• A private educational wiki for Delta to enhance and extend its Amelia Island learning experience.

SSP and NSSTA 2011 Annual Meetings - 2

This blog post continues S2KM's discussion of the 2011 annual conferences of the Society of Settlement Planners (SSP) and the National Structured Settlement Trade Association (NSSTA) with a strategic perspective. A prior S2KM blog post identified speakers and topics featured by SSP and NSSTA. Subsequent S2KM blog posts will summarize and provide commentary about selected speaker presentations.

SSP's conference, open to members and non-members, addressed two general topics: "Special Needs Settlement Planning" and "Practice Improvement: Marketing and New Products". NSSTA's conference, for members only, celebrated NSSTA's 25th anniversary. It also included a NSSTA business meeting with reports from immediate Past-President Michael Kelly, new President Dan Finn, Executive Director Eric Vaughn, Assistant Executive Director Peter Arnold and the Chairpersons of NSSTA's several committees.

One of the highlights of NSSTA's 2011 conference was the honoring of NSSTA's past presidents. David Ringler, NSSTA's first president, spoke briefly at the conference and re-stated his original vision for NSSTA:

"Although we do need to constantly be on the watch for legislative change, I still believe having a place where everyone and anyone can sit down with each other and discuss the issues and viewpoints regardless of beliefs is the most important reason for NSSTA. I have called it a common “talk table”, although I agree that is not exactly a very elegant term. If we can continue this tradition, there is no problem we cannot overcome."

Many industry participants, including some NSSTA members, question whether NSSTA has lost sight of this original purpose and tradition. Does NSSTA continue to represent "a place where everyone and anyone can sit down with each other and discuss [structured settlement] issues and viewpoints regardless of beliefs"? The answer, unfortunately, is "no".

For the past several years, NSSTA's leadership has superimposed a strict political litmus test for membership as well as for topics and speakers at its educational conferences. As one result, structured settlement industry participants with alternative issues, viewpoints, beliefs and educational interests have founded two other national structured settlement associations: the National Association of Settlement Purchasers (NASP) in 1996 and SSP in 2000.

Fortunately for NSSTA members and the structured settlement industry, based upon its 2011 conference, NSSTA appears to be expanding the scope of its educational programs to address important but controversial industry topics such as IRC 468B Qualified Settlement Funds, IRC 5891 and state structured settlement protection statutes. The educational programs offered by both NSSTA and SSP also increasingly discuss three fundamental transitions reshaping the structured settlement industry:

• From structured settlements to settlement planning;
• From a singular, illiquid, and non-assignable product to multiple products with greater flexibility to address changing needs and circumstances of injury victims;
• From traditional (pre-Internet) to web-based business models, processes and skill sets.

With the structured settlement industry facing these and other challenges, including aging leadership, declining structured settlement annuity sales, anticipated legislative changes plus an increasingly complex legal and regulatory business environment, where is the strategic vision and what are the strategic priorities for NSSTA and SSP?

NSSTA President Dan Finn and Executive Director Eric Vaughn identified the following:

• NSSTA challenges:
  • Promote the expanded use of structured settlements
  • Expand the structured settlement market
  • Protect structured settlement annuitants
  • Defend IRC sections 104(a) and 130
  • Enhance the Certified Structured Settlement Consultant (CSSC) program
  • Unify the structured settlement industry
• NSSTA objectives
  • Expand IRC section 104 (a)(2) to include wrongful imprisonment and sexual abuse cases
  • Expand government use of structured settlements
  • Promote structuring of MSAs in liability cases
  • Promote the structuring of Social Security disability payments
  • Promote the professionalism of structured settlements

SSP President Jack Meligan prioritized three objectives:

• Improve SSP's marketing to plaintiff attorneys
• Create an SSP lobbying presence
• Enhance the Registered Settlement Planner (RSP) certification program

Two of NSSTA's featured speakers, Jim Morris, President, Chairman and CEO of Pacific Life Insurance Company, and William T. Robinson lll, President-Elect of the American Bar Association (ABA), added important and positive assessments for structured settlements.

Morris 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. As corollaries to Morris' presentation:

• NSSTA announced that two highly rated annuity providers, Mutual of Omaha and Berkshire Hathaway, have re-entered the structured settlement market; and
• Thomas Ronce and Craig Ulman clarified the life and health guaranty association system and how that system applies to structured settlements.

Robinson praised structured settlements as "professional and dignified solutions" for injury victims based upon his first-hand experience as a litigation attorney. Structured settlements represent "state of the art" tools for all attorneys to consider when negotiating and resolving personal injury cases according to Robinson. In his capacity as President-Elect of the ABA: Robinson also:

• Spotlighted the current funding crisis facing state courts; and
• Suggested the ABA and NSSTA should identify shared interests and lobbying opportunities.

For S2KM's reporting and commentary about past SSP and NSSTA conferences, see S2KM's structured settlement wiki.

SSP and NSSTA 2011 Annual Meetings - 1

This blog post begins S2KM's reporting and outlines results from the 2011 annual meetings of the Society of Settlement Planners (SSP - May 15-17) and the National Structured Settlement Trade Association (NSSTA - May 18-20).

Elections

• NSSTA
  • President - Dan Finn
  • New Directors - Tom Donahue; Christine Logan; Kevin Silo; Mike Wostoupal
• SSP
  • President - Jack Meligan
  • New Directors - Tony Alfieri; Tim Denehy; Charles Schell; Michelle Whitmore.

Honors - NSSTA

• President's Award - Betty Gregware
• Leadership Award - Toni Warbington
• CSSC Designation Certificates
• NSSTA Past Presidents - honoring NSSTA's 25th Anniversary

Educational Programs - speakers by topic with recommended related resources from "Structured Settlements and Periodic Payment Judgments" (S2P2J), S2KM wikis and prior S2KM blog posts.

Legislative Update

• NSSTA - Eric Vaughn: Washington Update
  
• SSP - Roy Franco: HR 1063
  

Government Benefits

• NSSTA
  • MSA Panel -Toni Warbington; Doug Brand; David Korch; David Hayes
  • Special Needs Trusts - Jay Sangerman
• SSP
  • Liability MSAs - Jason Lazarus; Roy Franco; Mark Pololizio; Doug Shaw
  • Liens Panel - Roy Franco; Tevra Johnson
• Recommended resources
  • S2P2J Chapter 15 - "Government Benefits and Structured Settlements"
  • S2 wiki - "Government Benefits"

Taxation

• NSSTA: 468B QSF Funds - Martin Jacobson
• SSP
  • 468B QSF Funds - Robert Wood
  • Taxation of Damages - Robert Wood
  • Medical Expense and Estate Tax Issues - Jeremy Babener
• Recommended resources
  • S2P2J Chapter 2 - "Taxation of Damages"
  • S2P2J Section 3.08B - "Section 468B Settlement Funds"
  • S2 public policy wiki pages featuring: Robert Wood and Jeremy Babener

Stakeholder Perspectives

• NSSTA
  • Attorneys - William Robinson lll, President-Elect of the American Bar Association
  • Legal Committee Update (including secondary market) - Peter Vodola; Amy Ravitz; Kathy Scanlon
  • Financial Planners - Laura Tarbox
  • Judges - Peter Vodola, Edward Burke, Stephen Denton
  • Unions - Michael Rott
• SSP
  • Special Needs Attorneys - Kevin Urbatsch; Michele Fuller
  • Plaintiff Attorneys - Jay Fisher
• Recommended resources
  • S2P2J Chapter 4 - "Defense Counsel"
  • S2P2J Chapter 5 - "Plaintiff Counsel"
  • S2P2J Chapter 6 - "Case Preparation"
  • S2P2J Section 16.05 - "Judicial Review of Transfer Applications"
  • S2 wiki - "Secondary Market"
  • S2KM blog - "Ceron v. Henderson"

Marketing

• NSSTA: Business Communications - LuAnn Reeb
• SSP
  • Marketing to Personal Injury Attorneys - Joe Didier
  • Electronic Media and Social Networking - Mark Wahlstrom
• Recommended resources
  • S2 wiki - "S2 and KM"
  • Web 2.0 for Lawyers wiki

Practice Improvement and New Products

• NSSTA: CSSC Continuing Education Online - Karen Meyers; Kathy Moghadas
• SSP
  • Dissecting a Settlement Plan - Jack Meligan; Joseph Tombs
  • Non-qualified Assignments - Brian Michael
  • Indexed Annuities - Rick Miller
  • Re-cycling Structured Settlement Payment Rights - Anthony Prieto; Tim Denehy
• Recommended resources
  • S2P2J Section 3.06A - "Non-Qualified Assignments"
  • S2 wiki - "Re-thinking Structured Settlements"
  • S2 wiki - "Settlement Consulting"
  • S2 wiki - "Business Standards and Practices"
  • S2 wiki - "Spencer v. Hartford"
  • S2KM blog - "Online S2P2J" 

Strength of Life Companies

• NSSTA
  • Strength of Life Insurance Companies - Jim Morris, Chairman, President and CEO of Pacific Life Insurance Company
  • State Guarantee Associations - Tom Ronce; Craig Ulman
  • ELNY Update - Len Blonder; Randy Dyer; Dan Finn; Craig Ulman

• Recommended resources
  • S2P2J Section 3.05[9] - "Life Insurance Guaranty Associations"
  • S2P2J Section 3.05[10] - "Executive Life Insolvency"
  • S2KM blog - "Executive Life of New York"

For S2KM reporting and analysis of prior SSP and NSSTA meetings, see S2KM's structured settlement wiki.

All State v. Rapid Settlements

Less than one month after the Second Circuit Court of Appeals rejected Rapid Settlements' claim that the Federal Arbitration Act supersedes the New York Structured Settlement Protection Act in Pacific Life v. Rapid Settlements, the Third Circuit has reached a similar result for Pennsylvania's Protection Act in All State v. Rapid Settlements.

In its All State v. Rapid decision, the Third Circuit unanimously affirmed a decision of the United States District Court for the Eastern District of Pennsylvania which criticized Rapid's business practices and entered declaratory and injunctive relief against Rapid. Similar to the Second Circuit case involving New York's Protection Act, Rapid attempted to avoid the Pennsylvania Structured Settlement Act in the All State case by obtaining an arbitration award and court order (subsequently vacated) in Texas purporting to approve a transfer agreement.

All State refused to comply with the arbitration order and subsequently filed a complaint in Pennsylvania, where the structured settlement recipient resides, seeking declaratory and injunctive relief against Rapid.

All State argued that it was not bound to honor any such arbitration award without court approval as provided by an applicable state protection statute. The Pennsylvania District Court ruled in All State's favor and also determined that Rapid's attempt to use arbitration, and a court order confirming the arbitration award, violated the Pennsylvania Structured Settlement Protection Act.

Rapid argued unsuccessfully that Pennsylvania's Protection Act does not apply because the arbitrator did not order a "transfer" which the Pennsylvania Protection Act defines as: "Any direct or indirect sale, assignment, pledge, hypothecation or other form of alienation, redirection or encumbrance made by a payee for consideration". The Third Circuit rejected Rapid's argument as well as these additional Rapid arguments:

• The Federal Arbitration Act preempts the state statute;
• The District Court's decision was impermissibly broad; and
• The District Court's decision violated the federal full faith and credit statute.

In his written opinion denying Rapid's appeal, U.S. Third Circuit Judge Joseph F. Weis, Jr. noted: "We are one of the many courts to face Rapid Settlements' transparent attempt to use this arbitration scheme to evade the legislatures' intentions to protect the recipients of structured settlement payments".

All State's attorney, Stephen R. Harris, refused to comment about the Third Circuit decision or the future status of Rapid's arbitration business model. Other industry experts, however, point to a pending Fifth Circuit case (Symetra v. Rapid Settlements) as Rapid's next (and possibly final) legal challenge to the state structured settlement protection statutes.

For prior S2KM reporting about Rapid Settlements, see:

• Pacific Life v. Rapid Settlements
• Rapid v. Symetra
• CNA v. Rapid Settlements

For information about structured settlement transfers and state protection statutes, see Chapter 16 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

Pacific Life v. Rapid Settlements

The Second Circuit Court of Appeals yesterday rejected Rapid Settlement's claim that the Federal Arbitration Act supersedes the New York Structured Settlement Protection Act.

In the case titled "Pacific Life Insurance Company v. Rapid Settlements, Ltd.", Confederation Life Insurance and Annuity Company joined Pacific Life as a Plaintiff-Appellee. Joyce Allen was the structured structured settlement recipient who attempted to transfer payment rights.

The Summary Order from three Second Circuit judges unanimously affirmed a January 5, 2007 order of the United States District Court for the Western District of New York:

• Declaring "void and unenforceable" a purported assignment to Rapid of structured settlement payment rights;
• Declaring "void and unenforceable" an arbitration award purporting to effectuate the assignment;
• Enjoining Rapid from taking any further legal action "in any forum" to recover the structured settlement annuity payments.

In its appeal, Rapid argued:

• Rapid's earlier arbitration award in Texas was valid and enforceable under the Federal Arbitration Act; and
• The Full Faith and Credit Clause in Article IV of the United States Constitution required the New York District Court "to give preclusive effect to a Texas state court judgment confirming the arbitration award".

The Second Circuit Court of Appeals rejected Rapid's argument "for substantially the reasons stated by the District Court in its order". The Court's Order noted the following as "undisputed" when the purported assignment occurred:

• Allen was a resident of New York; and
• The New York Settlement Protection Act accordingly was applicable.

For a summary of the District Court decision, see Drinker Biddle's September 2007 Structured Settlement Update.

Stephen Harris, the Drinker Biddle law partner who represented Pacific and Confederation in the Second Circuit appeal, predicts the case result will become "important judicial precedent" in other Rapid cases now pending in the Third and Fifth U.S. Circuit Courts of Appeal.

For prior S2KM reporting about Rapid Settlements, see:

• Rapid v. Symetra
• CNA v. Rapid Settlements

For more detailed information about structured settlement transfers, see updated Chapter 16 in Release 45 of "Structured Settlements and Periodic Payment Judgments".