Beyond Structured Settlements

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.

NASP 2009 Annual Meeting - 2

The purpose of this S2KM blog post is to summarize educational discussions which occurred at the NASP 2009 Annual Meeting. In a prior post (NASP 2009 Annual Meeting-1), S2KM listed the discussion topics, moderators, speakers and panelists and also identified Van Tran as the winner of the NASP 2009 Alexander Hamilton award. In subsequent blog posts, S2KM will provide analysis and feature interviews with selected NASP educational program participants.

2009 Legislative Developments - Matthew Bracy summarized California Senate Bill 510 which Governor Arnold Swarzenegger signed into law October 11, 2009 and which becomes effective January 1, 2010. Among changes to the California structured settlement protection statute, SB 510 adds factors for the court to consider when determining whether a proposed transfer is fair, reasonable and in the payee's best interest. These factors now include the reasonable preference of the payee considering age and mental capacity. Bracy also summarized the new North Dakota structured settlement protection statute which generally follows the NCOIL Model Act. North Dakota becomes the 47th state to enact structured settlement protection legislation.

Legal Case Update - Tricia Laborde's legal case update focused primarily on the Fresno County cases and Rapid Settlement cases. Among other holdings in Scioteco v. Henderson, a California appellate court ruled that public policy supports state court approved structured settlement factoring transactions. In Allstate v. Rapid Settlements, which denied 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".

What Happened in California? - A panel of legal and political experts provided background and analysis of SB 510 and the Fresno County cases. NASP lobbyist Carl London summarized the collaboration between NASP and Consumer Attorneys of California (formerly the California Trial Lawyers), plus the role of California legislator Van Tran, in securing enactment of SB 510. Linda Morris, General Counsel for J.G. Wentworth, provided background information and strategic commentary about appellate decisions for the Fresno County cases which she characterized as an important victory for the structured settlement industry.

Transactional Structured Settlement Issues - A panel of attorneys discussed practical problems in securing judicial approval for proposed structured settlement transfers. Some of the issues discussed: difficulties in determining the domicile of transient payees; privacy issues including the impact of Pennsylvania Rule 229.2; difficulties in finding independent professional advisers; and what happens when judges attempt to re-negotiate agreed upon transfers.

Structured Settlement Capital Markets - A panel of factoring company executives discussed how the 2008-2009 capital market upheaval has changed the secondary structured settlement market.
The changes:

• The cost of funds today for factoring companies (8 to 9%) equals the best discount rates offered for transfers two years ago;
• Bundling purchases of individual payment rights into a security is financially less efficient and/or available today;
• Marketing and court costs for factoring companies remain high;
• Perceived financial risks for potential insurer failure have increased;
• The impact of a potential ELNY liquidation remains uncertain.

Structured Settlement Court Practices and Issues - Judges Edward Burke of Arizona and Christopher Marshall of Oregon joined a panel of attorneys in discussing settlement transfer court practices and issues including: prior transfers by the same payee; the roles of transfer attorneys and independent professional advisers; privacy concerns for transferring payees; the advantages of utilizing a single state judge for all transfer requests; plus other problems which cause continuing judicial concerns about factoring and factoring companies.

Factoring and the Structured Settlement Tax Subsidy - Jeremy Babener addressed the important role IRC 130 and 104 tax subsidies have played in the growth of structured settlements. He summarized the political and public policy attacks against, and defenses for, structured settlement factoring transactions and questioned whether:

• The tax subsidy prevents dissipation?
• The tax subsidy discourages factoring?
• Factoring undermines the tax subsidy?

Babener challenged NASP to develop better information about who actually sells structured settlement payment rights and why.

Structured Settlement Bankruptcies - Bruce Akerly summarized his recent paper titled "The Impact of an Annuity Servicer's Bankruptcy on the Annuitant and Structured Settlement Purchaser". Akerly's conclusions:

• "The annuity payments received by a structured settlement servicing company, as well as the servicing agreement itself, become property of the bankrupt estate"; and
• "It may be possible to draft provisions in the servicing agreement to anticipate some of the consequences of the servicing company entering bankruptcy and perhaps lessen the impact on all parties."

Re-thinking Structured Settlements - a multi-disciplinary panel of industry experts addressed strategic structured settlement issues:

• What developments in 2009 will most impact the future of structured settlements?
• What are the best (and worst) structured settlement standards and business practices?
• Which structured settlement myths are most out-of-line with reality?
• How will commutations change the structured settlement market?
• What knowledge and skill sets are most important for future success in the structured settlement industry?

For S2KM reports about prior NASP meetings, see the 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).

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".

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.

SSPA Non-Contravention Standards

State courts play an important "gatekeeper" role for structured settlement factoring transactions. IRC section 5891 imposes a 40 percent federal excise tax if a factoring transaction does not receive required state court approval. State structured settlement protection acts (SSPAs) make factoring transactions ineffective unless such transfers receive court approval.

When evaluating a proposed transfer, state courts must address these issues:

• Payee's best interest - taking into account the welfare of the payee's dependents;
• Compliance with SSPA requirements - including notice, disclosure and independent professional advice; and
• Non-contravention of applicable laws - including other statutes and court orders.

In the lead article of its Fall 2007 edition of "Structured Settlement Insights", Pullman & Comley summarizes growing judicial authority for what constitutes non-contravention of a statute or order - as well as the related issue of what information is required for a court to make a non-contravention finding.  The article distinguishes these types of non-contravention issues from contractual anti-assignment restrictions.

The Pullman & Comley newsletter article highlights:

• New Pennsylvania Rule 229.2.  Among other provisions, this judicial rule requires the "transferee" (factoring company attorney) to certify to the court "to the best of his or her knowledge, information and belief, formed after reasonable inquiry, that the transfer will comply with the requirements of the [Pennsylvania] Act and will not contravene any other applicable federal or state statute or regulation or the order of any court or administrative authority."
• Different standards established by courts in other states including Connecticut, Illinois, Indiana and Florida.
• Workers compensation laws.  Although most state workers compensation statutes prohibit or restrict assignments, both IRC sections 5891 and 130 reference and incorporate workers compensation cases.
  

For additional information:

• SSPA non-contravention standards: see Section 16.05 of "Structured Settlements and Periodic Payment Judgments".
• Pullman & Comley: see this earlier S2KM blog post.
• Pennsylvania Rule 229.2: see this earlier S2KM blog post.