Rapid v. Symetra
A recent, unpublished legal decision (Rapid Settlements v. Symetra Life Insurance Company) from the California Court of Appeals (Fourth Appellate District; Division Two) confirms the general rule that, even following the enactment of IRC Section 5891, courts will enforce a clear and explicit anti-assignment provision in structured settlement agreements provided the interested parties timely object after having been given notice and an opportunity to be heard. In this case, those interested parties were Symetra Assigned Benefits Service Company (SABSCO) and Symetra Life Insurance Company (Symetra Life) - collectively referred to as Symetra.
The decision over-ruled the trial court which had earlier approved the transfer to Rapid of $40,000, one-third of a $120,000 future periodic payment due to claimant Randy L. Griffin pursuant to a structured settlement agreement (SSA) signed in September 1993. In appealing the order approving the transfer, Symetra successfully contended the order should be reversed and the transfer declared void because the $40,000 payment was not assignable under the terms of the SSA. Based upon its ruling in favor of Symetra, the appellate court did not consider Symetra's additional contention that the transfer failed to comply with the requirements of California's structured settlement protection act.
When an interested party objects to the assignment of structured settlement payment rights, there are two basic legal questions: 1) does the structured settlement agreement clearly forbid assignment? And if so, 2) does state law override a contractual anti-assignment provision?
The appellate ruling in this case is consistent with the majority of prior cases addressing these issues. It rejected the trial court's decision which "relied on the 'general policy favoring the free alienation of contract rights' to payment, as opposed to contractual duties, and indicated that the non-assignment provision appeared to be 'solely for tax purposes.' "
What makes this decision interesting, and controversial, is Rapid's argument that Symetra had itself actively solicited the assignment of Griffin's payment rights despite the anti-assignment language in the structured settlement agreement and that this "establishes that the practical interpretation of the contract, as evidenced by Symetra's words, acts and conduct, is that Griffin's payment rights are in fact assignable and Symetra has objected on a purely competitive basis."
The California appellate court disagreed with Rapid. It reasoned: "...under California law it is clear that non-assignment provisions are for the benefit of the obligor, and only the obligor has the right to waive the provisions...As the obligor, Symetra may choose to enforce or waive the non-assignment provisions of the SSA. That it chose not to waive the provisions in favor of Rapid does not mean Symetra may not waive the provision in favor of itself or an affiliate entity."
Therefore, at least in California, when structured settlement documentation includes clear and unambiguous anti-assignment provisions, an annuity provider such as Symetra appears to have the power: 1) to prevent a proposed transfer; and 2) to restrict a transfer to a specific factoring company including an affiliated factoring company.
This result is similar to a defense insurance company conditioning a structured settlement upon the selection of its affiliated annuity provider.
Both practices are anti-competitive and should be avoided.
For current and future cases, all structured settlement participants should review the settlement language in NSSTA's revised Model Qualified Assignment (MQA) Agreement - paragraph 7 (Acceleration, Transfer of Payment Rights) and the related footnote.
For additional information about anti-assignment language in structured settlements, see "Structured Settlements and Periodic Payment Judgments" - Chapter 16 ("Transfers of Structured Settlement Payment Rights").
For additional S2KM blog posts about factoring, see:
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