Beyond Structured Settlements

Structured Settlement Wiki

S2KM has published a structured settlement wiki.

S2KM's objectives and purposes:

• Publish a wiki for structured settlement professionals and stakeholders.
• Feature industry issues and knowledge leaders in web 2.0 formats.
• Encourage industry practice communities and networks to use wikis.
• Better integrate S2KM's publications with other authors, publishers and publications.

S2KM will continue to publish S2KM's blog "Beyond Structured Settlements" including future posts announcing structured settlement wiki updates.

SSP 2008 Annual Meeting - 2

The Society of Settlement Planners (SSP) hosted its 2008 Annual Meeting in Washington, D.C. on March 5-7.  Approximately 75 persons attended the SSP meeting including settlement planners, special needs attorneys and annuity provider representatives. Under direction from 2007 SSP President Anthony Alfieri and Program Chairperson Jack Meligan, SSP's 2008 educational program matched the high standards of previous SSP programs.

During SSP's business meeting, SSP members:

• Adopted the "Standards of Professional Conduct for Settlement Planners"; and
• Elected new officers and directors .
  
  • SSP elected Greg Maxwell as 2008 President and Joseph Tombs as SSP Vice President.
  • SSP Directors include: Richard Bishop; Charles Derenne; Paul Lesti; Tim Nay; and Richard Risk.
  • Nay, the first-ever President of NAELA, is also the first-ever special needs attorney to serve on SSP's Board of Directors.

SSP's Educational Program

• Ethics
  • The SSP Code of Ethics (titled: "Standards of Professional Conduct for Settlement Planners") represents a multi-year SSP project initiated and managed by SSP Director and attorney Richard Risk.
    • Carl A. Pierce, distinguished professor of law at the University of Tennessee and a reporter for the latest revision of the American Bar Association's Model Rules of Professional Conduct, assisted SSP with this ethics project.
    • Pierce introduced drafts of SSP's Code of Ethics at both the 2007 and 2008 SSP Annual Meetings.
  • Frank Johns, a leading special needs attorney and settlement planning ethicist, also advised SSP on its Code of Ethics. Johns, an SSP member, delivered SSP's featured dinner address. Johns' comments focused on ethical considerations for judges, plaintiff attorneys and trustees when selecting a structured settlement or settlement planning professional. Johns' 2008 SSP presentation also featured his proposed Request for Proposal (RFP) for settlement planners. Johns first introduced his ideas for a settlement planner RFP at the 2007 Advanced Elder Law Institute.
• Tax Panel
  • Organized by structured settlement attorney and moderator Richard Risk, SSP's Tax Panel has become the best tax discussion in the structured settlement industry.
  • In addition to Risk, SSP's 2008 tax panel participants included:
    
    • Jody J. Brewster, Tax Partner with Skadden Arps Slate Meagher & Flom;
    • Glenn F. Mackies - Tax Partner at Deloitte & Touche.
    • Michael J. Montemurro - Branch Chief at the Internal Revenue Service responsible for Income Tax and Accounting;
  • The SSP tax panel addressed several topics with single claimant 468B receiving the most attention. The structured settlement industry is waiting for written guidance from the United States Treasury Department as to whether IRC section 468B applies to single claimant cases. SSP's tax panel provided a detailed look at these single claimant 468B issues:
    • The language in IRC section 468B and existing regulations;
    • Technical and policy Issues created by the language;
    • Technical and policy arguments for and against single claimant 468B funds;
    • Impact of economic benefit on single claimant and multiple claimant 468B funds;
    • Defining single claimant and multiple claimants within IRC section 468B.
• Government Benefits -SSP devoted three presentations to government benefit issues.
  • Medicaid
    • David Lillesand, a national leader among social security and special needs trust attorneys, dropped a bombshell on the structured settlement industry at the SSP meeting.
    • Based upon Lillesand's discussions with Social Security officials including Ken Brown, Lillesand declared "inoperative" Nancy Veillon's January 31, 2006 letters to attorneys Roger Bernstein and Jay Sangerman representing the National Structured Settlement Trade Association (NSSTA).
    • NSSTA's letters from SSA are inoperative, according to Lillesand, because:
      • NSSTA's letters from SSA do not represent meaningful authority inside the SSA. POMS yes. Letters no.
      • NSSTA's letters predate (by one week), and fail to address or consider, the Deficit Reduction Act of 2005.
    • Lillesand said he expects the SSA to issue new POMS within the next few weeks.
    • However, the new POMS will not address structured settlements. Lillesand stated "The SSA Office of General Counsel will not approve structured settlement POMS at this time".
    • Lillesand and Ken Brown of the SSA will be featured speakers at the ASNP 2008 Annual Meeting March 27-29 in New Orleans.
    • Lillesand's 2008 SSP presentation focused on the "life or death" issue of Medicaid insurance for disabled persons - plus the challenges and risks for special needs attorneys who recommend annuities as funding and investment options.
    • Lillesand's SSP presentation, and his excellent supporting SSP paper, define serious immediate challenges for structured settlement and settlement planning professionals.
    • Lillesand's proposed solution:
      
      • A collaborative (multi-trade association) initiative focused on annuities and government benefits.
      • And specifically for Medicaid and structured settlements:
        
        • Convince SSA to draft POMS favorable to annuities and structured settlement annuities.
        • Incorporate the January 31, 2006 NSSTA letters into the POMS.
  • Medicare
    • SSP offered two presentations about Medicare.
      • One titled "Medicare Compliance - Medicare Set Asides (MSA) - Beware of the Medicare Super Lien" featured Paul K. Isaac and Benjamin M. Basista.
      • The other titled "Nuts and Bolts of Medicare Set Aside Arrangements" featured Douglas L. Shaw and Marge George-Ratz of Medivest.
    • For this author, neither SSP  Medicare presentation focused satisfactorily on annuity issues related to Medicare Set-Aside arrangements.
    • Request for future SSP and NSSTA presenters about Medicare Set-Aside arrangements:
      • Summarize in your presentations CMS Policy Memoranda addressing structured settlement annuities - especially the CMS October 15, 2004 Policy Memorandum;
      • Context the CMS structured settlement policy memoranda within Medicare legal authority generally;
      • Identify any Medicare legal authority that updates or supersedes the October 15, 2004 CMS Policy Memorandum;
      • Identify the issues, opportunities and risks for settlement planners and structured settlement professionals.
      • Recommend strategies to advance the use of annuities as part of developing government benefit legislation and regulations.
• Secondary Life and Annuity Markets
  • SSP's panel discussion titled "What Settlement Planners Need to Know about the Secondary Markets" expanded previous trade association discussions about structured settlement transfers (aka factoring).
  • This author moderated the SSP secondary market panel discussion which featured:
    • Rhonda Bentzen - a secondary market intermediary who is an honorary member of SSP and serves as Chairperson of SSP's Membership Committee.
    • Stephen R. Harris - a partner at Drinker Biddle & Reath who represents annuity providers;
    • Earl S. Nesbitt - the Executive Director of the National Association of Settlement Purchasers (NASP) who represents factoring companies.
  • The SSP secondary market discussion offered multiple informative perspectives on this controversial topic. It also included questions by SSP members to Nesbitt for NASP members focused upon:
    • Alleged predatory advertising by factoring companies;
    • Alleged improper use of the term "structured settlement" by factoring companies;
• Nesbitt promised to communicate SSP's concerns to NASP members.
• Legislation and Litigation Update
  • 2008 SSP President Greg Maxwell provided a summary of recent legal developments impacting settlement planners and structured settlement professionals.
  • 2007 SSP President Anthony Alfieri updated a tax analysis of sexual abuse cases.
• Case Studies - SSP offered three presentations about settlement planning advice and developments.
  • Professor Joseph Tombs introduced the "Tombs' Dissipation Index" as a settlement planning tool;
  • Jack Meligan and Michele Whitmore analyzed multiple settlement planning scenarios and recommended settlement planning techniques and tools.
  • Ward Zimmerman moderated a panel discussion about negotiation tactics featuring Charles Derenne, Michele Whitmore and Jack Meligan.
• Internet Marketing
  • Mathew Hayes provided insights and strategies to improve SSP member email marketing.
  • Hayes' SSP presentation paralleled Mark Wahlstrom's marketing presentation at the NSSTA 2008 Winter Regional Meeting;
  • In this author's opinion, Hayes and Wahlstrom should expand their Internet presentations to include emerging web 2.0 technologies and tools such as blogs, wikis and podcasts.
    

For prior S2KM coverage about:

• SSP - see this S2KM blog post.
• Web 2.0 - see this S2KM blog post
• Deficit Reduction Act of 2005 - see this S2KM blog post
• Medicare, etc. Extension Act of 2007 - see this S2KM blog post.
• Secondary Life and Annuity Markets - see this S2KM blog post.

Patrick Hindert, S2KM's blog author, is a member of SSP.

Addendum 03132008

S2KM's original post above failed to report two important events from the SSP meeting:

• David Synder - SSP honored Snyder as a founding member of the Society of Settlement Planners and historic leader among settlement planners and structured settlement professionals.  Snyder recently announced the sale of his former company Delta Settlements to Michael Upchurch.
• AAPD Leadership Gala dinner - The 2008 AAPD Gala was even better than advertised and raised more than $1 million.  Both SSP and NSSTA members attended. NSSTA was an event sponsor.

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.

Who is Michael Upchurch?

Earlier this week, David and Dorothy Snyder announced that Michael A. Upchurch had purchased The Delta Group of Settlement Companies effective March 1, 2008.  As the new owner, Chairman and CEO of Delta Settlements, Michael Upchurch becomes a prominent stakeholder and participant in the structured settlement market. Upchurch agreed to provide S2KM with the following exclusive interview.  Upchurch responded in writing to S2KM's written questions:

What is your professional background?

After graduating with an MBA from Southern Methodist University, I began my professional career with IBM. At IBM, l specialized in the integration of advancing technologies into established business processes. This skill set appears to be increasingly important within the structured settlement and settlement planning industries.

In 2003, I entered the structured settlement industry with Ringler Associates. The following year, I decided to focus exclusively on helping injury victims and their attorneys. In 2004, I left Ringler and formed Upchurch Financial Services (UFS). During the past four years, UFS has enjoyed positive and productive relationships with Millennium Settlements and National Settlement Consultants. Throughout this learning process, I have attempted to distinguish myself as a leading structured settlement consultant. My focus has been on increasing the overall utility of the settlement and the efficiency of the settlement process.

Effective March 1, 2008, David Snyder and Dorothy Snyder have announced the sale of Delta Settlements to me. I am honored to be associated with Delta, Dave and Dorothy and excited about the future of Delta Settlements and structured settlements.

What are your interests outside of business?

My wife, Holly, is my college sweetheart from Emory University. We have three children Mick (10), Isabella (8) and William (5). Whatever personal time I have is devoted to my family.

What prompted you to enter the structured settlement industry?

My father, John J. Upchurch, introduced me to structured settlements. My father is a former judge who was instrumental in establishing the mediation legislation in the state of Florida. He retired from the bench and established a mediation practice that has become one of the most successful and respected mediation firms in the United States. As a mediator, my father helps resolve complex cases every day.

My father taught me the challenge and importance of meeting the medical needs of catastrophic injury victims - how to deal with ongoing medical expenses even before a case is settled. That planning challenge requires knowledge about Medicaid and Medicare. My father pointed out the disconnect that frequently occurs among the victims' legal and financial advisors, as well as the defendants, in addressing medical expenses.

My father recognized early the importance and opportunity for integrated analytics, financial services and care solutions. My father thought my business talents and interests would be a good match for the structured settlement and settlement planning industries.

What successes have you achieved in your structured settlement career to date?

I have been fortunate to have great teachers and mentors. I have learned from some of the most influential trial attorneys in the state of Florida. Specifically, E. Clay Parker has played a key role in my professional development. Clay taught me how to evaluate different insurance policies and understand the relationships between the different defendants and key insurance stakeholders. This type of analysis is extremely important when advising trial attorneys on settlement strategy. As a structured settlement professional who advises trial attorneys, I have the opportunity to communicate and practice Clay's lessons on a weekly basis.

Within the structured settlement industry, I have learned from some of the industry leaders. Scott Hoover taught me about the defense side of the business. Chris Diamantis taught me the challenges of building, managing and maintaining a multi-disciplined settlement firm. Most recently, Michael and Bill Goodman taught me about execution, organizational development and excellence. Michael and Bill have been exceptional friends and mentors.

My past successes are defined by my personal structured settlement production. Upchurch Financial and Delta Settlements will continue to be production leaders within the structured settlement industry. In addition to growing the structured settlement market, however, I want to improve the structured settlement industry. I want to do more for personal injury victims and their families.

What changes do you see occurring in the structured settlement market?

This is an exciting time to be part of the structured settlement industry. Many changes are creating new business opportunities. Obviously, the impact of government benefits is significant. Medicaid and Medicare legislation is re-defining structured settlements and settlement planning. Trusts and other banking products are important and those markets will continue to grow rapidly. The secondary markets are impacting all financial and estate planning - including structured settlements. I want Delta to become the most knowledgeable structured settlement company about the secondary markets. We need to help personal injury victims before and after the settlement. The Internet impacts everyone and every business. Delta will continue to be a technology leader within the structured settlement industry.

What opportunities do you see to grow the structured settlement market?

NSSTA published some market research last year that indicated we have hardly scratched the surface in developing the structured settlement market. Annuities are great products. We are fortunate to have excellent federal and state legislation for structured settlements. If we can develop the same type of rules for Medicaid and Medicare, structured settlements have a great future. It is important for all structured settlement stakeholders to understand the issues and to collaborate to develop the opportunities.

Why did you purchase Delta Settlements?

Delta Settlements is a fantastic company. Delta has wonderful owners, outstanding producers and employees. I am honored to be associated with Delta. Dave and Dorothy Snyder and my family share many of the same personal and business values. Delta has an important future. Delta is strategically positioned for success.

What role do you anticipate Delta will play in the structured settlement market?

Delta will continue to be a leader. We want to build upon the legacy and success that Delta has already achieved. We want to be the best structured settlement company - whatever positive performance metrics you apply.

How do you see the following developments impacting structured settlements?

• Government benefits - Medicaid and Medicare legislation have already revolutionized structured settlements. Any structured settlement leader who wants to remain a leader must offer knowledge, services and skill sets specific to government benefits.
• Secondary markets - The secondary markets are a legal and business reality. Unfortunately, our industry has not yet developed an adequate strategy to address the issues created by factoring. As an industry, we should be more proactive in developing best practices related to factoring. We should advise our clients before and following the settlement. Where factoring is appropriate, we should assist the original structured settlement recipient to obtain as much money as possible. Delta Settlements wants to play a leadership role in helping our industry develop a more enlightened, and more effective, factoring strategy. If done correctly, we can improve our sales growth as well as improve the secondary market.
• Internet technologies - As you might guess with my background at IBM, I am very focused on integrating technologies into the structured settlement market. Over the past three years, Upchurch Financial has built and tested a technology-based marketing and case management system. Over the coming year we will extend this platform to Delta and many of our clients. In addition, we anticipate using Delta's website as a platform to provide services and applications for our consultants and clients. Strategically, we expect our technology expertise to be an important differentiating advantage in the structured settlement marketplace.

For additional information about Delta Settlements, see S2KM's blog post titled "Michael Upchurch Purchases Delta Settlements".

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.

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"

Executive Life Of New York - 1

Was it merely coincidental that New York Governor Eliot Spitzer announced an "agreement in principle" for Executive Life of New York (ELNY) the same week "agreements in principle" unraveled for multiple high profile college football coaches? 

As college football fans are learning, "agreements in principle" are not always agreements in fact - and the devil is frequently in the details.

Governor Spitzer's publicly announced ELNY "agreement in principle" did not include many details:

• The proposed ELNY plan:
  • Is designed to continue paying all ELNY annuitants 100% of their benefits;
  • Provides protection for approximately 11,000 ELNY annuity recipients including structured settlement recipients;
  • Requires and anticipates future approval by the New York Nassau County State Supreme Court.
• Various insurers and guarantee associations have agreed to pay $650 to $750 million to fund approximately $2 billion of future ELNY payments;
• The insurers include several named liability (casualty) insurers.

Some of many unanswered questions:

• Exactly what are ELNY's current problems?
  
• What factors caused these problems?
• Who was aware of these problems and when?
  
• What issues will the ELNY plan address?
• Who will be the contributors?
  
• How much will they contribute?
• How many liability insurers will ultimately contribute?
• How much will they contribute?
• Why are the liability insurers contributing?
• What potential issues do the liability insurers' contributions create for:
  • Reinsurers;
  • Intermediaries;
  • Product providers;
    
  • Trade associations?   
    
• Will the total contributions be enough to pay ELNY's obligations?
• What are the key assumptions underlying future payment predictions?
  
• When will the ELNY plan be approved?
• Who are the parties in interest?
  
• What issues are involved in the plan approval process?
• How many of ELNY's annuities are structured settlement annuities?
• How many of ELNY's structured settlement annuities were assigned?
• Who were the assignees?
• How many ELNY annuities have already been transferred in the secondary market?
• Of these annuity transfers, how many involve structured settlement annuities?
• Will the ELNY plan honor annuity payment rights that have already been transferred in the secondary market?
• What limitations, if any, will the ELNY plan impose on the future transfer of ELNY annuity payment rights?
• What legal precedents will the ELNY plan establish for future insolvencies involving structured settlement annuities?
• What lessons should the structured settlement industry learn from ELNY?
• Is this the last chapter of the Executive Life structured settlement saga?

For historical background about Executive Life Insurance Company from a structured settlement perspective, see Section 3.05 of "Structured Settlements and Periodic Payment Judgments".

Deal Flow Media Webinar

Deal Flow Media publishes reports, and also sponsors webinars and conferences, about specialized financial markets.

Deal Flow Media's markets include:

• Life Settlements
• Private Investments in Public Equity (PIPEs)
• Special Purpose Acquisition Companies (SPACs)
• Reverse Mortgages
• Distressed Debt

On November 29, 2007, Deal Flow Media will enter the structured settlement market by sponsoring its first structured settlement webinar.  Please note the Postcript at the end of this post. Deal Flow Media will be rescheduling and expanding this structured settlement webinar.

In addition to Brett Goetschius, Karen Meyers and Dan Finn, this author will be one of the featured speakers. My topic will be "The Structured Settlement Secondary Market".  Some of the questions my presentation will address:

• What is a structured settlement?   
• What is a structured settlement factoring transaction?
• What are structured settlement payment rights?
• What is the secondary structured settlement market?
• How do the primary and secondary markets interact?
• Why do payees sell structured settlement payment rights?
• What definitions and legal rules apply to this secondary market?
• How large is the structured settlement secondary market?
• Who are the leading secondary market participants - and why are they successful?
• What does an investor in structured settlement payment rights actually purchase?
• What are the business and investment risks?

Additional S2KM online resources about the structured settlement primary and secondary markets:

• Structured Settlements
  • Overview of the Structured Settlement Market
  • History of Structured Settlements
  • Future of Structured Settlements
  • Structured Settlement Transaction Diagram
  • Structured Settlement Public Policy Wiki
  • Structured Settlements and Government Benefits
  • Blog posts featuring Robert Wood's podcasts
    • Structured Attorney Fees
    • Single Claimant 468B Funds
• 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".
• National Association of Settlement Purchasers (NASP)
  
  • 2007 Annual Meeting
  • 2006 Annual Meeting
  • NASP Wiki

Postcript - added November 28, 2007

• Deal Flow Media has decided to reschedule and expand its structured structured webinar.  Deal Flow Media will announce new dates and details for its expanded webinar on Deal Flow Media's website.   This author will appear as a participant in Deal Flow Media's structured settlement webinars- and will also provide continuing S2KM blog coverage of Deal Flow Media's structured settlement publications.
• S2KM has added corrected links for the following concept maps developed by Dr. Barbara Bowen of Sound Knowledge Strategies.  Each concept map includes embedded submaps and links.
  • Overview of Structured Settlement Markets
• How the Primary Market Views Factoring

For additional information about S2KM's collaboration with Barbara Bowen, see "Web 2.0 for Lawyers Concept Map".

2007 Advanced Elder Law Institute

The National Academy of Elder Law Attorneys (NAELA) hosted its 2007 Advanced Elder Law Institute November 2-4 at The Peabody Hotel in Memphis, Tennessee under the leadership of NAELA's 2007 President Mark Shalloway and NAELA's 2007 Institute Chair Christine A. Alsop.

Titled "Elder Law and Advocacy: It's Now or Never", the NAELA conference featured 24 outstanding and diverse presentations. In addition to 275 NAELA members, 23 law students attended. NAELA's 2007 law school writing competition attracted 26 submissions.

Highlights from the Advanced Elder Law Institute:

• The 24 presentations included four breakout sessions offering multiple program options plus extensive supporting written materials.
• Tim Nay and Stephen Dale were honored as recipients of NAELA's 2007 Powley Award and Gelardi UnAward respectively.
• Mariam Piven Cotler, a bioethicist, presented the 2007 Clifton Kruse, Jr. Professionalism and Ethics Luncheon address.
• 21 exhibitors confirmed a growing awareness that NAELA's 4700 members represent an important market for many product and service providers.
• NAELA's Not Ready For Prime Time Players performed two amusing scenes from "Sly Fox" with proceeds donated to the Alzheimer's Association of Memphis.
• NAELA's PAC sponsored a tour of Graceland with dinner at the Elvis Presley Car Museum.
• NAELA's President Mark Shalloway impersonated "The King" (born in 1935) as a 72 year old senior citizen complete with walking supporter and nurses.

From a structured settlement perspective, the following NAELA presentations were especially valuable:   

• "Representing the Unwary Client After the Purchase of Unsuitable Annuities"
  
  • Andrew S. Friedman, an Arizona plaintiff attorney who specializes in class action lawsuits, summarized current class action lawsuits against insurers and insurance agents who sell deferred annuities to senior citizens.
  • None of the defendants Friedman identified appear to be NSSTA or SSP members.
  • Although the annuity products (equity-indexed vs. fixed annuities) and the sales targets (elderly persons vs. personal injury victims) are different, structured settlements (at least the primary market) appear to share many of the business practices Friedman described.
  • According to Friedman:
    • The equity-indexed annuities are sold through "independent insurance agents";
    • Many of these insurance agents:
      • Promote their professional expertise with:
        • Bogus credentials (example: "Certified Estate Planning Specialist") resulting from a one or two day "certification program"; and
        • Assurances that state insurance departments regulate insurance sales practices - which, according to Friedman, is totally inadequate to prevent sales abuses.
      • Invariably recommend annuities and do not sell any other product;
      • Do not undertake any due diligence to prevent misleading or incomplete sales presentations;
      • Promise high rates of return, safety, liquidity and assets sheltered from potential creditors with no taxation;
      • Intentionally conceal or fail to disclose important information about their products;
      • Engage in the unauthorized practice of law;
      • Make sales misrepresentations and omissions - for example: "you don't pay me anything".
      • Develop marketing and sales materials that appeal to vulnerable elderly investors and exploit their fears of risky or insecure investments and living out their retirement years without financial security.
    • The insurance companies pretend to be innocent and to know nothing about these allegedly unethical business practices;
    • The class litigation claims include RICO conspiracy charges against three groups:
      • Annuity companies;
      • Insurance sales agents;
      • Related companies that assist with product development, marketing and administration.
• "Advocating for the Most Vulnerable: Financial Exploitation Lawsuits to Discover and Recover Assets Stolen from Persons with Disabilities"
  • Charles P. Golbert, Deputy Public Guardian for the Office of the Cook County Public Guardian, explained how financial exploitation of elderly and disabled persons is becoming more common and widespread.
  • Golbert summarized the common legal theories for recovery:
    • Incapacity;
    • Undue influence, coercion and duress;
    • Breach of fiduciary duty; and
    • Fraud.
• "Comprehensive Representation of Personal Injury Plaintiffs and Special Needs Trusts"
  • Frank Johns, an expert in disability rights, special needs trusts and legal ethics, outlined a process for elder law attorneys to negotiate their engagement for special needs trusts in personal injury litigation.
  • Johns' presentation included annotated documentation addressing as many as five potential roles for elder law attorneys:
    • Drafting the special needs trust;
    • Appearing in court to obtain approval of the trust;
    • Drafting a qualified settlement fund;
    • Administering a qualified settlement fund;
    • Drafting an RFP for potential structured settlement consultants;
  • Johns' proposed RFP for structured settlement consultants:
    • Addresses structured settlement:
      • Roles;
      • Expertise; and
      • Services.
    • Does not currently address structured settlement compensation issues.
• Clifton Kruse, Jr. Professionalism and Ethics Luncheon Address
  • Miriam Piven Cotler's presentation was one of multiple NAELA programs that addressed ethical issues;
  • Cotler warned against common perceptions and misperceptions about the elderly including the dangers of becoming paternalistic.
  • According to Cotler, when the primary issues relate to power and control, "you can forget about ethics".
• "Why Can't We All Just Get Along: The Battle Between Special Needs Trusts, Retirement Accounts and Tax Rules"
  • Bradley J. Frigon, a NAELA Director who recently participated as a featured speaker at the NSSTA 2007 Fall Regional Meeting, addressed this complicated relationship of overlapping and sometimes conflicting laws.
  • One recommended follow-up would be a similar presentation about the relationship among special needs trusts, personal injury settlements and tax rules.   
    
  • Concept maps represent a valuable com