For a more recent update on the Macomber case, see this March 28, 2006 weblog post.
In addition to single claimant 468B settlement funds, one of the most significant recent developments in the structured settlement and personal injury settlement planning industries is Macomber v. Travelers Insurance (Macomber case), a lawsuit which has been certified as a class action by the Superior Court in New Britain, Connecticut. The Macomber case was the subject of a recent program on the Settlement Channel where host Mark Wahlstrom interviewed lead plaintiff counsel Ralph Stone. Although still in the discovery stage, Ralph indicated the Macomber case may eventually involve tens of thousands of personal injury claimants nationwide.
The Macomber case is significant because it highlights and legally challenges structured settlement business practices which are common among many defendants and defendant insurance companies. These practices include commission-sharing on the sale of structured settlement annuities which frequently is not disclosed to plaintiffs or their legal counsel. With structured settlements, the cost of the annuity (plus up front cash) has become the accepted basis for calculating settlement value. Undisclosed commission-sharing arguably results in a lower net cost of settlement to defendants and undercompensates claimants. Plaintiff attorney fees in personal injury cases generally are based upon a percentage of the settlement or verdict value. Settlement value also is important for calculating insurance coverage and settlement contributions by co-defendants. Undisclosed structured settlement commission-sharing by defendants, therefore, creates potential legal problems for multiple participants in personal injury cases.
Following the recent legal actions by New York Attorney General Eliot Spitzer against prominent insurance companies and brokers, the National Association of Insurance Commissioners (NAIC) released draft model legislation on November 15, 2004 calling for broker disclosures. According to the NAIC, these new disclosure requirements are “designed to ensure consumers are provided the information necessary to understand the manner in which brokers are compensated for the sale of insurance products”. Although not specifically applicable to structured settlements, the NAIC requirements should be applicable to all participants (including defendants and their insurers) who receive commissions resulting from structured settlements.
Regardless of the outcome of the Macomber case, all structured settlement participants should reconsider their basic business practices and standards to address recent legislative and regulatory changes. Disclosure of all structured settlement compensation arrangements represents one obvious and important first step toward improved and updated "best practices".
See this weblog post for an update about the Macomber case.
For additional information about structured settlements see: “Structured Settlement Definition”, "Introduction to Annuities", “Advantages and Disadvantages of Annuities” as well as “Structured Settlements and Periodic Payment Judgments”.
For recent developments impacting the structured settlement and personal injury settlement planning industries, see "Structured Settlement Factoring", “Medicare Set-aside Arrangements”, “Special Needs Trusts” as well as “Knowledge Management and Structured Settlements” and "How Standards Impact Structured Settlements".
Comments